It is pretty hard to imagine how RadioShack could have performed worse. Gross profit was down about 10% and SG&A expenses were up about 20%. The company blamed competition for the fall in profits, but the fact is RadioShack’s costs are too high and its sales are too low.
The company’s plan to shut 1,100 stores, announced in March, was throttled by lenders to just 200 closures and that will not be enough. That should have been a hint that creditors were sorting out their positions in line for a RadioShack bankruptcy.
The company’s recent announcement about a partnership to produce high-margin private label products is way too little and way too late. In order to make that happen, the company needs liquidity, and that is in short supply. The company claims cash and equivalents of $61.8 million and about $328 million in a credit facility. RadioShack drew $35 million on its credit facility for general corporate purposes as of June 9.
The company’s market cap as of Monday’s close was about $150 million. Total assets are valued at $1.33 billion, of which more than half is inventory. It is just a matter of time before RadioShack’s creditors haul the company into bankruptcy court, wipe out the holders of common stock, and ride off into the night with all the products from the stores’ shelves that people already don’t want to buy. The longer creditors wait, the less they will get, so things could happen quickly now.
RadioShack shares traded down about 11.5% in the premarket Tuesday morning, at $1.31 in a 52-week range of $1.12 to $4.36. Thomson Reuters had a consensus analyst price target of $1.89 before the report.
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