Skip to main content

RadioShack looks to slash costs as as Q3 loss widens and sales keep falling


Fort Worth, Texas - There’s no quick turnaround in sight for RadioShack. On Thursday the struggling chain reported a wider-than-expected third-quarter loss and detailed cost costs that include staff reductions and more store closings to boost earnings by some $400 million annually.

RadioShack CEO Joe Magnacca said the company has begun a detailed set of cost reduction initiatives hat encompass a range of operating cost reductions related to headquarters, field, stores and store support . The measures are designed to” improve operational efficiency and right-size our business, as well as the benefit of targeted store closures,” he said.

So far, RadioShack has closed 175 stores during fiscal 2014, but its lenders have balked at its request to close a total of 1,100 underperforming stores.

The planned cuts include $100 million from store and regional management, $21 million from headquarters, $105 million from marketing, $41 million from professional fees, $28 million from general expenses including travel, recruiting and credit card fees, and $90 million from store closings and asset sales.

On the company’s quarterly conference call, Magnacca did not take questions. He also did not say how many employees were being being cut.

For the period ended Nov. 1, RadioShack reported a loss of $161.1 million, up from $135.9 million a year earlier.

Third-quarter revenue fell 16.1% to $650.2 million, hurt by challenges in its mobile phone business, from $775.4 million in the same period last year. Same-store sales dropped 13.4%, which marked the chain’s 11th consecutive quarter of declining sales.

Despite the gloomy results, Magnacca was upbeat about the company’s performance during the Thanksgiving weekend.

“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,” he stated. “It is notable that our core retail efforts are working, even as our mobility category is still experiencing challenges.”

RadioShack’s sales of mobile phones and related merchandise and contracts fell 24.7% in the quarter, to $280.6 million from $372.5 million a year ago. RadioShack and other traditional retailers have come under increasing pressure in recent years as wireless giants such as AT&T and Verizon have expanded and upgraded their own store portfolios.

"We are focused on three overarching operational imperatives: 1) reducing costs to end our negative cash flow, 2) driving growth and profitability through our retail platform, and 3) returning to a healthy mobility business that, while much smaller in terms of revenues than in recent years, will be substantially more profitable than our recent results," said Joseph C. Magnacca, CEO of RadioShack.

The company finished the quarter with with total liquidity of $62.6 million, which included $43.3 million in cash and $19.3 million available to borrow under its credit agreement. Total debt was $841.5 million. A quarter ago, the company had $182.5 million in liquidity and debt of $658 million.

In July Moody’s suggested that RadioShack has adequate liquidity to see it through this year, but that 2015 could be a different matter.
This ad will auto-close in 10 seconds