Radioshack reports big loss, warns of bankruptcy

RadioShack reported a big loss for its second quarter on plunging sales Thursday and warned it may have to file for Chapter 11 bankruptcy if it cannot obtain new financing.

For the 13-week period ended Aug. 2, the company reported a loss of $137.4 million, or $1.35 per diluted share, more than double the $51.4 million loss recorded last year. Net sales fell nearly 22 percent to $673.8 million, and comparable-store sales — at stores open at least a year — were off 20 percent.

The company’s cash balance narrowed to $30.5 million at the end of the quarter and its total liquidity, including available credit, was $182.5 million.

RadioShack CEO Joseph Magnacca said the Fort Worth, Texas-based consumer electronics retailer is “in advanced discussions with a number of parties” to obtain additional capital to fund its turnaround plan.

He said the company is working with “key financial stakeholders, including our existing lenders, bondholders, shareholders and landlords seeking to create a long-term solution. This may include a debt restructuring, a store base consolidation program, and other measures to make significant reductions in our cost structure”

In a filing with the Securities and Exchange Commission, the company said that if it cannot reach a recapitalization plan with lenders or a deal to sell the company, “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. As a result, we may be required to seek to implement an in-court proceeding under Chapter 11 of the United States Bankruptcy Code.”

On a conference call with analysts, Magnacca said he could not discuss details about the deliberations and so did not take any questions.

Two weeks ago, Bloomberg News reported that Standard General, a hedge fund that is now one of RadioShack’s top shareholders, was seeking to line up investors to refinance some of the company’s debt. UBS is also involved in the talks, the news service reported this week.

Magnacca said the weak second- quarter results were driven primarily by its wireless business, where consumers held off on purchases as they awaited new phones from Apple and carriers stepped up promotions.

But he said the company is making strides outside cellphones, in what he called its retail business, with consumers responding positively to its store redesigns with interactive displays and a mobile device repair service called Fix It Here.

As an example, he said stores with a speaker wall, which allows shoppers to compare sound quality, has driven year-over-year sales increases in the triple digits.

Still, while all of its 4,000 stores have been remerchandised, and about 2,000 have received cosmetic upgrades like new paint and signage, only 84 have been remodeled to draw features from its new concept stores, like the speaker wall.

Magnacca said RadioShack has seen strong consumer response to its Fix It Here program, which offers repair services for smartphones and tablets. He said the service is now available at 500 stores and will be expanded to 750 by November.

“Smart, qualified service and technology expertise simply doesn’t exist in marketplace and we are strongly positioned to provide it today,” he said.