RadioShack CFO Jumps Sinking Ship

Just seven months into the job, John Feray has had enough. 'He made a mistake going there,' one analyst observes.
David McCannSeptember 15, 2014
RadioShack CFO Jumps Sinking Ship

With RadioShack likely heading to bankruptcy, the company announced this morning that its CFO, John Feray, who was brought on board only seven months ago in a last-ditch attempt to right the ship, has resigned.

Bounty SinkingThe official statement from the failing retailer attributed Feray’s departure to “personal reasons.” His replacement is AlixPartners consultant and turnaround expert Holly Etlin, now in her second stint as interim finance chief for the company. The first was from July 2013 until the following February, when Feray arrived.

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It’s doubtful she’ll be doing much turning around, though. “The new CFO adds no value to shareholders,” says Wedbush Securities analyst Michael Pachter. “She will represent creditors.”

RadioShack’s stock price briefly skipped ahead to $1.18 this morning after the news was announced but shortly thereafter sunk back to just over $1. It traded under a dollar for most of the summer, thereby inviting a potential delisting by the Securities and Exchange Commission.

Of Feray, Pachter says simply, “He made a mistake going there.” Feray previously was CFO of Haggar Clothing for 11 years and First American Payment Systems for one year, before a six-year post as senior vice president of financial planning and strategy for Dollar General.

It’s important for RadioShack to hire the right CFO, says David Strasser, an analyst with Janney Montgomery Scott. Still, whether Etlin — whom he describes as “clearly very competent” — ultimately stays on or the company brings in someone else, that person is not likely to make much of a difference in RadioShack’s survival efforts. “The company is really struggling to get some traction on the sales side, and that’s not a CFO issue,” Strasser says. “I don’t know that it’s even a CEO issue. It’s just a business-model issue.”

Indeed, the concept of storefronts specializing in electronics may well be obsolete, thanks to and the fact that most popular gadgets are now sold just about everywhere. Best Buy too has been struggling mightily, though not quite to the brink of extinction like RadioShack. Bloomberg quoted Oliver Wintermantel, an analyst at International Strategy & Investment Group, as saying, “There’s a gut check in retailing: If the company doesn’t exist, would you invent it today? And RadioShack would probably not be one that you would start.”

The company said in its quarterly report filed on Sept. 11 that unless it can obtain new debt financing, consolidate its store base and possibly restructure its existing debt and other obligations, it likely would “be required to liquidate under Chapter 7 of the Bankruptcy Code.”

In March RadioShack announced plans to close up to 1,100 stores, then backed off after its lenders effectively blocked the move by demanding terms RadioShack found to be unsatisfactory. Under its existing lender agreement, it can close only 200 stories per year and 600 over the life of the agreement.

Lining up new leverage is a dicey prospect as well. “I don’t understand how anyone would give them any money, unless it was highly secured against some very fresh inventory,” one analyst tells CFO. Bloomberg, though, citing unnamed sources, reported on Sept. 10 that UBS and Standard General are working on a loan package for the company.