RadioShack Files Bankruptcy

RadioShack

RadioShack files for chapter 11 bankruptcy. The technology store has around 5,000 stores as of now, but around 1,780 stores will be closing for sure. Sprint may make a deal with the tech store to keep 1,750 locations as Sprint retail sites, a co-branded deal.

As of February 5, the tech store filed for bankruptcy. Some stores will close mid to end of February, and others will close in March. Most of the 1,784 stores will be closed by the end of February and March.

The deal between Sprint and RadioShack may save more than 1,700 stores, but 1,784 stores will definitely be closing in the next two months. The result of the impending bankruptcy is the liquidation sale of products for the 1,750 stores. The company made a deal to sell the remaining stores. The franchises will not be directly affected .

RadioShack has taken out loans from Cerebus, with $100 million and Salus Capital Partners LLC with $150 million.  Similar to how Circuit City went bankrupt in 2009, with their last-ditch effort to change their name to The City, RadioShack did something similar as they attempted to change their name to The Shack.

The RadioShack filing was not unexpected, as it has been in the process for months. With 11 back-to-back unprofitable quarters, the company has failed to draw customers into their stores.

RadioShack officials admits that their not as hip as they used to be. In fact, a recently released commercial shows company employees saying that “the eighties called and they want their store back.” The next minute of actions consist of 80’s characters, Jason Voorhees, green slime ghost, Hulk Hogan, and the mailman from Cheers as well as various other well-known icons and celebrities. These 80’s celebs take all of RadioShack’s products, with the end implying that their stores are now up to date. 

The potential merger between the tech store and Sprint would allow many stores to stay in business. According to a statement made by Marcelo Claure – Sprint Chief Executive, the merger would allow Sprint to increase branded distribution for more bang to the buck.

The merger would mean that current Sprint stores would receive less traffic, but this is a good thing because people are currently waiting too long, according to Claure in an interview with Reuters. The RadioShack stores that are going to have Sprint will have to give up a third of the space in each store to the telecommunications giant. RadioShack stores occupied by Sprint will now sell Sprint’s mobile devices in addition to RadioShack items, services, and other electronic devices.

The bankruptcy will not affect the Mexican subsidiary or the Asian operations, nor the 1,000 franchise locations. Right now, the RadioShack locations that are to be abandoned will have a liquidation sale because the company cannot afford to lose a weekend.

The company will be restructured, meaning that RadioShack will largely  be owned by another entity or entities. The company’s Chief Executive, Joe Magnacca, said the steps had to be taken for the effort to have maximum value for their stakeholders. Stakeholders are the people or companies invested in the company from shareholders to employees.

The RadioShack bankruptcy filing allows the company to sell products at a reduced liquidation price, consequently meant to break the 2-year-long streak of not being profitable. Around a third of the company will be liquidated leaving two-thirds left: the profitable locations, and the franchises.

By Jacob Dowd

Sources:

Gizmodo

Business Insider

GameSpot

FOX Business

The Wall Street Journal

Photo by Nicholas Eckhart – License

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