Updated!General Wireless Operations (GWO), the company that runs RadioShack’s remaining 1,500 stores, has filed for Chapter 11 protection, plunging the iconic CE retail chain into bankruptcy for the second time in two years.
The reorganization plan calls for the shutting of 187 stores by Monday; the sale to Sprint or closure of another 365 stores by March 31; and an evaluation of the remaining 1,000 locations, with an option to liquidate.
General Wireless, a unit of hedge fund Standard General, which bought the RadioShack brand and its best stores in a series of bankruptcy auctions in 2015, blames its in-store co-leasing deal with Sprint for its current woes.
In the filing, president/CEO Dene Rogers, the company’s second chief executive in two years, cited a number of operational improvements and sales milestones during GWO’s short reign. Those include a 23 percent reduction in operating expenses and an 8 percent increase in gross profit dollars last year; the sale of more than 1 million private-label headphones and 700,000 Hulu login pins; a revamp of its e-commerce site; and the integration of FedEx pick-up/drop-off points into 140 RadioShack stores.
The problem, Rogers said, stemmed from unexpectedly weak sales of Sprint mobile subscriptions, which cratered during the fourth quarter of 2016. GWO was counting on its share of commission payments, which were to kick in after Sprint realized its first $60 million from the in-store shops, and projected the target to be hit within the first 12 months.
But the carrier never reached that threshold, and absent the commission payments GWO was unable to raise new capital, cover its liabilities or pay its debt obligations, Rogers said. With Sprint unwilling to renegotiate the contract, GWO had no choice but to file.
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In a statement, Sprint omnichannel sales president Kevin Crull described the bankruptcy and store closings as “an unfortunate development for this storied retailer,” but said it would have no material impact on the carrier’s overall sales results.
Crull said his company will convert several hundred RadioShack locations to carrier-owned Sprint stores, and will move its signage, displays and inventory from the remaining 1,000 or so co-branded RadioShack stores to other Sprint showrooms.
In his own statement, Rogers thanked his corporate staff, most of which was let go in a Feb. 3 bloodbath, angry vendors told TWICE.
“Over the course of the past two years, our talented, dedicated team has worked relentlessly in an effort to revitalize the company and the RadioShack brand, while providing outstanding service to our customers,” Rogers wrote. “We greatly appreciate their hard work and dedication.”
Vendors said the buying, inventory management, marketing operations and franchise management teams were cut in one fell swoop, and that invoices went unpaid and phone calls unanswered in the weeks and months before the filing.
The bankruptcy, the second this week by a major CE retailer, may finally spell the end of the nearly 100-year-old gadget chain. Named after the radio cabin on old steamer ships, RadioShack helped usher in CB radio, home computing and satellite TV, but ultimately became an anachronism in the age of e-commerce.