RadioShack CEO Joseph Magnacca told shareholders Tuesday that a dispute with lenders that scuttled a plan to close up to 1,100 stores this year presents challenges for the consumer electronics chain’s turnaround plan.
“I don’t know if we can overcome this impasse, but we’ll continue to work at it,” he said.
For now, RadioShack is moving forward with plans to close 200 stores this year, and 600 over three years, the maximum allowed under its loan agreements. The company has closed 20 stores so far, he said, and plans to shut down more in the second and third quarters.
Still, that’s far fewer than what was signaled in March, when the retailer announced plans to close up to 1,100 of its 4,300 company-owned stores after reporting disappointing holiday sales and a $191 million fourth-quarter loss.
“It definitely changes the pace [of the turnaround] when you have to go over three years instead of more aggressively closing stores in one year,” Magnacca told reporters. He said some stores will move into a “harvest” strategy, meaning they will be targeted for other cost reductions.
Magnacca said he is in almost daily conversations with the lenders, who wanted to take a “premium” from the store-closing savings, which the company found unacceptable. The company secured $835 million in new financing from lenders in December.
He declined to say whether the development has led RadioShack to consider a Chapter 11 bankruptcy filing. “I can’t comment on that, obviously,” the CEO said.
While much attention has been paid to the dispute over closings, Magnacca told shareholders at their annual gathering that RadioShack will remodel about 100 stores this year, using some of the best aspects from nearly 40 new “concept stores.”
These new “hybrid concept” stores will include features such as a speaker wall, a live headphone display, a tablet table and a home automation device spot, Michael DeFazio, senior vice president for store concepts, said after the meeting.
The new designs, with trimmed-down product inventories and less emphasis on cellphones, are part of Magnacca’s strategy for reversing sales losses.
He has also overhauled the management team and launched a new advertising push, including a well-received Super Bowl ad.
So far, the results have been disappointing. He said he couldn’t discuss financial details Tuesday because the company is in a quiet period before the release of its first-quarter results, expected next week.
“This transformation will take time before we see the results to our financials,” he said.
The shareholders meeting, held at the Norris Conference Centers in downtown Fort Worth, was enlivened by a broadside attack on RadioShack’s product selection by former employee Hy Siegel of Fort Worth.
Siegel complained that the chain is no longer the go-to place for proprietary entertainment devices and components and has become a me-too cellphone store with products that can also be found at supermarkets and convenience stores.
“In a word, it stinks,” said Siegel, who worked in RadioShack’s public relations department during the 1970s.
He used to visit a RadioShack store several times a week but now goes only once a month — to buy batteries, if they are on sale. Siegel called for more unique house-brand products that once helped feed the company’s growth.
Magnacca responded that such proprietary goods are in the pipeline but take time to develop. He urged Siegel to come back in a year.