Radio Shack 2010 Annual Report Download - page 29

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19
ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (“MD&A”).
This MD&A section discusses our results of operations,
liquidity and financial condition, risk management practices,
critical accounting policies, and estimates and certain
factors that may affect our future results, including
economic and industry-wide factors. Our MD&A should be
read in conjunction with our consolidated financial
statements and accompanying notes included in this
Annual Report on Form 10-K, as well as the Risk Factors
set forth in Item 1A above.
EXECUTIVE OVERVIEW
RadioShack is a leading national retailer of mobile
technology products and services, as well as products
related to personal and home technology and power supply
needs. RadioShack’s mobile technology products and
services include wireless services from all major national
carriers. Each U.S. RadioShack company-operated store
and wireless kiosk offers services from at least three major
national carriers.
We have two reportable segments, U.S. RadioShack
company-operated stores and kiosks. The U.S.
RadioShack company-operated stores segment consists
solely of our 4,486 U.S. company-operated retail stores, all
operating under the RadioShack brand name in the United
States, Puerto Rico, and the U.S. Virgin Islands. Our U.S.
RadioShack company-operated stores offer a broad
selection of relevant technology products, including
innovative mobile devices, accessories, and services, as
well as items for personal and home technology and power
supply needs. The kiosks segment consists of our network
of 1,267 kiosks located throughout the United States.
These kiosks, which are not RadioShack-branded, are
primarily located in Target and Sam’s Club store locations.
Our kiosk locations offer a wide selection of mobile phones,
accessories and related services. Our other operations
include business activities that are not separately
reportable, which include sales to our independent dealers,
sales to other third parties through our service centers,
sales generated by our www.radioshack.com website and
our Mexican subsidiary, sales to commercial customers,
and sales to other third parties through our global sourcing
and manufacturing operations.
Our more than 7,100 locations in the U.S. and Mexico give
us a unique competitive advantage in scale, reach and
convenience. We strive to differentiate ourselves through
an appealing store format, a comfortable store size, a
carefully tailored product assortment, and knowledgeable
sales experts.
We believe RadioShack occupies unique advantages in the
consumer electronics marketplace, providing an alternative
to big box retailers:
• We offer a broad selection of relevant technology
products, including innovative mobile devices,
accessories, and services, as well as items for
personal and home technology and power supply
needs. Our lineup features leading national brands
and wireless carriers, as well as exclusive private
brands.
• We continue to capitalize on the growth of wireless
communications and consumer demand for
customer-friendly wireless service plans and
devices; our mobility assortment has been and will
continue to be priced aggressively and is fully
competitive with that of any alternative retailer or
carrier.
• We believe we have sufficient financial strength.
• We believe we are efficient operators and are a high-
margin operation with a proven culture of cost
control.
• We have highly trained sales experts who offer
friendly and personal service within an inviting, easy-
to-shop store environment.
As with most other specialty retailers, our net sales and
operating revenues, operating income and operating cash
flows are greater during the fourth quarter, which includes
the majority of the holiday shopping season in the United
States and Mexico.
External Factors Affecting Our Business
Since the fourth quarter of 2008 we have seen a highly
challenging economy and muted consumer spending.
However, the consumer electronics industry, particularly the
mobile phone industry, has experienced attractive growth
rates over the past several years, driven by product
innovations and new services. The growth in mobile phones
has been driven by growth in both the number of wireless
subscribers and an increase in smartphones, which
represent the latest in mobile phone technology.
A smartphone is a mobile phone that offers more advanced
computing ability and connectivity than a basic feature
wireless phone. Smartphones typically combine mobile
phone capabilities with capabilities previously found on
separate devices. Some examples include GPS (global
positioning system) navigation, memory players and
camera capabilities. We believe this convergence of
capabilities into smartphones has contributed to a decline in
several other product categories. This convergence trend is
likely to continue as smartphones evolve and as more
consumers adopt smartphone technology.