RadioShack to Close Its Doors for Good
RadioShack, which was once a giant in the electronic retail market, has filed for chapter 11 bankruptcy protection after being in business for an astonishing 94 years. This nearly century-old retailer is set to close almost 1,700 stores nationwide. RadioShack, a local Fort Worth, TX electronics store that CEO Charles Tandy turned into a national chain, has been struggling for many years due to intense competition from Amazon.com and Best Buy. Users have become enamored with the ease of purchasing from competitors’ websites, thus removing the need to leave their home to purchase desired items.
Morris Ajzenman, an analyst at Griffin Securities, is emphatic in his assertion that RadioShack has reached a point of no return. “This is the end. There’s nothing to say. It’s history. It’s a dinosaur. It’s a has-been,” Ajzenman told USA Today.
Current CEO Joseph Magnacca, a former Walgreen’s executive, tried to save the sinking company by introducing products that would peak consumers’ interests, such as Bluetooth speakers and smartphones. In an attempt to turn things around, Magnacca and his team remodeled various RadioShack stores across the United States and improved their advertising techniques, to include a sleek advertisement in last year’s Super Bowl which showcased former pro-wrestler Hulk Hogan. Despite his best efforts to turn RadioShack around, Magnacca realized that the continual drop in profits since 2006 made it time to throw in the towel.
According to the Los Angeles Times, RadioShack’s 2006 fourth-quarter earnings dropped 62%, and at that time the company announced plans to close 400 to 700 stores and two distribution centers to improve its financial performance — its’ total shares still tumbled 8%. The Los Angeles Times also reported that RadioShack earned $49.5 million, (or 36 cents a share) in the three months ending Dec. 31, down from $130.9 million, (or 81 cents) a year earlier. The profit decline reflected a $62-million write-down in the value of its inventory, higher promotional expenses and a merchandise shift.
RadioShack, which at one point used to sell the TRS-80, one of Tandy Corporation’s (name was formally changed to RadioShack in 2000) first mass-market personal computers, will stick around but it is only temporarily. According to the New York Times, 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. According to the New York Times, Sprint is also expected to run special “store to store” departments in approximately 1750 of those stores. In the meantime, RadioShack is still figuring out what to do with the rest of their remaining assets, including the stores that are still a part of the Standard General agreement/contract.
The TRS-80 (Tandy/Radio Shack, Z-80 microprocessor) was a personal computer system RadioShack invented back in the 1970s and immediately became a popular contraption amongst small businesses, home users, and hobbyists. Some of the key features of this device included a full-stroke keyboard, basic programming language as well as a monitor that came along with the package. Several government agencies, including the Federal Communications Commission (FCC), began to use the Model one computer, but radio interference became a major issue, and the FCC was forced to upgrade to the Model three.
Just last year alone, RadioShack had to close down approximately 175 stores and had a hard time refinancing its debt last fall. Standard General, RadioShack’s biggest shareholder, provided $120 million dollars in liquidity in order to prevent the company from going under.
According to www.Forbes.com, the company filed with $1.2 billion in assets and $1.38 billion in liabilities in a Delaware court Thursday, listing between 50,000 and 100,000 creditors. Wilmington Trust Company, owned by M&T Bank MTB +0.1%, is acting as a trustee representing unsecured creditors with $329 million in claims listed against RadioShack. Sprint holds a $6 million claim, the filing shows. As part of its bankruptcy filing, RadioShack reports that its secured a $285 million in debtor-in-possession financing commitment from its current asset-backed lenders group, which includes DW Partners.
RadioShack sold its first cellular phone in 1984 and the retailer has sold over 73 million cellphones nationwide since. RadioShack has had great success selling beepers, CD players, and mini disc players but, unfortunately, sales of these items fell off as smartphones began to dominate the market.
After being in business for 94 years, this is a disappointing end to an innovator in the electronics market. RadioShack’s choice to file for bankruptcy is not new. Many other electronic stores have filed bankruptcy in the past five years, included Circuit City, Olsen Electronics, and Leo’s Studio. A complete list of all the store’s closings can be found directly on the RadioShack’s website at www.radioshackcorporation.com.
Photo Credit: Wikipedia Commons
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