FORT WORTH, TEXAS – RadioShack turned a major corner during the second quarter when it recorded its first same-store sales increase – 1.3 percent – since 2010.
Still, the red ink continued to rise during the period, ended June 30, representing the company’s sixth consecutive quarterly loss.
While turnarounds take time, the clock is ticking for the 92-year-old retailer, as nervous vendors considered last summer’s downgrade by Standard & Poor’s. The bond-rating agency suggested that short of a major revival or capital infusion, the chain could run out of cash next year. What’s more, the timing of the report couldn’t be worse, coming just as retailers and manufacturers began gearing up for the holiday selling season.
Not surprisingly RadioShack differed, pointing to its pay-down of $216 million in convertible debt, while Janney Montgomery Scott retail analyst David Strasser estimated the company’s total liquidity at just shy of a comfy three-quarters of a billion dollars.
Nevertheless, CEO Joe Magnacca also brought in a new interim chief financial officer, Holly Etlin, a managing director at AlixPartners, a global business advisory firm with expertise in corporate turnarounds, and retained her company along with Peter J. Solomon Company, an investment banking firm.
Published reports say Magnacca is looking to refinance RadioShack’s debt and calm vendor qualms. In a statement, he said he made the hires “to support and accelerate” the chain’s turnaround.
“Like many companies, we have discussions with investment banks from time to time to help us evaluate ways to further strengthen our balance sheet and manage it efficiently,” he noted. “That has been the sole focus of these discussions … we are focused on executing our turnaround and serving our customers.”
Specifically, Magnacca told TWICE that the company was exploring ways to finance improvements in its logistics and supply-chain functions, which will comprise fully half of his planned capital expenditures.
“Looking ahead, we expect the turnaround to take several quarters, and during that time our results may vary from quarter to quarter as we make strategic changes to improve our long-term financial performance,” he said in the statement. “We have a clear plan of action and our team is completely focused on driving the business forward. I remain confident that we can build on our strengths, improve our financial performance, and return this company to a position of prominence in the lexicon of American retailers.”