Radio Shack 2009 Annual Report Download - page 16

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Any reductions or changes in the growth rate of the wireless industry or changes in the dynamics
of the wireless communications industry could materially adversely affect our results of
operations.
Sales of wireless handsets and the related commissions and residual income constitute a significant
portion of our total revenue. Consequently, changes in the wireless industry, such as those discussed
below, could materially adversely affect our results of operations and financial condition.
Lack of growth in the overall wireless industry tends to have a corresponding effect on our wireless sales.
Because growth in the wireless industry is often driven by the adoption rate of new wireless handset and
wireless service technologies, the absence of these new technologies, our suppliers not providing us with
these new technologies, or the lack of consumer interest in adopting these new technologies, could
adversely affect our business.
Another change in the wireless industry that could materially adversely affect our profitability is wireless
industry consolidation. Consolidation in the wireless industry could lead to a concentration of competitive
strength within a few wireless carriers, which could adversely affect our business if our ability to obtain
competitive offerings from our wireless suppliers is reduced or as competition from wireless carrier stores
increases.
Our competition is both intense and varied, and our failure to effectively compete could materially
adversely affect our results of operations.
In the retail consumer electronics marketplace, the level of competition is intense. We compete with
consumer electronics retail stores similarly situated to our stores as well as big-box retailers, large
specialty retailers and discount or warehouse retailers and, to a lesser extent, with alternative channels of
distribution such as e-commerce, telephone shopping services and mail order. We also compete with
wireless carriers’ retail presence, as discussed above. Some of these other competitors are larger than us
and have greater market presence and financial and other resources than us, which may provide them
with a competitive advantage.
Changes in the amount and degree of promotional intensity or merchandising strategy exerted by our
current competitors and potential new competition could present us with difficulties in retaining existing
customers and attracting new customers. In addition, pressure from our competitors could require us to
reduce prices or increase our costs in one product category or across all our product categories. As a
result of this competition, we may experience lower sales, margins or profitability, which could materially
adversely affect our results of operations.
In addition, some of our competitors may use strategies such as lower pricing, wider selection of
products, larger store size, higher advertising intensity, improved store design, and more efficient sales
methods. While we attempt to differentiate ourselves from our competitors by focusing on the electronics
specialty retail market, our business model may not enable us to compete successfully against existing
and future competitors.
We may not be able to maintain our historical gross margin levels.
Historically, we have maintained gross margin levels ranging from 45% to 48%. We may not be able to
maintain these margin levels in the future due to various factors, including increased sales of lower
margin products, such as personal electronics products and name brand products, or declines in average
selling prices of key products. If sales of lower margin items continue to increase and become a larger
percentage of our business, our gross margin will be adversely affected.