RadioShack ended its mobile retail relationship with Target, saying the two companies could not agree to terms that would have created more profit for both parties.
RadioShack said that as of April 8 it will no longer help operate Target Mobile in 1,500 Target stores. The deal, which was put in place in 2010, allowed RadioShack to manage Target's postpaid wireless business, but RadioShack did not manage the prepaid business or the wider range of mobile accessories Target sold.
The companies had been trying since October 2012 to renegotiate the terms of the partnership with so that it would be profitable to both companies. At that time, RadioShack gave Target notice that would allow RadioShack to exit the pact if an agreement could not be reached. The deal turned into a $38 million loss for RadioShack during the first three quarters of 2012, according to the Wall Street Journal; overall, RadioShack reported a loss of more than $76 million during that period.
"In order for RadioShack to have continued this relationship, we needed to establish a new agreement that would be financially appealing to both companies," Telvin Jeffries, a RadioShack executive vice president and general manager of retail services, said in a statement. "Ultimately, we amicably agreed to dissolve the relationship."
The deal put a crimp on RadioShack's ability to turn a profit because it could not sell accessories, which tend to have a higher profit margin, according to Scott Tilghman, an analyst at B. Riley Caris. "RadioShack will lose some lower-margin revenue from this," Tilghman told Reuters.
Target noted that Brightstar, a leading wireless distributor, and MarketSource, a sales and marketing services company, will take RadioShack's place in April.
RadioShack CEO Jim Gooch stepped down in September from the company after 16 months at the helm. CFO Dorvin Lively has been serving as acting CEO while the company searches for a permanent replacement.
For more:
- see this release
- see this WSJ article (sub. req.)
- see this Reuters article
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