RadioShack to Close 200 Stores In Each of Next Three Years
RadioShack will close 200 stores in each of the next three years -- the maximum allowed without lender approval -- but is continuing talks with the firms in a move that could broaden the restructuring, an analyst said.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
The chain unveiled plans in March to shut 1,100 stores, but met with an impasse with lenders under a 2018 credit and loan agreement that forced scaling back plans, an analyst said. RadioShack hasn’t identified the lenders but it placed a five-year $250 million loan in December with Salus Capital Partners. It also landed a five-year credit pact in December with GE Capital that included a $535 million asset-based revolving facility.
Closing 1,100 locations would have enabled RadioShack to make a “more significant advancement” in the chain’s business “much more quickly,” RadioShack CEO Joe Magnacca said. While the stores slated for closing were reviewed for profitability, RadioShack also weighed their location and whether they overlapped with other outlets, Magnacca said: “It was more about taking a much more strategic view of our real estate and getting to a place sooner than later."
As it restructures, RadioShack has opened 38 new concept stores including one recently in Baltimore, Magnacca said. It plans to remodel another 100 to the new format, which includes speaker and headphone walls and a connected home section of products that will include Belkin gear, Magnacca said. RadioShack also plans to expand its Fix It Here repair centers for mobile devices to 700 locations by year-end from 300, he said. The centers launched last fall with 21 locations.
While RadioShack is making strides with the new formats, which are generating sales growth, they are “such a small part of the overall store base that they do not really move the needle,” Janney Capital Markets analyst David Strasser said.
RadioShack also is “refreshing” 30-40 percent of its product assortment with new items, including private label devices, that account for about 25 percent of the chain’s SKUs, Chief Financial Officer John Feray said. Some private label products -- including a RadioShack brand cellphone case -- will arrive in Q2, but most of them will be available in the second half, he said. The first products from RadioShack’s agreement with supply chain management company PCH also will arrive in July as part of the launch of RadioShack Labs. RadioShack also will have exclusive headphones from Harman International’s JBL brand and Jaybird’s Bluetooth headsets, Magnacca said.
RadioShack’s mobility business, which accounts for more than half of the chain’s revenue, fell to $360 million from $443 million on a decrease in the chain’s postpaid wireless segment, due to “intense” promotional activities from wireless carriers, RadioShack said. Retail platform revenue, which includes sales of batteries, chargers, home networks and voice-over-Internet devices, fell to $314 million from $346.2 million, the chain said.