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Shares of RadioShack (RSH) are catching static this morning after the struggling retailer announced plans to close 1,100 of its 4,000 stores. The company also said it lost $191.4 million during the holiday quarter as sales declined 20% to $935 million.
RadioShack CEO Joe Magnacca said steep pricing competition, weak mall traffic, and a soft market in mobility sales negatively impacted results. Magnacca says the closures will improve RadioShack’s financial flexibility as the company aggressively tries to refresh its store base for a new generation of electronics customer.
RadioShack’s stock was down more than 18% in early trading, erasing all of its gains for the year. The drop is just another blow in a long brutal trip for investors. In 1999 RadioShack sported a stock price of over $75 and a market cap of $15 billion. Shares are trading hands at about $2.25 today, valuing the entire company at about $190 million.
While Magnacca insists traffic has been strong in its new concept stores, RadioShack is still plagued by the same issues we talked about a month ago when the company unveiled its well-received Super Bowl ad. Bringing in customers is a mixed blessing when you haven’t finished a redesign. Shoppers drawn to RadioShack over the last month were more than likely to find the stores looking very much like they’d been locked in a time capsule for more than a decade.
As for a buyout, RadioShack is going to first need to stop the bleeding and begin operating at a break-even level before private equity groups would be willing to consider a bid. There’s also the problem that RadioShack had to put up its store base as collateral to secure a much-needed loan last December.
It isn’t clear what an outside group could do strategically to change RadioShack’s fortunes. Current management is doing what they can but sometimes companies just die of old age. That’s tough news for 30,000 employees of the Fort Worth based company, but unfortunately that’s the circle of life and capitalism.
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