RadioShack shares rebound after concerns about finances

Posted Friday, Jul. 12, 2013  comments  Print Reprints
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RadioShack shares climbed 11 percent Friday, apparently helped when the retailer countered a dire online report by insisting it has sufficient financial resources but, like many corporations, is in discussions with lenders.

At least one investment analyst publicly agreed, and the ailing Fort Worth-based consumer electronics chain saw its shares (ticker: RSH) finish the trading day at $2.92, up 29 cents.

“We continue to have a strong balance sheet with total liquidity of $820 million at the end of the first quarter,” RadioShack said in its prepared statement. “Like many companies, we have discussions with investment banks from time to time to help us evaluate ways to further strengthen our balance sheet and manage it efficiently. That has been the sole focus of these discussions.”

The statement went on to say that the company’s management remains focused on turning RadioShack around. The venerable retailer lost $139 million last year on $4.3 billion in sales.

On Thursday, Internet news site Debtwire.com cited unnamed sources as saying RadioShack was seeking advice on how to deal with mounting debt and unreasonably sized inventories, Reuters said. That’s often interpreted as a prelude to a financial restructuring or bankruptcy.

That day the company’s shares were down as much as 20 percent, but recovered most of that by the close of trading.

David Strasser, financial analyst with Janney Capital Markets, bluntly stated in a research note: “We do not think RSH is close to filing for a bankruptcy. That is the story circulating today. We do believe the company could be talking to financial advisers, which would make sense for a struggling stock, a company at a crossroads with new management looking for advice.”

Strasser asserts that RadioShack has “sufficient cash to get through the current year and well into next year, even with weak results, and still pay down” $216 million due in August.

“We think the longer term strategy is challenging, but there is a solid new team in place to execute it,” he said, referring to new CEO Joe Magnacca and other recently hired executives. “We like the new store format, but are taking a wait-and-see approach on the opportunities for long-term success. We do worry near-term trends are not good, and that the company has bloated inventory held over from (the first quarter).”

Inventory was up 27 percent in the quarter while sales were down 7 percent. Strasser predicted a net loss of $42 million in the second quarter.

RadioShack earlier this month opened a new concept store in Manhattan as Magnacca and his management team work to retool the electronics chain's stores to attract tech-savvy tech shoppers.

Meanwhile, a RadioShack manager in the Midwest told the Star-Telegram that a major shakeup was under way in the Ohio region, as well as in California. The move was described as a consolidation of territories with top managers in some cases laid off.

Managers were informed in a teleconference only after some firings, said the source, who declined to be identified because there was no authorization to speak to the media.

There was no immediate confirmation from RadioShack.

Barry Shlachter, 817-390-7718 Twitter: @bshlachter

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