Report: Analyst firm Wedbush sees ‘imminent’ RadioShack bankruptcy

Fort Worth, Texas – Analyst firm Wedbush Securities is reportedly advising clients that a bankruptcy is “imminent” at RadioShack. According to Barron’s, Wedbush has lowered its target price for RadioShack to $0, citing concerns including inability to secure lender approval for 1,100 proposed store closings and general weakness in the consumer electronics sector.



Wedbush analyst Michael Pachter expects RadioShack to report a net loss of $0.66 per share when it releases second quarter earnings on Sept. 11, almost twice the consensus estimate of a $0.36 per share loss. Pachter is also predicting RadioShack will report net sales of $762 million, below consensus estimates of $893 million.



“In May, RadioShack announced that it was unable to successfully negotiate consent from its lenders under the 2018 Credit Agreement and Term Loan to close up to 1,100 stores,” Pachter said in an advisory note. “The terms offered by lenders were not acceptable to the company. RadioShack’s operational decisions are now being vetted by creditors and equity investors are no longer relevant to management decisions — the creditors cleary are in control of the ship and, in our view, the ship is sinking. The credit agreement allows the closure of 200 stores per year or 600 over the life of the agreement. We believe a bankruptcy reorganization is imminent…



We believe brick-and-mortar electronics retailers will see persistent structural decline as Internet sales continue to take share. Best Buy experienced comp declines of 2.7% for Q2:15. Domestic Q2 sales were down 2% overall, and store level sales were down roughly 4% without the contribution of over $100 million incremental online sales. Notwithstanding significant investments in price competitiveness, we see continuing evidence of traffic deterioration and lower productivity for Best Buy’s retail footprint. RadioShack has less financial flexibility to invest in price competitiveness, and its primary business is as a consumer electronics “convenience store.”



RadioShack did not comment on the report.