RadioShack share price down, tries to reduce store density

RadioShack Corp has picked up the pace in store closures in line with its plan to reduce size, but the struggling electronics retailer is a long way from done.

RadioShack has shut down more stores in the past two months compared to the rest of the year, however, it has only eliminated one fifth of the targeted stores so far.

The boom of online ordering has pushed the company to take action and reduce its store count. The companys 4 400 outlets are located in very close proximity of each other, furthermore, RadioShack have said that around 90% of all US citizens live within five miles of a store.

However, having so much stores so close has become a burden for the almost bankrupt company. Earlier this year CEO Joe Magnacca acknowledged the problem and said management was aware.

“Within five miles of my home, I have eight RadioShack locations,” Mr. Magnacca said. “So in that example, we are overstored.”

Adding to its performance troubles, the company faced difficulties to improve as creditors have blocked a move where RadioShack would have shut down 1 100 underperforming stores.

Salus Capital Partners and Cerberus Capital Management declined to approve the store closures unless RadioShack paid “unreasonable” fees and prepaid a major part of its debt. The lenders said RadioShack breached their contract by signing to a rescue package provided by a group led by Standard General. As the largest shareholder, Standard General should not be able to make such a move, the lenders said.

The rescue package provided $120 million to RadioShack, much needed funding in order to cover the company’s operational costs over the holidays. Whether or not Standard General will convert debt into equity in RadioShack, as more permanent solution, will be determined by the company’s holiday results.

RadioShack needs to generate $100 million of cash and lending capacity by the middle of January in order to reach the next stage of the rescue plan. However, at the end of October the company had some $63 million. RadioShack has been trying to decrease its store numbers because its a fast way to raise cash as it decreases operational costs related to payrolls and utility bills.

RadioShack Crop gained 8.57% on Tuesday and an additional 2.61% on Wednesday to close at $0.3899 in New York, marking a one-year decrease of 85.40%. The company is valued at $ 39.26 million. According to the Financial Times, the 4 analysts offering 12 month price targets for RadioShack Corporation have a median target of $0.25, with a high estimate of $1.00 and a low estimate of $0.00. The median estimate represents a $35.88 % decrease from the last price of 0.3899.