RadioShack Files Bankruptcy for Second Time

The electronics retailer blamed its filing on the "surprisingly poor performance of mobility sales" despite its co-branded stores with Sprint.
Matthew HellerMarch 9, 2017
RadioShack Files Bankruptcy for Second Time

RadioShack has filed for bankruptcy protection for the second time in two years, its turnaround effort having run aground on weak mobile sales despite a partnership with Sprint.

In its Chapter 11 petition, the electronics retailer said it planned to close 187 stores by March 13 and close about another 365 stores, or transfer their ownership to Sprint. It is “evaluating options” for the remaining 1,000 stores.

RadioShack originally filed Chapter 11 in February 2015 after struggling to compete with online retailers and big box chains. Its brand and stores were acquired by General Wireless, a joint venture of Sprint and hedge fund Standard General.

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To turn its fortunes around, RadioShack teamed up with Sprint to create mini-stores within more than 1,000 locations. But RadioShack CEO Dean Rogers indicated that effort had failed, even though the company reduced operating expenses by 23% last year while increasing gross profit by 8%.

“For a number of reasons, most notably the surprisingly poor performance of mobility sales, especially over recent months, we have concluded that the Chapter 11 process represents the best path forward for the company,” he said in a news release.

Sprint sales dropped during the fourth quarter of 2016 and “it became apparent” RadioShack would not receive expected revenue from mobile commissions, the company said in its Chapter 11 filing.

RadioShack was once the eighth-largest consumer electronics dealer, with more than 5,000 stores in the U.S., but by 2014 it was losing $200 million annually in the mobility business alone. “In an age of growing competition from online retailers such as Amazon, traditional brick-and-mortar stores are in trouble,” CNN Money noted.

According to Rogers, RadioShack last year integrated FedEx pickup/drop-off into 140 locations, delivered over 700,000 Hulu login pins to customers, and sold more than a million RadioShack private brand headphones and speakers.

Joel Levitin, a bankruptcy attorney at Cahill Gordon & Reindel LLP, told USA Today that a company can “get it right” with a second bankruptcy but “has to figure out whether … there is a sustainable business.”

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