RadioShack warns of possible Chapter 11 bankruptcy
RadioShack warned on Thursday that it may need to file for Chapter 11 bankruptcy reorganisation if it can't rework its debt or find another way to ease a cash crunch.
The struggling retailer said in a regulatory filing that it is in talks with its lenders, bondholders, shareholders and landlords to fix its balance sheet, but if it can't, it will try to file a prepackaged bankruptcy.
RadioShack, which is based in Fort Worth, Texas, has been working on turning around its business for the past 18 months. The company's efforts have included cutting costs, renovating and closing stores, and shuffling management. It reported another quarterly loss on Thursday on lower revenue.
CEO Joseph Magnacca said efforts to fix the company's problems could include debt restructuring, closing more stores and other cost-cutting measures. He said the company is reviewing several alternatives, some that would need consent from its lenders.
running out of cash
RadioShack is quickly running out of cash and warned on Thursday that it doesn't have enough left to fund its operations beyond the "very near term". The company reported US$30.5 million in cash and cash equivalents on hand as of August 2. That's down from US$179.8 million at the end of last year.
The company has struggled to find its place in the evolving retail and technology landscape. It's sought to remake itself, focusing on wireless devices and accessories, but growth in that business is slowing as more people have smartphones and see fewer reasons to upgrade. The company says it is working on becoming less dependent on that business.
It is trying to update its image and remain competitive against online and discount retailers. It is also working to add new products, including private brand and exclusive items.
For its second quarter, RadioShack reported on Thursday that it lost US$137.4 million, or US$1.35 per share, for the period ended August 2. That compares with a loss of US$52.2 million, or 51 cents per share, a year ago.
Stripping out certain items, loss from continuing operations was US$1 per share.
Revenue dropped 22 per cent to US$673.8 million from US$861.4 million.
Analysts surveyed by FactSet expected a loss of 66 cents per share on revenue of US$735.9 million.
Magnacca said the quarter's performance was mostly hurt by the postpaid mobile phone business, as customers were relatively unenthused about the current phone selections and were waiting for announcements on new devices such as the next generation of iPhones. There were also intense promotional efforts by wireless carriers, he added.
Sales at stores open at least a year declined 20 per cent on softer traffic and the weak performance of the mobile phone business. That figure is a key indicator of a retailer's health because it excludes results from stores recently opened or closed.
RadioShack's shares rose 10 cents to US$1.03 in midday trading.