Mitchell Schnurman: Could RadioShack use that $3 billion now?
Ed Fox, director of the JCPenney Center for Retail Excellence in SMU's Cox School of Business, talks about the financial difficulties now facing Radio Shack.
Not long ago, RadioShack had money to burn. And that’s what it did.
From 2000 to 2011, the company spent $2.6 billion to buy back its own shares. It also spent more than $400 million on dividends.
The payouts pleased some shareholders, goosed earnings per share and lifted executive pay. But they did nothing to prepare RadioShack for the future.
Now the Fort Worth retailer is running out of cash and veering toward bankruptcy. Many question whether it can survive.
Imagine if RadioShack had built up a rainy day fund instead. Or invested more in stores and online sales. Or if it could pay off the high-interest loans that let lenders block its latest revival plan. . .
Its history includes epic misses in personal computers, cellphones and the Internet. It’s long struggled to catch the next hot thing and remain relevant. Meanwhile, big-box giants and online upstarts have eroded its once-lofty margins in everything from mobile service to Asian parts.
But at least RadioShack would have had some runway for reinvention. As it stands, the buybacks were a money pit and a symbol of what went wrong with leadership.
“It underscores the lack of vision and the internal focus,” said Ed Fox, a marketing professor at Southern Methodist University. “Management was too focused on its own business rather than how the business world was changing.”