UPDATE 4-RadioShack closing 1,100 stores after sales tumble 20 pct

Tue Mar 4, 2014 12:22pm EST

(Adds hedge fund manager, CEO comments, graphic, financing, updates stock price)

By Dhanya Skariachan

March 4 (Reuters) - RadioShack Corp said it will close up to 1,100 U.S. stores after reporting a wider quarterly loss and huge drop in sales during the holidays that raised concerns about the longer-term prospects for the U.S. electronics chain.

Its shares dropped as much as 20 percent.

The planned closings would leave the Fort Worth, Texas-based retailer with over 4,000 stores, including more than 900 dealer franchise locations, it said on Tuesday.

RadioShack's sales have been in free fall since 2010 amid executive departures, tough competition and an image problem. Despite its ubiquitous presence, analysts say the U.S. retailer has not done enough to become a destination for mobile phone shoppers or younger buyers.

The retailer, which has been losing share to the likes of Best Buy Co Inc and Amazon.com Inc, reported 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.

Sales totaled $935.4 million in the quarter covering the 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 "results 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.

The report also highlighted the mammoth task facing Chief Executive Officer Joe Magnacca, who took the helm in February 2013.

Magnacca, a restructuring expert credited with revamping Duane Reade drugstores before Walgreen Co bought the chain, said "the RadioShack turnaround will take time."

(For graphic on RadioShack shares after Magnacca took the helm: link.reuters.com/paz37v)

BUYING TIME

David Tawil, the co-founder of hedge fund Maglan Capital, said the move to shrink its store base was not a permanent solution to its problems.

"It should buy them time," said Tawil, a former bankruptcy attorney and distressed corporate workout specialist. "I don't think they have a place in the market." Maglan does not own RadioShack shares.

Its market share has fallen about 20 percent since 2010, according to data from Euromonitor International.

Tawil said he is concerned about its cash flow levels. "They can continue to operate but they are in a cash-flow negative spiral and that doesn't usually reverse itself," Tawil said.

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 matured between 2018 and 2019.

"SIGNIFICANT OBSTACLES"

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.

Magnacca blamed the latest sales weakness on poor shopper traffic, intense discounting, tepid mobile phone demand and operational problems such as poor inventory management.

"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.

RadioShack has been working with bankers from Peter J Solomon Co to boost liquidity, and with AlixPartners on improving operations. Last October, it obtained $835 million in financing commitments from a consortium of lenders led by GE Capital; CIT Corporate Finance; RBS Citizens NA and Salus Capital Partners.

Under Magnacca, RadioShack has changed its logo, reduced store clutter and improved displays. 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.

The stock slid 13.6 percent to $2.35 on the New York Stock Exchange, but fell as low as $2.19. (Reporting by Dhanya Skariachan in New York; Editing by Jeffrey Benkoe)

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Comments (16)
commonsense4 wrote:
Where am I going to get me ham radio supplies?

Mar 04, 2014 8:22am EST  --  Report as abuse
suiris wrote:
RS sales a ton of stuff most people will never buy… and unfortunately it’s 5-10 times more expensive than online competitors.. A resistor I can buy online for 89 cents with free shipping is 10 bucks at RS. Product knowledge of sales associates is next to nothing as well. When purchasing a 12v AC to DC inverter last summer no one could find one larger than 1amp while I required at least 10. After being told I was out of luck, I perused the section where they were looking and lo and behold in a box 12″ on a side, right in front on the bottom shelf.. an 18 amp inverter. I’m surprised they’ve lasted this long… I was in there last week and if not for the phone display it would have just been a mish-mash of products everywhere without reason. Does anyone buy a TV or stereo here anymore?

Mar 04, 2014 9:08am EST  --  Report as abuse
venturen wrote:
there are only uber rich…. The printed money went to the ultra rich….the rest of you can starve! Thank Obama for rescuing the wall street ultra rich! 9 private equity leader made $2.6 Billion…thanks to the Federal Reserve printing $85 Billion a month and GIVING IT TO THE RICH!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Mar 04, 2014 9:15am EST  --  Report as abuse
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