RadioShack parent, General Wireless Operations, made a voluntary Chapter 11 filing yesterday. The company stated it would close 200 stores immediately. General Wireless is “evaluating options” for another 1,300, the entire balance of the locations. If all of them are shuttered, it will be one of the largest mass store closings in recent memory. Based on past employee counts, over 10,000 jobs maybe at stake.
Some of the stores may stay open. Many are operated as joint locations with Sprint Corp. (NYSE: S), which uses them as locations to sell wireless services and products. If all locations disappeared, Sprint would lose some of its ability to compete with the wireless operations of T-Mobile US Inc. (NASDAQ: TMUS), AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ).
The battle for wireless market share in the United States is brutal. With over 300 million wireless subscribers, which is close to the number of people in the country, the primary challenge is market share improvement. Sprint already struggles in the number four position.
One set of stores may remain regardless of the Chapter 11 proceedings. Those are 425 owned by independent companies. RadioShack posted online that:
RadioShack stores and website are currently open for business and serving customers.
RadioShack is exploring all available options for the Company, including alternative business models that will enable it to keep some stores open on an ongoing basis.
Additionally, we expect the 425 independent dealers stores to continue to serve communities nationwide.
RadioShack debt holders will need to decide if there are any circumstances under which they can probably make money with a much smaller national store footprint. Much of its business competes with largest consumer electronics stores with well-established locations. Best Buy Co. Inc. (NYSE: BBY) has 1,035 stores. Large retailers like Wal-Mart Stores Inc. (NYSE: WMT) also have substantial consumer electronics businesses. And the sector is one of Amazon.com Inc.’s (NASDAQ: AMZN) greatest strengths.
No matter what decision the companies that control RadioShack make, the odds it has a chance to survive are overwhelmingly against it.
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