Amid sales losses, RadioShack to close 1100 stores
Retailer RadioShack Corp reported a wider quarterly loss on Tuesday and said it will close up to 1,100 U.S. stores after a huge drop in sales over the holidays, sending its stock down nearly 24 percent.
The planned closures would leave the Fort Worth, Texas-based chain with over 4,000 stores, including over 900 dealer franchise locations, its chief executive officer said.
Sales totaled $935.4 million in the quarter covering the all-important holiday season, down 20.1 percent from $1.17 billion in the year-ago period. Analysts, on average, looked for sales of $1.12 billion, according to Thomson Reuters I/B/E/S.
Sales at stores open at least a year fell 19 percent in the fourth quarter on weak customer traffic.
The grim results were not entirely unexpected, considering the overall weakness in the consumer electronics industry during the holidays, but many on Wall Street took a grim view of the company's prospects.
"The company's results were much worse than we anticipated, and cast serious doubt onRadioShack's long-term viability in our opinion," said BB&T Capital Markets analyst Anthony Chukumba.
RadioShack peers Best Buy Co Inc and hhgregg Inc also reported weaker-than-expected sales in what turned out to be the most heavily discounted holiday shopping season since the recession.
CEO Joe Magnacca, who took the helm in February 2013, has said he expected the turnaround to take several quarters. He blamed the latest sales weakness on poor shopper traffic, intense discounting by rivals, tepid mobile phone demand and operational problems.
"Mr. Magnacca and the new team deserve a lot of credit for the changes they are making, but it seems harder and harder for them to overcome the more significant obstacles," said Janney Capital Markets analyst David Strasser. He worried that wireless industry weakness could stall its turnaround.
Strasser said the announcement on Tuesday "reads somewhat like the Circuit City press releases of 2008, before they filed (for bankruptcy) in November 2008."
RadioShack's sales have been in free fall amid executive departures, tough competition and an image problem. Despite its ubiquitous presence, analysts say the U.S. retailer has not done enough to transform itself into a destination for mobile phone shoppers or become hip enough to woo younger shoppers.
RadioShack's market share has fallen 30 percent since 2004, according to data from Euromonitor International.
Its net loss widened to $191.4 million, or $1.90 a share, in the fourth quarter, from $63.3 million, or 63 cents, a year earlier.
RadioShack has been working with bankers from Peter J Solomon Co to boost liquidity and with AlixPartners on improving operations.
The retailer, which secured new loans heading into the holidays, ended the fourth quarter with total liquidity of $554.3 million, including $179.8 million in cash and cash equivalents and $374.5 million in available credit.
At Dec. 31, its debt totaled $614 million and matures between 2018 and 2019.
Under Magnacca, RadioShack has changed its logo, reduced store clutter and improved displays of key brands. It has also been moving some products from stores to its website, and carrying more private-label goods with higher margins.
The retailer recently named a new merchandising chief, global sourcing chief and chief financial officer. But some analysts say the efforts are too little, too late.
RadioShack shares were down 23.9 percent at $2.07 in premarket trading.
