RadioShack plans to close a quarter of its stores as it continues its struggle with an outdated image and finding a niche in the competitive consumer electronics industry.
The chain yesterday said it plans to shutter 1,100 under-performing stores as part of a turnaround and cash management plan.
The Fort Worth, Texas, company's stock took a beating yesterday. It fell 17.28 percent to $2.25 per share after it reported a wider-than-expected quarterly loss of $191.4 million — its eighth straight quarterly loss — on sales that declined 20 percent to $935.4 million.
"As we noted in the past, the RadioShack turnaround will take time, and our results will vary as we make strategic changes to improve our long-term financial performance," said CEO Joseph Magnacca, who was hired a year ago.
RadioShack is trying to reposition as a more modern brand that appeals to a new generation of shoppers. Its Super Bowl ad poked fun at the company's outdated image by showing characters and personalities from the 1980s such as Hulk Hogan, It's revamping its merchandise in part by partnering with business incubators, and trying to reinvigorate stores with interactive content and through design.
The store closings require lender approval and are subject to landlord negotiations. CFO John Fera said the company didn't consider a prepackaged bankruptcy to get out of the leases more quickly. "We feel like we have enough liquidity for the remainder of the year," he said.
But B. Riley & Co. analyst R. Scott Tilghman said the turnaround plan has come too late. "It would have been great if it would've been implemented four or five years ago, but I think today the balance sheet will ultimately be what guides them," he said. "And they'll likely be very limited in implementing massive change because they don't have deep pockets."
Tilghman also doubts the store closings will make a difference for RadioShack's profit and loss statement.
"There's still the rest of the chain that is going to be unprofitable," he said. "The company is really up against the ropes. Competitive pressures have been heightening for years."
That competition is coming from mobile carriers' own stores, a tripling of market share by Best Buy, and more retailers getting into mobile sales, such as Framingham-based Staples.
In addition to a tough holiday season, RadioShack had a few operational challenges, according to Magnacca: "Simply put, we exceeded our organization's capabilities by trying to do too much too quickly."
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