RadioShack says failed Sprint deal led to bankruptcy filing

RadioShack was forced to file for bankruptcy late Wednesday because a partnership with Sprint failed to generate the revenue it had anticipated from selling wireless products inside its stores, the company’s top executive said in a court filing.

Earlier this week, RadioShack and Sprint agreed to terminate their relationship, and Sprint paid RadioShack $12 million in exchange for transferring leases on 115 stores to Sprint, according to the filing from Dene Rogers, president and chief executive officer of General Wireless Operations, the company that operates RadioShack.

Sprint began pulling its wireless products from some RadioShack stores in recent days in a sign that the partnership was crumbling. General Wireless filed for Chapter 11 bankruptcy court protection in Delaware on Wednesday evening.

The move marks a return to bankruptcy for RadioShack, which significantly downsized under court supervision in 2015. After closing more than half of its 4,000 stores, a group led by the Standard General hedge fund joined with Sprint to bring about 1,700 stores out of bankruptcy and open Sprint displays inside more than 1,000 stores.

General Wireless said it now operates more than 1,500 company-owned RadioShack stores, plus 425 dealer outlets primarily in small towns. The court filing said it intends to close 187 stores by March 13, and that another 365 would close or be transferred to Sprint by March 31. The remaining stores, about 1,000, will continue to be evaluated.

Rogers — who took over as CEO last April — told the court that RadioShack considerably improved operations by the end of last year and that its core retail business “had turned a corner and become profitable.” However, “the Sprint relationship did not yield the benefits that (General Wireless) had anticipated.”

“Sprint mobility sales dropped off precipitously in the fourth quarter of 2016, following the U.S. presidential election, calling the original arrangement into question,” Rogers said in the document. After not receiving projected commissions from Sprint last year, the company concluded that it might not receive payments until 2018.

“Management made numerous attempts to compel Sprint to make the payments beginning as early as March 2016 and continuing into early 2017, all of which were rebuked,” Rogers wrote.

In a memo posted online, Sprint said RadioShack’s bankruptcy filing is “not material” to its sales results and that it planned to convert several hundred locations into Sprint stores.

RadioShack is based in downtown Fort Worth, occupying about 90,000 square feet on the west end of the riverfront complex now occupied mostly by Tarrant County College. Angela Robinson, vice chancellor for administration at TCC, said RadioShack has made all payments to the college with the exception of its March 2017 rent.

This story was originally published March 9, 2017 at 11:32 AM with the headline "RadioShack says failed Sprint deal led to bankruptcy filing."