The struggling American franchise of electronics retail chain
) withdrew its plan of downing the shutters of 1,100 unprofitable
stores after two of the company's major creditors decided against
supporting the plan. As of now, the company will shut down only 200
stores. Following the announcement, the company's shares jumped
In March this year, RadioShack had announced its intentions to
close unprofitable stores after the company reported dismal results
for the eighth consecutive quarter. The company had earlier stated
that it was trying to obtain permission from its lenders to
discontinue 1,100 stores under the 2018 Credit Agreement and 2018
However, neither of the parties involved had managed to reach a
final conclusion on the same at that point of time. At present,
though RadioShack has decided upon shutting down 200 stores, it
plans to continue its negotiation with the lenders on the proposed
store closure plan.
RadioShack had undertaken 5 strategies to restructure its
business model which included redefining the brand, revamping
product assortment, reinvigorating stores, achieving operational
efficiency and attaining financial flexibility. The proposed plan
of closing down its underperforming stores was part of the business
strategy to bring the company back on the growth track.
RadioShack's core Consumer Electronics retail business is on a
secular downtrend. Present-day consumers prefer making online
purchases rather than visiting retail stores.
RadioShack currently has a Zacks Rank #5 (Strong Sell). In the
last reported quarter, the company's top and bottom line had missed
the respective Zacks Consensus Estimate. More importantly, the
company's comparable store sales for operated stores and kiosks
(stores and kiosks that have been operational for at least a year)
had declined 19%.
We believe, until there is an improvement in comparable store
sales, a drastic turnaround in business is impossible. RadioShack
is also subject to stiff competition from retail giants like
Best Buy Co., Inc.
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