RadioShack Corp. has long been a leader in technological advances; however, according to Rebecca Ruiz and Michael De La Merced at The New York Times, the 94-year-old company filed for a Chapter 11 bankruptcy on February 5.
This decision, which took place in Delaware, took few by surprise since RadioShack had not turned a profit in 11 consecutive quarters. According to The New York Times, RadioShack was once the “vanguard of the technological revolution.” The company sold an all-electronic calculator in 1972 and sold one of the first mass-market computers in 1977. However, with the rise of e-commerce, its brick-and-mortar stores have become more and more irrelevant. There has also been a decline in cell phone purchases, which has caused third-party retailers such as RadioShack to suffer from price wars and battering profit margins.
In an attempt to save the company, RadioShack hired Joseph Magnacca as CEO in 2013. Magnacca was the former president of Duane Reade Inc. and was credited with reinventing the brand before it was eventually sold to Walgreens, according to Ruiz and De La Merced. The new management did not help, however. The company continued to decline financially. Michael Pachter of Wedbush Securities said the company’s problem is its irrelevance.
Pachter said in a New York Times article that “it’s your grandmother’s store.”
RadioShack tried to close 1,100 of its stores in March 2013, but the decision was overruled by its lenders. The company ended up only closing 175 stores. In a rush for cash, RadioShack needed to refinance its debt, which is when one of the company’s biggest shareholders, Standard General, stepped in and provided $120 million in liquidity. This kept the company afloat through the 2014 holiday season. According to The New York Times, RadioShack has listed $1.2 billion in assets but $1.4 billion in debt. According to Pachter, the company could survive on a much smaller level, selling prepaid phones in low-income areas.
Despite all of this, the company’s stock is still in the positives at $0.24 per share. The New York Stock Exchange has said it will suspend trading in the company while the bankruptcy continues and is seeking to delist it, saying in the same New York Times article, “RadioShack’s market value was too low to qualify its stock to trade on the exchange.” In the end, the once avant-garde company will soon end its 94-year-long stretch.
March 27, 2015.