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RadioShack To Close 1,100 Stores; Posts Q4 Loss

Fort Worth, Texas — RadioShack plans to close upward of one-quarter of its store base amid deepening losses.

The chain reported a net loss of $191.4 million in the fourth quarter, ended Dec. 31, compared with a year-ago loss of $63.3 million. Net loss for the full year hit $400.2 million, compared to a $139.4 million loss in 2012.

 Net sales for the critical fourth-quarter holiday period declined 20.1 percent to $935.4 million and comp sales sank 19 percent on weak traffic and soft mobile performance, the company said. For the full year, net sales fell 10.4 percent to $3.4 billion and comps declined nearly 9 percent.

In a statement, CEO Joe Magnacca attributed the company’s fourth-quarter results to “lower store traffic, intense promotional activity — particularly in consumer electronics, a very soft mobility marketplace and a few operational issues.”

He said the decision to close up to 1,100 underperforming locations followed a comprehensive review of its store base over the last few months that considered location, area demographics, lease life and financial performance. The consolidation, which is subject to the consent of RadioShack’s lenders, would still leave the chain with “a strong presence in each market” and more than 4,000 stores, including some 900 dealer franchise locations, he said. The company currently operates about 4,300 corporate-owned stores.

Going forward, the chain will continue its turnaround strategy of repositioning the brand, revamping the product assortment, improving operational efficiency and financial flexibility, and updating its stores along a new “concept” model that has shown strong sales growth.

In a research note, Janney Montgomery Scott retail analyst David Strasser lauded Magnacca and his new management team for their valiant efforts, but suggested that the company could now follow the fate of Circuit City, which was similarly plagued by lost market share and a broader economic malaise. Compounding the problem, he said, is RadioShack’s overdependence on the maturing wireless business, its declining gross profits and a liquidity squeeze from the store closures. “We don’t see a path to reversing this decline,” he wrote.

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