Tandy Corp.

views updated

Tandy Corp.

founded: 1919

Contact Information:

headquarters: 100 throckmorton st., ste. 1800
fort worth, tx 76102 phone: (817)415-3700 fax: (817)390-2647 url: http://www.tandy.com

OVERVIEW

Tandy Corporation is one of the largest retailers of consumer electronics and personal computers in America operating about 7,000 retail stores in the United States, primarily in two chains: Radio Shack and Computer City. Some of its Radio Shack stores are operated under franchise agreements. Radio Shack sells audio and video equipment, digital satellite systems, PCs, and electronic parts. The Computer City chain sells hardware, software, and related computer products and operates approximately 100 stores in Canada, Europe, and the United States.

COMPANY FINANCES

In calendar 1997 Tandy Corp. posted net income of $187 million on revenue of $5.37 billion, compared with a net loss of $92 million on revenue of $6.29 billion in 1996, including charges for restructuring and impairment. Per-share earnings in 1997 were $1.63, compared with a loss of $.82 per share in 1996. In 1995, Tandy reported net income of $212 million on revenue of $5.84 billion, compared with net earnings of $224 million on revenue of $4.94 billion in 1994. Per-share earnings in 1995 and 1994 were $1.58 and $1.43, respectively.

ANALYSTS' OPINIONS

In recent years there has been something of a shakeout in the ranks of consumer electronics retailers. This has been a result, some have suggested, of the tendency of some retailers to invest millions in megastores that never attracted sufficient business to sustain them. Another stumbling block for some retailers in this market has been their decision to market a very broad range of products, which may have served to confuse less sophisticated consumers. In the wake of the shakeout, however, the outlook for this sector has improved sharply. According to Gary Shapiro, president of the Consumer Electronics Manufacturers Association, "the optimism is the highest it's been since the go-go days of the VCR."

HISTORY

The Tandy family operated a small leather craft store in Fort Worth, Texas, that opened its doors in 1919. Charles Tandy took the family store and expanded it into a national chain of leather and hobby stores in the 1950s. Tandy sought to expand the business further. He purchased Leonard's Department Stores in the early 1960s and then bought a near-bankrupt electronics supplier located in Boston in 1963. He took RadioShack's modest mail order business and nine retail outlets and aggressively expanded their inventory and sales. By the end of the decade Tandy's company's sales had grown, primarily on the strength of the RadioShack expansion, to $180 million and earnings to $7.7 million.

In the 1970s RadioShack's expansion continued. By 1973 there were about 2,300 retail stores that were contributing approximately 50 percent of Tandy Corporation's total sales. Tandy sold Leonard's Department Stores to Dillard in 1974. The following year, the leather and hobby stores were spun off into retail stores under the name of Tandycrafts. This allowed Tandy to concentrate on its consumer electronics business.

The boom in CB radios and the nascent personal computer market assisted Tandy's growth. The now-legendary TRS-80 was introduced to consumers in 1977—the first computer mass-marketed to consumers. It would become the top selling personal computer.

Tandy Corporation executives made a great deal of changes in the company's corporate operations in the early 1990s. Early in the decade, Tandy announced that its manufacturing and retail operations would be divided. TE Electronics Inc. would develop computers and home electronic equipment for Tandy's RadioShack stores. Also, Tandy Corp. closed 100 of its 413 name-brand stores, opening its first two Incredible Universe stores in their stead. These so-called gigastores were designed to be larger than existing stores in the chain and designed to offer consumers more software and entertainment products, as well as areas for displaying new electronics and consumer education. The plan behind these huge stores was to attract new merchandise from other manufacturers into the retail segment, while the manufacturing operation would be able to sell to various retailers in addition to RadioShack.

Construction was begun on the third Incredible Universe store in Dallas. Television Digest reported the existing Incredible Universe stores had traffic in excess of 100,000 customers each month. These superstores reportedly stock more than $9 million in inventory. Sales at the Portland store alone were greater than $59.5 million in its first year of operation.

Tandy Corp. officials announced plans to open four new store formats, raising questions about the company's market strategy and commitment to its traditional large-store format. The new chains included Famous Brand Electronics and Energy Express Plus; and RadioShack Express and Computer City Express—smaller versions of the existing Tandy retail chain stores. The new stores were designed to be placed in specific market segments in order to expand its customer base.

In 1993 Tandy began divesting itself of its non-retailing operations. These included Memtek Products, O'Sullivan Industries, and Lika. The sale proceeds were earmarked for the retirement of short-term debt and expansion of the Computer City and Incredible Universe chains. Tandy sold Memtek Products, and its license agreement with Memorex Telex N.V., to Hanny Magnetics (B.V.I.) Limited for $62.5 million in cash before the close of 1993. Tandy retained $61 million of the firm's account receivables. The other businesses were sold in 1994. Its computer manufacturing operation was sold to AST Research Inc. for $90 million; Tandy divested its ready-to-assemble furniture manufacturing and marketing business; and it completed the sale of Lika, its circuit-board manufacturing subsidiary, to Viktron LP for $17 million in cash.

Tandy Corporation announced in April 1994 its plans to open up to 14 Incredible Universe electronics stores during 1994 and 1995. The company said it expected sales in 1995 to increase to $450 million from $150 million in 1994. When Tandy opened its ninth Incredible Universe store in the Seattle/Tacoma market in 1995, the company announced plans to open an additional 10 Incredible Universe stories in 1996. The company originally estimated each store must have sales of about $65 to $85 million in order to succeed, but since has exceeded that figure. Most stores were constructed on the periphery of major metropolitan cities to attract a larger customer base.

The continued opening of the high-sales-volume retail chains—Incredible Universe and Computer City—was in response to increased competition Tandy faced in the consumer electronics industry. The company also began attempts to revitalize its RadioShack chain in late 1994. Sales in the second quarter of 1994 were about 20 percent higher than the same quarter in 1993, which indicated the company's strategies were working.

Tandy Corporation in 1994 began renovating Tandy Center, a fixture in downtown Fort Worth, with plans to convert it into an outlet retail center. The decision to revamp the 300,000-square foot center was made following a study that pointed to a lack of outlet retail projects in the Dallas/Fort Worth area.

As 1995 opened, Tandy Corporation closed more than 200 retail stores. The company announced it would shutter 173 Video Concept stores, 20 McDuff Super-centers and 40 McDuff mall stores. The company said it expected the impact on its bottom line to be minimal. The closure of the Video Concept chain was attributed to lower margins for PCs and big-screen televisions, the specialty in this particular chain. These closures meant Tandy would still have 47 McDuff Supercenters and 6 McDuff mall stores.

The Incredible Universe concept was not working as well as planned. The company reported that it was "disappointed" in both the sales volume and profitability of these stores after opening eight Incredible Universe stores during the year. Revenues for 1995 were $742 million. In May of 1996 Tandy executives announced the adoption of strategies designed to help boost sales throughout its struggling Incredible Universe chain. Among these were plans to open Computer City stores in Seattle to boost sales. Computer City assumed control of that area's Incredible Universe stores in June of 1996.

FAST FACTS: About Tandy Corp.

Ownership: Tandy is a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: TAN

Officers: John V. Roach, Chmn. & CEO, 59, $1,540,000; Leonard H. Roberts, Pres., Tandy & Radio Shack, 49, $884,020; Robert M. McClure, Sr. VP, Tandy 66, $507,058; Dwain H.Hughes, Sr. VP & CFO, 50, $502,252

Employees: 44,000

Principal Subsidiary Companies: Tandy Corp. has two major retail operations: Radio Shack and Computer City.

Chief Competitors: As a major force in the field of consumer electronics retailing, Tandy Corp. faces competition on two basic fronts: other consumer electronics retailers (some of which operate almost exclusively in the mail order arena) and the large national discount retailers that offer a wide range of products, including consumer electronics. Some of the company's leading competitors include: Best Buy; CompUSA; Circuit City; Dell; Babbage's Etc.; Gateway; Kmart; Office Depot; Office Max; Sears; Staples; and Wal-Mart.

In a major restructuring begun in late 1996 and continuing into 1997, Tandy completely phased out its mini-chain of Incredible Universe mega-stores. Also closed down were all of the company's McDuff outlets, as well as about 20 Computer City stores. Tandy also sold off a 20-percent interest in its Computer City chain to a group made up of former CompuCom and CompUSA executives.

In June 1997 Tandy opened the first of four prototype stores for its new TechAmerica subsidiary in Denver. Responding to a demand from the nation's burgeoning population of electronics hobbyists, Tandy strategists saw an opportunity to develop a new sort of retail operation to meet those needs. The Denver store has more than 15,000 products in stock, giving TechAmerica the largest technical electronics selection of any retail operation in the country. TechAmerica also offers a catalog with more than 540 pages of products from which to select.

Early in 1998 John Roach announced he would hand off his responsibilities as chief executive officer to president Leonard Roberts at the end of the year. Roach, however, will remain as chairman.

STRATEGY

Probably more than anyone else, Tandy president Leonard Roberts, who joined the company in the mid-1990s, has shaped the strategy that will carry it into the new millennium. It was Roberts who fathered the RadioShack advertising campaign with the slogan "You've got questions; we've got answers." To ensure that RadioShack personnel knew enough about the new technology to be able to effectively assist customers, Roberts instituted Saturday training sessions. RadioShack repair personnel, which previously had worked only on products purchased in RadioShack stores, began accepting products bought elsewhere. Roberts calculated that the goodwill generated by this broadened repair policy would in time pay off when consumers began shopping around for replacement products.

Roberts, correctly calculating that the cellular telephone would grow almost exponentially in popularity, early on cut a deal with Sprint Corp., under which RadioShack outlets began aggressively marketing Sprint telephone equipment and Sprint wireless service. The move has vaulted RadioShack into the number one position in retail sales of wireless telephone service. The telephone marketing strategy also has helped RadioShack attract more women into its stores, because about two-thirds of home telephone equipment is purchased by women. Even with that increase, women make up only a little more than a quarter of RadioShack's total clientele. Roberts is hoping to increase that share to 35 percent by the start of the new century.

Roberts has helped to reverse Tandy's move in the direction of "super-sized" retail outlets, selling off the company's Incredible Universe stores and selling a 20-percent interest in its Computer City chain to a group of outside interests. To extend RadioShack's marketing network even further, Roberts has begun opening the first of some 1,000 boutiques, each of which will average 500 square feet of display area in larger hardware and office supply stores around the country.

INFLUENCES

One of the factors that has helped to shape Tandy Corporation's marketing strategy during the 1990s has been the realization that more than 90 percent of Americans live within five minutes of a RadioShack retail outlet. The chain, with nearly 7,000 company-owned and franchised stores, enjoys one of the densest marketing networks of any company in the United States. When Leonard Roberts joined the company as its president in the middle of the decade, he saw this enormous marketing web as an asset that had not be fully utilized.

CHRONOLOGY: Key Dates for Tandy Corp.

1919:: Founded as a leather craft store in Fort Worth, Texas
1963:: Purchases a near-bankrupt electronics store
1974:: Sells Leonard's Department Store
1975:: Spins off leather and hobby stores as Tandycrafts
1977:: TRS-80 computer is introduced
1993:: Sells Memtek Products, O'Sullivan Industries, and Lika
1994:: Begins renovating Tandy Center in Fort Worth
1997:: Opens first Tech America store
1998:: Radio Shack announces plans to sell only three PC models made by Compaq

Another major influence shaping Tandy's marketing strategy in recent years has been the recognition that technical expertise in the consumer electronics arena could give the company a distinct advantage over some of the giant discount retailers that marketed computers and other consumer electronics products, but had few salespeople who knew much about the workings of those products.

CURRENT TRENDS

Having abandoned production of its own brand of computers, Tandy's RadioShack outlets in the mid-1990s have concentrated on marketing private-label personal computers and audio-visual equipment from other manufacturers. Early in 1998 Tandy president Leonard Roberts announced that beginning in the summer of 1998, the RadioShack chain will confine its personal computer sales to three PC models manufactured by Compaq Computer Corporation. As its part of the marketing agreement, Compaq will underwrite the cost of in-store displays and produce Compaq brand name accessories for use with its personal computers.

PRODUCTS

No longer involved in the manufacture of much of the product line it sells, Tandy markets private-label electronic components; telephone, audio, and video equipment; and personal computers in its chain of RadioShack retail outlets. Tandy's Computer City chain, 20 percent of which is owned by outside interests, concentrates on the sale of computers, software, and computer peripherals. There have been reports that Tandy soon may try to sell off the remainder of its interest in the Computer City chain.

CORPORATE CITIZENSHIP

Tandy Corporation has a matching gifts program under which it contributes funds to specific non-profit community organizations that meet specific criteria. The company gives on a two-to-one basis, up to $500 per person per annum, or matches one-to-one contributions of up to $7,000. The company includes among eligible organizations educational institutions, cultural organizations, and hospitals and medical centers.

Through its RadioShack subsidiary, Tandy also is involved in the national campaign to reduce crime. RadioShack has joined with the National Crime Prevention Council and the National Sheriffs Association to form United Against Crime, a public-private alliance to help educate the American public about crime prevention. Crime Prevention Answer Centers have been set up at RadioShack outlets around the United States. At these centers the public can obtain literature outlining simple steps that can be taken to reduce the risk of crime. Literature is available on reducing domestic violence, increasing security in schools, personal security measures, and how to set up community crime prevention programs.

To supplement the program's distribution of literature, RadioShack has set up the United Against Crime Network. Every quarter, at selected RadioShack regional offices, law enforcement, city, and school officials, as well as the public, are invited to attend live teleconferences on crime prevention. To make sure its war on crime reaches the broadest audience possible, RadioShack has set up a site on the Internet to distribute information on how best to combat crime. Information on personal, property, and community safety can be found at the Web site (http://www.unitedagainst.com/).

GLOBAL PRESENCE

With 12 distribution centers and 1,211 service centers in the United States and Canada, Tandy Corporation also operates or franchises almost 7,000 RadioShacks in the United States. Its Computer City stores operate approximately 100 stores in Canada, Europe, and the United States. Tandy has 9 manufacturing plants in the United States and in China it has 1.

SHACK SCHOLARS

The RadioShack/Tandy Scholars program recognizes both students and teachers in accredited high schools across the United States. This program was created to encourage academic excellence in America's schools. National winners share $350,000 in cash scholarships and awards. Certificates are also given to winners at their Honors Day programs. Schools may register by completing a one-time only form. Each school may nominate its premier math, science, or computer science student from the senior class for special recognition. One hundred of these nominees are chosen to receive a $1,000 scholarship to be used at the college or university of their choice. Participating schools may also nominate a math, science, or computer science teacher who demonstrates academic excellence in and out of the classroom. Of these nominated teachers, 100 receive a $2,500 award. Additionally the top 2 percent of students in the ninth, tenth, and eleventh grades are presented with certificates of recognition for their academic performance.

EMPLOYMENT

Tandy is an equal opportunity and affirmative action employer. The corporation's growth has created openings for administrative and support staff positions at Tandy's headquarters complex in Fort Worth, Texas.

With nearly 7,000 retail stores across the United States and abroad, RadioShack offers a number of job opportunities in both sales and management. The company is particularly interested in "individuals who display excellent communication skills, self-motivation, and the desire to succeed on a performance basis."

SOURCES OF INFORMATION

Bibliography

annual report 1995: tandy. fort worth, tx: tandy corporation, 1996.

company background: tandy corporation. fort worth, tx: tandy corporation, 1997.

mcwilliams, gary. "compaq's power play." business week, 9 february 1998.

palmeri, christopher. "management, strategies, trends: radio-shack redux." forbes, 23 march 1998.

"tandy corporation." hoover's online, 10 may 1998. available at http://www.hoovers.com/premium/profiles/11441.html.

tandy corporation: matching gifts program-an opportunity to triple the impact of your personal contributions. fort worth, tx: tandy corporation, 1994.