RadioShack’s Losses Widen

Mobile declines offset operational improvements
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Fewer footprints and weakness in mobile led to steepening third-quarter losses for RadioShack.

Fort Worth, Texas — Fewer footprints and weakness in mobile led to steepening third-quarter losses for RadioShack.

The beleaguered CE chain reported a net loss of $161.1 million for the three months, ended Nov. 1, compared with a year-ago net loss of $135.9 million.

Total net sales and operating revenues fell 16.1 percent to $650.2 million, and comp sales declined 13.4 percent due to traffic declines and soft performance, particularly in the company’s postpaid mobile business, CEO Joe Magnacca said.

Analysts presumed during the quarter that RadioShack would have limited access to the just-released iPhone 6 and 6 Plus, and perhaps other popular phones, reflecting vendor caution amid RadioShack’s dire financial straits.

RadioShack, like all CE chains, was further hampered by its exclusion from carrier-exclusive installment plans and promotions.

The retailer, which is contesting a potentially disastrous default claim by term lenders, ended the period with $43.3 million in cash and access to $19.3 million in loans. The liquidity is net of letters of credit totaling $94.4 million and $233.9 million in borrowings outstanding, and total debt was $841.5 million at the close of the quarter.

But Magnacca also reported progress on multiple fronts. Excluding mobile, comps at company-owned U.S. stores slipped just 2 percent, and improved throughout the quarter as the chain focused on private-label and other higher margin products, plus new programs like its “Fix It Here” in-store mobile repair service.

What’s more, comps within the company’s growing fleet of remodeled concept stores were 12 percentage points higher than the total chain, and 15 percentage points higher excluding mobile.

In addition, comps for the three-day Thanksgiving holiday period excluding mobile were up 35 percent within company-owned U.S. stores, while wireless comps declined 27 percent.

 “It is notable that our core retail efforts are working, even as our mobility category is still experiencing challenges,” Magnacca said.

The company has also begun a cost-cutting initiative touching headquarters, field operations, stores and store support that aims to improve operational efficiency, “right-size” the business, and boost earnings by more than $400 million annually.

The initiative is part of a three-pronged plan to reduce costs to staunch negative cash flow; make its considerably smaller mobile business substantially more profitable; and to drive growth and profitability through its non-mobile assortment.

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