Biz Beat Blog – by Maria Halkias
RadioShack said Thursday that it may have to file bankruptcy to reorganize its business.
The company’s earnings report showed sales dropping 20 percent and its loss doubling year-over-year in the second quarter.
CEO Joe Magnacca said this morning in a press release that the company is looking for more capital needed for turnaround efforts he started 18 months ago.
“We are actively exploring options for overhauling our balance sheet and are in advanced discussions with a number of parties,” he said.
RadioShack is in talks with its existing lenders, bond holders, shareholders and landlords, he said. Solutions may include a debt restructuring and store closings and other actions that will significantly reduce the company’s costs, he said.
“Details of a recapitalization haven’t been finalized. As a result, we may be required to seek to implement an in-court proceeding under Chapter 11 of the United States Bankruptcy Code,” the filing said.
So far this year, RadioShack has closed 47 stores by not renewing leases. Magnacca wanted to close more than 1,000 of the chains 4,200 U.S. stores, but its lenders nixed that idea. Under its current credit agreement it can close only 200 stores a year.
The Fort Worth-based consumer electronics chain reported a net loss of $137.4 million, or $1.35 a share in the period ended Aug. 2, compared with a loss of $52.2 million, or 51 cents a share, a year ago.
RadioShack said a weakness in consumer electronics, shoppers waiting for new smartphones out this fall and aggressive price competition in the mobile space hurt its second quarter results.
Intense promotions from wireless carriers such as AT&T, Verizon, Sprint and T-Mobile, motivating customers to switch networks and offers for new phone financing left it out of the loop. Those programs initially were only offered by the carriers. This month, RadioShack began offering the carrier financing programs too.
RadioShack ended the quarter with $30.5 million in cash and $152 million available to it on its credit agreement. The company’s total debt was $658 million and doesn’t come due until 2018 and 2019.
Second quarter sales fell 22.percent to $673.8 million versus $861.4 million last year. Same-store sales fell 20 percent both from a decline in traffic and a 30.4 percent decline in its mobile business.
Wednesday, Wedbush Securities analyst Michael Pachter said in a report where he lowered his price target for the stock to $0, that a bankruptcy filing was imminent.
“RadioShack’s operational decisions are now being vetted by creditors and equity investors are no longer relevant to management decisions the creditors clearly are in control of the ship and, in our view, the ship is sinking,” Pachter said.
Magnacca didn’t take questions form analysts during the call this morning. He emphasized that no decision has been made yet about how the company would recapitalize.
“It’s clear the pace of our turnaround simply isn’t not fast enough” and so the company needs more cash to see plans through, he said.
This holiday season, the company plans to be more aggressive both with assortments and pricing, Magnacca said.
Radio shack lost its way a long time ago
too busy trying to be a cell phone store
no longer an electronics store for the “builder” of electronic stuff, very little in the way of components for the hobbyist that has knowledge of how to build circuitry and items like that
its a gimmick store now with very little substance JMO
Agreed. Never liked the store anyways.
I dont consider them competition and I own an electronics repair/parts store.
They are 1 mile away. usually people come in with things RS screwed up because the kid working thinks ohms law is an act of congress.