RadioShack: Circling the Drain?

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The struggling electronics retailer may be forced to file for bankruptcy.

RadioShack is hemorrhaging cash, leaving the troubled electronics retailer to consider filing for bankruptcy.

“We may not have enough cash and working capital to fund our operations beyond the very near term, which raises substantial doubt about our ability to continue as a going concern,” the company said in a quarterly financial report filed with the Securities and Exchange Commission, according to USA Today.

RadioShack has been on life support for some time. Competition from online retailers and wireless carriers has token a toll. But Bloomberg Businessweek said the electronics store has been trying new things in an effort to remain profitable.

RadioShack’s survival plan is developing services that aren’t available online. It’s building in-store phone-repair operations and experimenting with concept stores designed as places where people can try out headphones and poke around with connected gadgets. The 84 concept stores open so far have been performing better than the rest of the chain.

In a statement, RadioShack CEO Joseph C. Magnacca said they are “actively exploring options” to gain access to more cash. The ailing retailer is negotiating with bondholders, shareholders, existing lenders and landlords to find a long-term solution.

Bloomberg added:

Earlier this year, after the company moved to close 1,100 stores, its lenders refused to approve the plan. Instead, the retailer got permission to close 200 stores this year and the same number each of the next two years. In the meantime, RadioShack is trying to cut expenses by negotiating lower rents and cutting hours to save on labor costs.

The efforts so far haven’t been enough. RadioShack just released its second-quarter results, reporting that same-store sales had plunged 20 percent from a year ago. It reported a net loss of $137 million for the last quarter, ending with just $30.5 million on its balance sheet, Bloomberg said.

Unless the company can negotiate some sort of lifeline with lenders and shareholders, bankruptcy may be the only option.

“Bankruptcy protection might not keep the company from failing altogether, but it might also be its only chance,” Bloomberg said.

Are you surprised to hear about the struggles of RadioShack? Share your comments below or on our Facebook page.

Stacy Johnson

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