Media Moves

Coverage: Radio Shack files for bankruptcy protection

February 6, 2015

Posted by Liz Hester

Radio Shack is down for the count after nearly a century in business. If you’ve walked or driven past a storefront lately, this isn’t a shock. What is surprising is how long it has lasted.

The New York Times story by Rebecca R. Ruiz and Michael J. de la Merced said time was up:

For years, RadioShack — the retailer that helped bring personal computers to the masses — outlasted untold predictions that it would buckle in the face of bigger rivals and online competitors.

But its clock has finally run out.

RadioShack, a long-ailing 94-year-old electronics chain, filed for bankruptcy protection on Thursday after striking a deal to sell up to 2,400 of its stores to the wireless service provider Sprint and a hedge fund that is its biggest shareholder.

The Chapter 11 filing, made in federal bankruptcy court in Delaware, took few unaware. RadioShack had not turned a profit since 2011, and its fate had been a regular topic of speculation in the retail and corporate restructuring circles.

“The surprise is that they survived this long,” said Michael Pachter, an analyst at Wedbush Securities. “I didn’t think they’d last through Christmas 2013.”

But RadioShack is poised to live on, at least in much diminished form. Sprint and the hedge fund Standard General agreed to buy 1,500 to 2,400 of RadioShack’s 4,000 company-owned stores in the United States. Sprint is expected to run special “store within a store” departments in up to 1,750 of those stores.

The USA Today story by Matt Krantz highlighted that Radio Shack’s troubles aren’t unique:

RadioShack personifies the type of brick-and-mortar company that’s struggled amid the growth of online rivals such as Many of the cords and electronic products sold in the stores can be purchased at much lower prices online, while RadioShack must manage expensive real estate in cities across the country.

“We’ve seen this in the past. Major retailers that don’t adapt over time disappear and fade away,” Ajzenman says.

Current CEO Joseph Magnacca, a former Walgreen executive, tried to revitalize the brand by introducing more products popular with today’s consumers, such as smartphones and Bluetooth speakers. Many of the stores were also remodeled, locations closed and advertising ramped up. The company had the sleeper hit Super Bowl advertisement last year, featuring celebrities famous during the 1980s, like pro wrestler Hulk Hogan.

But the turnaround hasn’t panned out. RadioShack’s revenue has fallen each and every year since 2006. RadioShack’s revenue of $2.3 billion during the 12 months ended Nov. is 46% below where it was in 2010. The company reported a net loss of $633 million in the 12 months ended in November.

Dawn McCarty and Lauren Coleman-Lochner wrote for Bloomberg about the company’s finances:

The company listed assets of $1.2 billion and debt of $1.38 billion in documents filed Thursday in U.S. Bankruptcy Court in Wilmington. More than a dozen affiliates also sought court protection, including Tandy Finance Corp. and Atlantic Retail ventures.

Holders of RadioShack’s 6.75 percent notes that mature in May 2019, owed $329.67 million, are listed as the largest creditors without collateral backing their claims. Other unsecured creditors include Sprint PCS, owed about $6.1 million; Assurant Service Protection Inc., owed about $4.1 million; and Verizon Wireless, owed about $2.9 million, according to court papers.

RadioShack plans to borrow as much as $285 million from its current lender group to provide liquidity during the sale process, according to the statement.

CNET’s Roger Cheng outlined what Sprint would get in the deal:

Sprint, however, breathes new life into a fraction of the stores. The deal gives the nation’s third-largest wireless carrier additional distribution. Sprint operates 1,100 company-owned stores in the US, fewer than even T-Mobile, the No. 4 wireless carrier.

“Sprint’s deal is a smart way to dramatically increase its footprint of company-owned retail locations,” said Jan Dawson, an analyst for Jackdaw Research. “This deal is a cost-effective, rapid way for Sprint to make some rapid progress.”

“Our goal is to grow distribution,” Sprint CEO Marcelo Claure said in an investor conference call earlier Thursday. “We’re looking at different opportunities.”

Sprint said that it would operate a “store within a RadioShack store,” allowing it to have a retail location where it has the exclusive rights to push its own service, as well as its prepaid options Boost Mobile and Virgin Mobile. The stores will carry both brands with Sprint being the primary brand on storefronts and in marketing material. RadioShack previously pitched phones and services from several different carriers.

The bankruptcy proceeding means that the rest of the stores will likely close, although the company said it is in talks to sell the rest of its assets. Amazon was reportedly also interested in scooping upsome of the stores.

Many of the story headlines highlighted how expected the news was of Radio Shack’s demise. Some of the pieces pointed out that Sprint was getting a good distribution network, while others talked about the inevitability of specialty retailers falling prey to mass ones such as Amazon. Sure it might have been coming, but it doesn’t mean the fall isn’t worth noting.

Subscribe to TBN

Receive updates about new stories in the industry daily or weekly.

Subscribe to TBN

Receive updates about new stories in the industry.