Thursday, March 9, 2017

Radio Shack Files For Bankruptcy Again

(Reuters) -- U.S. electronics chain RadioShack Corp filed for bankruptcy on Wednesday for the second time in a little over two years, faced with a challenging retail environment and an unsatisfying partnership with wireless provider Sprint Corp.

The Chapter 11 filing comes after RadioShack, owned by General Wireless Operations Inc, tried to revitalize its business by co-branding stores with the wireless carrier in an effort to compete against their largest rivals.

General Wireless, which acquired the RadioShack brand in 2015, listed assets and liabilities in the range of $100 million to $500 million in the U.S. bankruptcy court for the Delaware district.

RadioShack will close approximately 200 stores and will evaluate options on the remaining 1,300, the company said in a statement.

Sprint will convert several hundred locations into Sprint corporate-owned stores, the wireless provider said in a separate statement.

RadioShack's bankruptcy filing and subsequent store closings are not material to Sprint’s overall sales results, Sprint added.

RadioShack, a nearly 100-year-old chain that captured the heart of electronics enthusiasts for its specialty products such as "walkie talkies", first filed for bankruptcy in 2015 after the rise of mobile phones caught it off-guard and customers abandoned its stores for big box competitors including Best Buy Co Inc and Amazon.com Inc.

In an attempt to keep the doors open on 1,740 stores, RadioShack struck a partnership with Sprint during its bankruptcy, inviting the mobile carrier to co-brand with the company and set up smaller stores within its own.

At the time, Sprint viewed RadioShack's retail footprint as a way to quickly scale up its own business and RadioShack hoped to benefit from increased liquidity in the form of rent and commission payments from Sprint.

But, in the years since RadioShack has emerged from bankruptcy, both Sprint and RadioShack have been challenged.

Sprint, whose network is viewed by analysts as inferior to the country's largest carriers, Verizon Communications Inc and AT&T Inc, has been forced to offer heavy discounts to grow its business.

Sprint's challenges, which led to sales dropping "precipitously" toward the end of last year, meant RadioShack received less than expected in commission, RadioShack said in papers filed on Wednesday.
"The Sprint relationship did not yield the benefits" RadioShack was anticipating, it said.

RadioShack, meanwhile, has struggled to compete against internet behemoth Amazon.com and for the attention of shoppers who increasingly wait for deep discounts before making a purchase.

The influx of cheaper copycat consumer products manufactured abroad has also hurt the business.

Still, in the years since its first bankruptcy, RadioShack has focused on expanding its private label offerings, which include drones, radios and adapters, and now makes up the majority of its business.

The shift away from selling other retailers' products to its own has helped it reduce operating expenses and increase gross profit.

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