This could be the last call for RadioShack.
General Wireless Operations, the company that runs the approximately 1,500 remaining RadioShack stores, is reportedly about to file for bankruptcy protection.
But unnamed sources cited by Bloomberg said the bankruptcy will likely lead to liquidation rather than another stab at reorganizing.
If so, the endgame comes two years after hedge fund Standard General paid $187 million in a series of bankruptcy auctions for the RadioShack brand and the 1,740 stores left standing after the public version went bust.
As part of the prepackaged Chapter 11 plan, Standard General’s operating entity for RadioShack, General Wireless, leased space in 1,440 of the locations to Sprint in a co-branding agreement.
But according to vendors, suppliers, former franchisees and rep groups in contact with TWICE, Sprint backed out of the deal in late January citing a breach of covenants, effectively cutting off the retailer’s cash flow.
As a result, these sources said, General Wireless terminated its buying, inventory management, marketing operations and franchise management teams in a Feb. 3 bloodbath; shut its Illinois fulfillment center; and stopped paying its vendors.
General Wireless’s senior management has not responded to multiple requests for comment, nor has Sprint answered queries regarding its in-store Sprint at RadioShack shops. But a check of RadioShack’s website confirms that the cupboard is bare.
Moreover, Wave7 Research, which tracks the U.S. wireless market, told TWICE that Sprint’s sales reps have left most of the remaining 1,200 co-branded locations after the carrier ended its contract with a third-party vendor last year, and that RadioShack stores are being closed in major California markets.
“Our sources and checks point to very slow Sprint sales at this channel, despite solid overall Sprint sales,” noted principal Jeff Moore.
That’s cold comfort to vendors left holding the bag. “We put [General Wireless] into collections for a high five figure,” reported Sal Irigoyen, CEO of Odyssey, a small, family-operated toy company that sold its drone line through the chain. “I guess that’s how they are ‘improving their cash flow,’ by not paying their vendors,” he said, in a reference to a TWICE Q&A with General Wireless president/CEO Dene Rogers.
“We had a decent fourth quarter,” Rogers said at a TWICE Executive Retail Roundtable, held at CES in January, prior to Sprint’s purported pullout. “The focus was very much on gross profit rate, not absolute sales dollars.”
Rogers noted that drones in particular were a big holiday hit for the chain, which contributed to “a pretty decent lift in gross profit dollars versus last year, which was the first holiday season out of bankruptcy.”
The comments only added to Sy Kessler’s despair. “My company” — Sy Kessler Sales, representing Renata Batteries — “is a 25-year vendor to RadioShack,” he told TWICE. “We have sold [them] many millions of Renata Swiss-quality batteries. We have numerous open orders working and inventory for RadioShack [with] easily $500,000 on the line, and I have been unable to get anybody to call me back.”
“We are very concerned,” he said.