Radio Shack and Target are splitting up; who gets the kids?
Meanwhile, Radio Shack has made a big effort to become a major player in the business. With an infrastructure in place that already includes stores coast to coast and a rather highly recognizable brand name and identity, pushing smartphones has been a great idea. Mobile handsets now account for half of Radio Shack's sales. But with prices for the phones constantly being discounted, company margins have taken a hit from 44% to 36% in the 12 months ended September 30th.
Things are so bad at the Shack that credit ratings agency Fitch recently lowered the company's debt rating to CCC which is a few rungs under "junk". Meanwhile, by eliminating the dividend and restructuring some debt due this year, the company is trying to conserve cash to keep going. Fitch had cut its ratings due to a steep drop in the retailer's profitability.
That leaves Target. Will the discount retailer give up on mobile phones, do it themselves, or find a new partner? Target has until April to decide.