Net sales tumbled 16% due to store traffic declines and weakness in the mobility business.
Beleaguered electronics retailer RadioShack RSH reported a wider third-quarter loss as net sales tumbled 16% due to store traffic declines and weakness in the mobility business. Here’s what else you need to know about the company’s earnings report.
What you need to know: RadioShack, which is in the midst of a high-profile tussle with loan providers, reported a 13% slump in same-store sales for the latest quarter, a decline that was mostly due to weakness in the postpaid mobility business. RadioShack attempted to strike a bullish tone by pointing out that the “retail segment,” the half of its business that isn’t mobility, has performed better in the third quarter and during the key Thanksgiving holiday weekend. But it is still troubling that RadioShack posted a double-digit drop in overall same-store sales, especially after larger rival Best Buy BBY recently reported a surprise 2.2% increase in U.S. same-store sales for its latest quarter.
The big number: RadioShack’s quarterly loss swelled to $161.1 million from a loss of $135.9 million a year ago. The company’s total liabilities are at $1.39 billion with total assets of just $1.2 billion (as of February of this year, the retailer had slightly more assets than liabilities). Fitch Ratings on Thursday said that RadioShack’s five-year credit-default swaps have reached their widest levels ever, and said “mounting market concern for RadioShack comes amid speculation over whether a failure to pay credit event has occurred.”
What you might have missed: RadioShack has been in trouble for quite some time, as it is on pace to report its third consecutive annual loss as the seller of mobile devices, accessories and other consumer electronics faces steep competition from larger rivals that sell the same products but typically with a wider selection. RadioShack CEO Joseph Magnacca on Thursday promised cost-cutting efforts that would boost earnings “by over $400 million annually,” including efforts to trim expenses at the company’s headquarters as well as close some locations. While cost-cutting is important, it is also interesting to note that RadioShack’s net loss for the first nine months of the current fiscal year already totaled nearly $400 million, and Wall Street analysts expect the company to lose more than $100 million in the key fourth quarter.
RadioShack is also finding itself distracted by an argument about the terms of a $250 million loan that was provided by Cerberus Capital Management and Harbinger Group. Magnacca earlier this month said that the lenders “have repeatedly blocked our efforts to accelerate and intensify our turnaround and make smart decisions for our business.” One area of contention: RadioShack has repeatedly requested that the lenders sign off on the closure of up to 1,100 stores, but hasn’t yet won approval for that move.