RadioShack scrambles to revive chain, will close up to 1,100 stores

Bloomberg NewsMarch 5, 2014 

RadioShack said it plans to close up to 1,100 stores in the U.S. and reported a wider quarterly loss after a disappointing holiday season. This store in downtown Cincinnati is one of the chain’s existing stores.

AL BEHRMAN/THE ASSOCIATED PRESS

Shares of RadioShack, the electronics retailer trying to shake its reputation as a relic, tumbled the most in more than four months after the company reported disappointing sales and announced plans to close about a fifth of its stores.

Fourth-quarter revenue declined 20 percent to $935.4 million, the Fort Worth, Texas-based company said in a statement Tuesday. Analysts anticipated $1.12 billion on average, according to data compiled by Bloomberg.

The results show that CEO Joe Magnacca hasn’t yet succeeded in rejuvenating the almost-century-old chain, which once sold gear to shipboard radio officers. The retailer has been retooling stores in response to competition from online rivals such as Amazon.com. To help speed the comeback, RadioShack said Tuesday it will shut as many as 1,100 underperforming stores, leaving about 4,000 U.S. locations.

“The company is burning through cash,” Scott Tilghman, an analyst at B. Riley & Co., said Tuesday on Bloomberg Radio. “We don’t see the fundamentals moving out of the red for at least the foreseeable future.”

The shares fell 17 percent to $2.25 at the close in New York, the biggest decline since Oct. 22, when RadioShack reported a wider-than-estimated third-quarter loss. The stock has dropped 46 percent since its 2013 closing peak of $4.19 in May.

The company’s $324.8 million of 6.75 percent notes due May 2019 dropped 9.75 cents to 56.25 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The 21 percent yield is more than three times the 5.5 percent yield on the Bloomberg USD High Yield Corporate Bond index.

RadioShack’s fourth-quarter net loss widened to $191.4 million, marking the eighth consecutive quarterly loss, from $63.3 million a year earlier. Sales at stores open at least a year sank 19 percent. David Schick, an analyst with Stifel Financial in Baltimore, anticipated a 3 percent decline.

RadioShack’s “strategic initiatives will take time and expense,” Schick said in a note to clients. Still, “closing stores is a positive,” and the chain may be able to regain some sales online, he said.

“The mobile phones category was very weak, and mall traffic is very weak,” Schick, who has a hold rating on the shares, said in a phone interview. “Their biggest category is wireless. The majority of folks have their mobile phones. We are past adoption.”

The company had problems keeping some merchandise in stock during the quarter while trying to clear out other goods, Magnacca said on a conference call Tuesday.

“We exceeded our organization’s capabilities by trying to do too much too soon,” said the CEO, who took over last year.

RadioShack’s roots reach back almost a century, to the founding of the Hinckley-Tandy Leather in Texas in 1919, and, two years later, to a RadioShack store and mail-order business in Boston that sold gear to shipboard radio officers, according to the company’s website. Tandy bought RadioShack in 1963, and the company changed its name to RadioShack in 2000.

In the 1990s, the retailer bought 100 Computer City stores and opened its Incredible Universe chain to expand into larger formats. Both are now defunct.

The retailer was the first to sell a mass-produced personal computer, in 1977, and in the 1980s became among the earliest merchants to offer mobile phones.

RadioShack mocked that period with a Super Bowl commercial last month featuring Alf, Hulk Hogan and other characters from the era rampaging through a store after a salesman picks up the phone and informs his colleague: “The ’80s called. They want their store back.” The spot has garnered almost 3 million views on YouTube.

“It’s time for a new RadioShack,” the ad’s narrator concludes. “Come see what’s possible when we do it together.”

RadioShack didn’t immediately identify which stores will close or how many jobs would be affected. A call to the company, based in Fort Worth, Texas, was not returned.

The Associated Press contributed to this report.

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