How is radio shack still in business

Sprint to run a "store within a store" across 1,750 locations.

by Cyrus Farivar - Feb 5, 2015 11:42 pm UTC

Well, we all could see this coming a mile away: RadioShack has finally filed for Chapter 11 bankruptcy protection.

The company’s Thursday court filing states that it has over $1.3 billion in liabilities, with $1.2 billion assets. In the wake of the filing, the company will close about half of its existing stores, and will indeed sell the remaining (as had been rumored ) half to Sprint.

Bankruptcy protection wouldn't necessarily mean that RadioShack intends to go out of business. Rather, it would mean RadioShack would be given a certain period of time to rebuild itself and shield itself from creditors. In a similar situation from September 2013, a smaller Kodak emerged from bankruptcy.

Heck, back in 2007, the satirical newspaper The Onion offered this prescient headline: "Even CEO Can't Figure Out How RadioShack Still In Business." In late 2013, Ars named RadioShack as one of five companies under “deathwatch ” for 2014. The company has not been profitable since 2011.

In a statement. RadioShack said that Sprint would “effectively operate a store within a RadioShack store, occupying approximately one third of the retail space of each location.”

“We’ve proven that our products and new offers drive traffic

to stores, and this agreement would allow Sprint to grow branded distribution quickly and cost-effectively in prime locations,” said Sprint CEO Marcelo Claure in the statement. “Sprint and RadioShack expect to benefit from operational efficiencies and by cross-marketing to each other’s customers.”

In December 2014, after RadioShack posted its most recent third fiscal quarter earnings statement. the company revealed a quarterly net loss of over $161 million—and a nearly $400 million net loss on the fiscal year to date. By comparison, RadioShack lost over $216 million in the first nine months of 2013.

To put it plainly, things did not look good in that filing :

We have experienced losses for the past two years that continued to accelerate into the third quarter of fiscal 2015, primarily attributed to a prolonged downturn in our business. Our ability to generate cash from operations depends in large part on the level of demand for our products and services. We continue to face an uncertain business environment and a number of fundamental challenges in our mobility business due to lack of availability of new devices launched during the period, aggressive price competition and intense wireless carrier marketing activities.

In its report, RadioShack added that it has closed 175 "underperforming stores since the beginning of the current fiscal year," with more likely on the way.

Source: arstechnica.com

Category: Personal Finance

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