RadioShack, after more than 90 years in operation, is in serious trouble.
"We may not have enough cash and working capital to fund our operations beyond the very near term, which raises substantial doubt about our ability to continue as a going concern," RadioShack said today in a regulatory filing, bluntly describing a deteriorating business that may soon be driven into bankruptcy.
RadioShack said its two years of losses will likely speed up through the next fiscal year because of the "prolonged downturn in our business." The company's stock, now trading at $1.11, has declined 93% in the last five years and 72% in the last year.
While RadioShack and other electronics retailers have long struggled to compete with the aggressively low-priced Amazon, RadioShack's slide just in the last year has been especially acute. The company announced another decline in sales and further losses for the second quarter of the year. Its $674 million in revenue was down from $862 million in the second quarter last year, and its operating loss widened to $119 million from $41 million last year.
"We have been challenged by the persistent industry-wide decline in consumer electronics and soft mobility market," the company's chief executive officer Joseph Magnacca said in a statement. In other words, people aren't buying as many cell phones at RadioShack.
In July, the New York Stock Exchange warned the struggling electronics retailer that its stock could be delisted. The company said that if it slips back below $1, the NYSE could start the delisting process early next year.
The company only has $30.5 million in cash and another $152 million available in a credit facility, but that cash could dwindle rapidly as the business continues to decline. Just in February of this year, its cash pile was $110 million.
"Our ability to generate cash from operations depends in large part on the level of demand for our products and services," the company said, noting that it had negative cash flow and will need to raise money for the next year and "possibly restructure our debt and other obligations." That last bit implies bankruptcy.
RadioShack also said that it is in discussions with lenders, bondholders, shareholders and landlords, and could also pursue a sale or raise money from investors. A restructuring or rescue plan might include further store closures "and other measures to make reductions in our cost structure."
"There is no pre-determined outcome to this work and, of course, we cannot be certain as to the outcome from the current discussions," Magnacca said. "Our highest priority is working on a solution to maximize the value to all of our stakeholders."
In March, the company said it would close a quarter of its 4,300 U.S. stores, but in May pulled back from the plan because it couldn't get lenders to agree. It noted today that any store closures in the absence of a comprehensive restructuring plan would require lenders' approval.
Matthew Zeitlin is a business reporter for BuzzFeed News and is based in New York. Zeitlin reports on Wall Street and big banks.
Contact Matthew Zeitlin at email@example.com.
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