RadioShack to close nearly 1,100 stores
By James Covert
They’re starting to switch off the lights at RadioShack.
The cash-strapped electronics chain said it’s looking to shutter as many as 1,100 stores, more than a fifth of its locations nationwide, after disclosing a full-year loss that swelled to $400 million.
Fourth-quarter results, which got slammed by a 20-percent revenue drop, “were much worse than we anticipated, and cast serious doubt on RadioShack’s long-term viability in our opinion,” BB&T Capital Markets analyst Anthony Chukumba said.
RadioShack, which lately got attention for Super Bowl ads that featured throwback characters from the ’80s including Hulk Hogan, Mary Lou Retton and sitcom alien ALF, saw its shares slide 17 percent on the news, closing at $2.25.
The stock has been stuck below the $5 range for more than a year and a half as the debt-laden retailer has struggled to right its business.
Industry experts say RadioShack has been hit especially hard by the rise of Web retailers such as Amazon. That’s because the latter are better equipped to carry a wide selection of the gadgets, parts and accessories that had been RadioShack’s bread and butter for decades.
I think that the business is irrelevant,” said David Tawil of Maglan Capital, a New York investment firm. “I don’t see a vision on the future of the business.”
In a Tuesday conference call with analysts, CEO Joe Magnacca made it clear that the company believes that its chain of 5,200 stores is simply too big.
“Within five miles of my home, I have eight RadioShack locations,” said Magnacca, a former Walgreen exec hired last year to help resuscitate the retailer.
Nevertheless, insiders say the company’s plan to close stores has sparked friction with the company’s lenders, which in some cases have taken RadioShack’s leases as collateral.
“After a quarter like this, it’s going to be an uphill battle convincing the banks that exiting stores is a safe bet,” according to one industry source.
On Tuesday’s conference call, RadioShack execs fielded analysts’ questions about the company’s liquidity after it disclosed that some suppliers have demanded letters of credit in exchange for deliveries of fresh merchandise.
For the fourth quarter, RadioShack’s loss widened to $190.4 million — three times the size of its year-earlier loss — as its margins got squeezed by stiff price competition.
Some of the wounds were self-inflicted, execs admitted, as RadioShack discounted some items that were already selling briskly and failed to order adequate stocks of other hot sellers.
Sagging demand for mobile phones has been a nagging problem in recent seasons for electronics retailers industrywide. Still, RadioShack seems to have been hit harder than most, according to Tawil of Maglan Capital.