RadioShack plans to close up to 1,100 stores

RadioShack Corp. said Tuesday it will close up to 1,100 U.S. stores after reporting a wider quarterly loss and huge drop in sales during the holidays that raised concerns about the longer-term prospects for the U.S. electronics chain.

The planned closings would leave the Fort Worth, Texas-based retailer with more than 4,000 stores, including more than 900 dealer franchise locations, it said.

RadioShack’s sales have been in free-fall since 2010 amid executive departures, tough competition and an image problem. Despite its ubiquitous presence, analysts say the U.S. retailer has not done enough to become a destination for mobile-phone shoppers or younger buyers.

Radio Shack has more than 25 stores in Central Florida, according to the company’s website. The company did not return requests for information about how many stores would be affected in the area.

The retailer, which has been losing share to Best Buy and Amazon.com, reported that its net loss widened to $191.4 million, or $1.90 a share, in the fourth quarter, up from $63.3 million, or 63 cents, a year earlier.

Sales totaled $935.4 million in the quarter covering the holiday season, down 20.1 percent from $1.17 billion in the year-ago period.

Sales at stores open at least a year fell 19 percent in the fourth quarter on weak customer traffic.

The grim results were not entirely unexpected, considering the overall weakness in the consumer electronics industry during the holidays, but many on Wall Street took a dim view of the company’s prospects.

The “results were much worse than we anticipated, and cast serious doubt on RadioShack’s long-term viability, in our opinion,” BB&T Capital Markets analyst Anthony Chukumba said.

Thereport also highlighted the mammoth task facing Chief Executive Officer Joe Magnacca, who took the helm in February 2013.

Magnacca, a restructuring expert credited with revamping Duane Reade drugstores before Walgreen Co. bought the chain, said “the RadioShack turnaround will take time.”

“Mr. Magnacca and the new team deserve a lot of credit for the changes they are making, but it seems harder and harder for them to overcome the more significant obstacles,” said Janney Capital Markets analyst David Strasser. He worried that wireless industry weakness could stall its turnaround.

Under Magnacca, RadioShack has changed its logo, reduced store clutter and improved displays. It also has been moving some products from stores to its website and carrying more private-label goods with higher margins.

The retailer recently named a new merchandising chief, global sourcing chief and chief financial officer. But some analysts say the efforts are too little, too late.

David Tawil, the co-founder of hedge fund Maglan Capital, said the move to shrink its store base was not a permanent solution.

“It should buy them time,” said Tawil, a former bankruptcy attorney. “I don’t think they have a place in the market.” Maglan does not own RadioShack shares.

Its market share has fallen about 20 percent since 2010, according to data from Euromonitor International.

Tawil said he is concerned about its cash flow levels. “They can continue to operate but they are in a cash-flow negative spiral and that doesn’t usually reverse itself,” Tawil said.