Cost cuts reap profit for Radio Shack

Consumer electronics can be a brutal business. Narrow profit margins, tough online competition and discounts, discounts, discounts. Some national chains have folded, Circuit City probably the best known. But today Radio Shack reported its profits rose 18% from a year ago.

Radio Shack’s been around so long, some say it feels like a relic from the ‘90s.

“By the general public, they are seen as kind of out of date, behind the times, they’re not big and flashy,” said John Laposky, managing editor of Twice, a consumer electronics industry newsletter.

So why has Radio Shack survived as others have fallen? Part of the answer is the company’s ubiquity: 4,500 stores, 1,400 dealer outlets and 600 cell phone kiosks.

“They’re a little bit like the McDonald’s of technology retail,” said consumer analyst Carl Howe with the Yankee Group. “They don’t have the fanciest things. They don’t have the highest-end models. But they do have something that a lot of people will buy.”

Radio Shack also has been ruthless about cutting costs and closing underperforming stores. The chain was profitable this past quarter not because its sales are up, but because its expenses are way down. Analyst Paul Nolte with Hinsdale Associates said Radio Shack has cornered a consumer niche: the do-it yourselfer.

“A Best Buy or a Circuit City is a let-me-buy-everything-and-be-done-with-it. As opposed to, you know, I need a couple replacement parts, can’t find it anywhere. And Radio Shack is the place to go to find some of that stuff,” he said.

Radio Shack sees its future in wireless accessories and services. Last week, it inked a deal with T-Mobile to start selling their phones.