RadioShack Corporation has been circling the drain for so long that it’s hard to believe that even after declaring bankruptcy, the electronics retailer is still not dead.
Although there will be far fewer locations — and they’ll play second banana when it comes to branding — a couple thousand RadioShack locations will live on under a plan with the company’s largest shareholder and wireless telecom Sprint Corp. (NYSE:S).
As part of its bankruptcy filing, RadioShack has an agreement with an affiliate of hedge fund Standard General — its largest shareholder and a major creditor — to salvage a large chunk of the company.
The affiliate will buy anywhere from 1,500 to 2,400 of RadioShack’s stores. Sprint will then operate up to 1,750 of those locations. Sprint would have a store-in-store format, although its own branding would take top billing over RadioShack.
As for the remaining roughly 2,000 stores, RSHC will see if there’s any interest as part of a wider asset sale, but most locations look headed to liquidation.
After all, an inability to close stores fast enough is what pushed the retailer into bankruptcy in the first place. Now that RadioShack is in bankruptcy, vendors aren’t exactly going to line up to supply those stores. Besides, RadioShack already pledged to shutter underperforming locations.
RadioShack’s more than 1,000 dealer franchise stores in 25 countries, the stores operated by its Mexican subsidiary, and its Asia operations are not included in the Chapter 11 filing or the agreements with Standard Charter.
The New York Stock Exchange this week suspended trading of RadioShack stock and sought to delist it. Shares were valued today at about 12 cents.
RadioShack: Not Dead Yet
It’s kind of a stunning move. Usually, the playbook for a big retail bankruptcy like RadioShack’s is liquidation. The brand just goes poof. But for better or worse, the almost laughable RadioShack name will live on.
As for the stores operated by Sprint as part of its deal with Standard Charter, that could actually prove to be a smart move for the telecom company.
Sprint currently has about 1,100 company-owned retail stores where customers often suffer with long wait times. The acquisition and development of the 1,750 RadioShack location would more than double Sprint’s store base, which the company thinks will be a revenue booster. As Sprint CEO Marcelo Claure said in a statement:
“We’ve proven that our products and new offers drive traffic to stores, and this agreement would allow Sprint to grow branded distribution quickly and cost-effectively in prime locations. Sprint and RadioShack expect to benefit from operational efficiencies and by cross-marketing to each other’s customers.”
Sprint’s store-in-a-store format will have RadioShack occupying about two-thirds of a location’s retail area, but the wireless company will be the primary brand on storefronts and marketing material.
Equity holders in RadioShack might be done for, but the name — at least for now — lives on.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
