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Anyone watching RadioShack's demise over the past few months knew that a bankruptcy filing had become more a question of "when" than "if."
So to some, it came as a bit of a surprise when the retailer said Thursday that as part of its Chapter 11 filing, RadioShack shops could continue to exist in up to 1,750 newly purchased Sprint stores.
Although the locations would be rebranded as Sprint, on both the storefronts and in marketing materials, the stores would continue to sell some RadioShack products, services and accessories. Sprint spokesman Doug Duvall said it's yet to be determined whether RadioShack's nameplate would live on in the co-branded stores.
Retail experts, however, cautioned that it would be a risky move to keep the electronics chain's name associated with these new locations, given the beating its brand has taken over the past few years.
"The anchor that's been dragging this company down is the name," said Jack Trout, president of Trout & Partners marketing firm. "Talk about locking yourself to an ancient technology."
Ken Perkins, president of Retail Metrics, sounded a similar tone.
"It's become the butt end of a lot of jokes, unfortunately," he said. "They knew they had a problem with their image and their outdatedness and they just never could get beyond that," Perkins said.
Although changing the name on the door should "immediately provide some sort of a lift," that alone won't be enough to deliver a long-term boost to the stores, Perkins said. The shops will also need to to carry a more exciting, modern product selection, starting "first and foremost" with expanded mobile offerings.
That could include wireless gadgets, tablets and cellphone accessories.
Mickey Chadha, senior analyst at Moody's, added that the high-margin business of cellphone repair could continue to be an attractive offering for shoppers. Before it filed for bankruptcy, RadioShack was in the process of rolling out its Fix It Here program, which was "driving incremental high-margin growth," CEO Joe Magnacca said on the firm's most recent earnings call.
Sprint also stands to gain by driving consistent traffic into the stores through its prepaid phone service, which requires consumers to visit the shops to reload their phones.
Chadha added that many of RadioShack's locations skew toward lower demographics, meaning they could be particularly well-positioned to attract prepaid customers, who don't need to have a credit history to manage their accounts.
"It's definitely attractive in terms of getting people back to fill their cards," he said.
In the most recent quarter, Sprint's prepaid business generated $1.2 billion in revenue. While that's certainly sizable, it pales in comparison to $5.2 billion over the same period from its post-paid business.
The new stores would also help Sprint, which was looking to boost its store count to better compete with AT&T and Verizon, more than double its store base at a relatively low cost. That would be an important step for the carrier, which has the fewest stores in the category.
However, it wouldn't be all smooth sailing. If a deal were to be completed, the result would be the marriage of two companies that have struggled to compete in their respective categories. Whereas RadioShack fell victim to the Amazons and Best Buys of the world, Sprint continues to lag its competitors in the mobile market.
"The combination of RadioShack and Sprint, two underperforming companies, may not necessarily be a panacea of what ails the mobile market," Chadha said.