Spavined RadioShack to file for bankruptcy next month – report
May sell off some retail locations to Sprint
Ailing electronics retailer RadioShack is teetering ever closer to insolvency, reports claim, with a potential bankruptcy filing to come as soon as next month.
Although RadioShack has not said that it plans to file for bankruptcy, the Wall Street Journal reports that Salus Capital Partners has already offered it $500m in financing to underwrite its operations should it choose to do so.
The iconic US electronics chain is believed to be preparing to file for protection under Chapter 11 of the US Bankruptcy Code, which would allow it to remain in business while it works with the court to restructure its debt.
So far, however, RadioShack is spending money faster than it can make it. It posted a net loss of $161.1m for the third quarter of its fiscal 2015, which ended on November 1. Over the 39 weeks leading up to that date, it lost a total of $398.6m, and it shows no signs of slowing the bleeding. Its most recent filing was its eleventh quarterly loss in a row.
During the company's financial earnings report in December, CEO Joseph Magnacca said he plans to scale RadioShack down and focus on its mobile business, which, "while much smaller in terms of revenues than in recent years, will be substantially more profitable than our recent results."
One way to reduce RadioShack's footprint that Magnacca is reportedly considering is to sell off some of its estimated 4,100 retail locations. The company shuttered some 1,100 stores in March 2014, which represented around 20 per cent of its then total. Now Reuters reports that the firm is believed to be in talks with US wireless carrier Sprint to take over some locations.
Magnacca would reportedly like RadioShack to emerge from bankruptcy with 2,000 to 3,000 stores, meaning he plans to shed at least 25 per cent of the current total.
Such talk has done little to assuage investors, however, who have pummeled RadioShack's stock mercilessly ever since word of its impending bankruptcy let slip late on Wednesday. The company's share price was down 35.6 per cent as of Thursday's closing bell and continued its slide in after-hours trading. ®
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