Amazon considers acquiring RadioShack
Taking over locations could put online retailer on more even footing with Apple
Amazon.com Inc., aiming to bolster its brick-and-mortar operations, has discussed acquiring some RadioShack Corp. locations after the electronics chain files for bankruptcy, two people with knowledge of the matter said.
Amazon has considered using the RadioShack stores as showcases for the Seattle-based company’s hardware, as well as potential pickup and drop-off centres for online customers, said one of the people, who asked not to be named because the deliberations are private.
The possible move, discussed as part of RadioShack’s looming trip to bankruptcy court, would represent Amazon’s biggest push into traditional retail. Amazon joins other potential bidders, including Sprint Corp. and the investment group behind Brookstone, in evaluating RadioShack stores, people familiar with the situation said.
RadioShack has more than 4,000 U.S. locations and is moving toward a deal to sell a portion and close the rest, according to some of the people. Sprint has discussed buying 1,300 to 2,000, they said.
Craig Berman, a spokesman for Amazon, didn’t respond to a request for comment. Merianne Roth, a spokeswoman for Fort Worth, Texas-based RadioShack, declined to comment, as a representative for Brookstone.
As part of the negotiations, Sprint and RadioShack have discussed cobranding the stores, two of the people said. Liquidation isn’t inevitable: It’s possible that another bidder could emerge that would buy RadioShack and keep it operating, the people said. Amazon’s talks also may not lead to a deal.
Retail locations would put Amazon on more of an even footing with Apple Inc., which has hundreds of stores in choice shopping districts. While Amazon’s Kindle has been a breakthrough success, some of its other devices haven’t connected with consumers. Its Fire smartphone didn’t sell well and contributed to a $170-million (U.S.) inventory writedown in the third quarter of last year.
Amazon continues to invest in new hardware as it pushes beyond its core business of selling products online. In November, it introduced the voice-activated Amazon Echo speaker that lets people stream music and add items to Amazon shopping lists. The company also has opened temporary “pop-up” shops to entice shoppers during the holidays.
RadioShack traces its roots to 1921, when it began as a mail-order retailer for amateur ham-radio operators and maritime communications officers. It expanded into a wider range of electronics over the decades, and by the 1980s was seen as a destina- tion for personal computers, gadgets and components that were hard to find elsewhere. In more recent years, competition from Wal-Mart Stores Inc. and an army of e-commerce sellers — including Amazon — hurt customer traffic.
In a sign of RadioShack’s escalating woes, the New York Stock Exchange said Monday it would suspend trading of the stock immediately. The exchange took the step after RadioShack failed to submit a business plan that would address its lack of compliance with NYSE rules. Companies listed on the exchange are required to have an average market value of at least $50 million for 30 straight days or shareholder equity of that amount.
Before the suspension announcement, the shares tumbled 13 per cent to 24 cents on Monday. RadioShack has lost about 90 per cent of its value over the past year.
RadioShack received a rescue financing package from Standard General in October and the hedge fund would serve as the lead bidder in a filing and provide debtor-in-possession financing after filing, people familiar with the matter said. The investment firm arranged $535 million of first-lien loans in October and is the biggest shareholder of the retailer. Liquidating the stores would let RadioShack avoid a battle with lenders over control of the company. RadioShack CEO Joe Magnacca has been remodelling stores and revamping the retailer’s product lineup in a bid to revive sales. Still, the former Walgreen Co. executive hasn’t halted a decline at the electronics chain, which has posted more than two years of losses.
In one scenario discussed during negotiations, RadioShack considered keeping its name alive as a store-within-a-store concept involving wireless carriers, two of the people said. Sprint, meanwhile, is expanding its chain. CEO Marcelo Claure told investors at a conference last month that the company would be adding retail locations.
“This is a year in which we intend to grow our distribution dramatically,” Claure said. “You are going to see the opening of more and more Sprint stores as this is one area that we work on.”