Radio Shack 2004 Annual Report Download - page 20

hours of operation. Finally, we have improved our store envi-
ronment by rolling out an updated store format to nearly 300
more stores in 2004. We intend to accelerate this roll-out in
2005. In addition, we make continuous enhancements to our
store format as stores are rolled out.
We are also focusing on businesses that are considered to
be close to our core strengths. This close-to-core strategy
includes expanding our retail services business, recognizing
innovative product channels and opportunities, and identify-
ing international expansion opportunities. In order to identify
innovative product channels and opportunities, we are focus-
ing on creating innovative relationships with key parties such
as vendors and product developers, utilizing new channels,
and obtaining intellectual property and licensing rights to
innovative products.
In 2004, we significantly expanded our retail services busi-
ness by purchasing the wireless kiosks in SAM’S CLUB.
During the fourth quarter of fiscal year 2004, we acquired
wireless kiosk fixtures and inventory located within SAM’S
CLUB retail locations, as well as certain other assets and lia-
bilities from Wireless Retail, Inc. (“WRI”). The total purchase
price was $59.1 million. In conjunction with this transaction,
we received cash and commitments from wireless carriers
of $40.3 million. Regarding our SAM’S CLUB operations,
we pay rent for the use of the kiosk area within SAM’S
CLUB locations, while utilizing our own employees, POS
system, and store fixtures.
Another component of our retail services business is our
Sprint kiosk locations, which are Sprint-branded and are locat-
ed in malls. At these locations, which we staff, we sell Sprint
wireless hardware and related accessories. We have a profit-
sharing and working-capital arrangement with Sprint related to
these locations. We expect to continue to identify additional
opportunities in our overall retail services business in 2005.
Key Indicators of Financial Performance for Management
To identify our progress in achieving our solutions strategy,
we use several key financial performance metrics, including
net sales and operating revenues metrics, gross margin met-
rics, and selling, general and administrative (“SG&A”) expense
and operating margin metrics.
Net Sales and Operating Revenues Metrics
As a retailer, we consider growth in revenue to be a key
indicator of our overall financial performance. We examine
our revenue by using several key metrics, including overall
change in net sales and operating revenue, comparable
company store sales growth, average tickets per store and
average sales per ticket.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
RadioShack Corporation and Subsidiaries
This MD&A section discusses our results of our operations,
liquidity and financial condition, risk management practices
and certain factors that may affect our future results, includ-
ing economic and industry-wide factors, as well as our critical
accounting policies and estimates. You should read MD&A in
conjunction with our consolidated financial statements and
accompanying notes included in this Annual Report.
Overview
RadioShack is primarily a retailer of consumer electronics
and services. We seek to differentiate ourselves from our
various competitors by focusing on dominating cost-effec-
tive solutions to meet everyone’s routine electronics needs
and families’ distinct electronics wants. This strategy allows
us to take advantage of the unique opportunities provided
by our extensive retail presence, knowledgeable sales staff,
and relationships with reputable vendors. We believe this
strategy provides us with the opportunity to increase our
market share in the highly competitive consumer electronics
area. In addition, we continue to focus on methods to reduce
the costs of products sold and selling, general and adminis-
trative expense as a percentage of net sales and operating
revenues. Furthermore, we believe that by focusing on
opportunities such as innovative products, new markets,
licensing opportunities and creative distribution channels,
we can ultimately generate increased financial returns for
our shareholders over the long term.
We have identified two key opportunities to drive company
growth, which are in alignment with our overall strategy
described above. We are focusing on growth of our core busi-
ness, which includes our company-operated stores, dealers
and our Web site www.radioshack.com, as well as businesses
that we consider to be close to our core strengths, which
includes retail services, international operations and con-
sumer electronics repairs.
With respect to our core business, our strategy is to enhance
our brands and customer experiences in our stores. We are
accomplishing this by focusing on improvement of our prod-
uct assortment, store personnel and store environment. In
order to improve our product assortment, we are customizing
key stores by market area, with the goal of providing products
that are tailored to the customers of that particular market.
We are also focusing on high-performing product categories,
while de-emphasizing other product categories that have had
lower historical performances. In addition, we are attempting
to identify technologies that we believe we can grow, based
on our established ability to accelerate the adoption rate of
new technologies. With respect to store personnel, we are
enhancing our training, compensation and store operating
procedures, including our receiving, labor scheduling and
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