RadioShack Corp announced a cost-cutting plan as the struggling electronics retailer reported its eleventh consecutive quarterly loss.
“We have begun a detailed set of cost reduction initiatives designed to enhance earnings by over $400 million annually,” said CEO Joseph Magnacca. Those cost cuts will be related to the companys headquarters, field, stores, store support, store closures and asset sales, and aimed at improving operational efficiency, Mr. Magnacca added.
For the three months ended November 1, RadioShack posted a net loss of $161.1 million, or $1.58 earnings per share, up from the $135.9 million loss, or $1.35 earnings per share, it reported a year earlier.
Revenue decreased 16.1% to $650.2 million, with same-store sales decline of 13.4%, worse than the 10% drop projected by Wedbush Securities. However, the company said that US comparable sales were down only 2% as RadioShack focused on higher margin products and private labels.
The company ended the third quarter with $62.6 million in cash and total debt of $841.5 million. Earlier this year RadioShack announced it may be forced to seek bankruptcy protection if its state does not get better. However, 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 companys 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 companys holiday results.
“Over the three-day Thanksgiving holiday, comparable store sales in our U.S. corporate stores were up 35 percent for our retail segment, while mobility was down 27 percent. It is notable that our core retail efforts are working, even as our mobility category is still experiencing challenges,” Mr. Magnacca said.
RadioShack Corp lost 3.34% on Wednesday and closed at $0.550 in New York. The stock lost 5.80% on Thursday to trade at $0.5181 at 15:07 GMT, marking a one-decrease of 81.02%. The company is valued at $57.29 million. According to the Financial Times, the 6 analysts offering 12 month price targets for RadioShack have a median target of $0.75, with a high estimate of $1.00 and a low estimate of $0.00. The median estimate represents a 36.36% increase from the last close price of $0.550.
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