(Reuters) - Electronics retailer RadioShack Corp said lenders have not agreed to the closure of 1,100 stores, raising doubts about its turnaround and sending its shares down 7 percent.
RadioShack, which warned of bankruptcy in September, was forced to reduce its target of 1,100 closures to 600 over three years after objections from lenders.
“We view the headwinds facing RSH as insurmountable,” CRT Capital analyst Kirk Ludtke wrote in a note. He said the company may file for bankruptcy.
The company, which has more than 4,000 stores in the United States and Mexico, said it has shut 175 stores this fiscal year and was in talks with lenders over further closures.
“We face significant challenges including from our term-loan lenders,” Chief Executive Joseph Magnacca said.
Lender Salus Capital Partners last week accused the company of breaching covenants on a $250 million term facility but RadioShack denied it.
Lenders refused to approve the closure plan unless the company prepaid a substantial portion of its debt and agreed to other covenants and concessions RadioShack considered “unreasonable”.
Gaining lenders’ consent could be difficult, Standard & Poor’s Ratings Service analysts wrote in a note.
The company said it expects $90 million of $400 million in annual savings to come from store closures and asset sales. [ID:nPn66XDtS]
RadioShack, which reported a bigger-than-expected quarterly loss, also said it was preparing for a rights offering in early 2015.
The retailer, once the go-to shops for innovators and engineers, has been left behind by the mobile revolution and its e-commerce strategy lags those of rivals such as Best Buy Co Inc and Amazon.com Inc.
RadioShack will reduce $300 million in costs by end of January, including $18 million from job cuts, Magnacca said. He did not reveal the extent of the job cuts.
The company expects cost cuts to continue into the early part of its year starting March.
The company also expects to save on its headquarters and field and store support.
Net loss widened 18.5 percent to $161.1 million, or $1.58 per share, in the third quarter ended Nov. 1.
Excluding items, loss from continuing operations was $1.23 per share, bigger than analysts’ estimate of $1.04.
Same-store sales shrank 13.4 percent.
Net sales fell 16 percent to $650.2 million, its eleventh straight quarterly decline. Analysts had expected $717 million.
Shares recovered 3 cents after touching a new record low of 50 cents.
Editing by Siddharth Cavale and Don Sebastian