RadioShack reported another big loss Thursday for its third quarter, as declining sales and depleting cash forced the retailer to launch a new round of cost-cutting to try to stay out of bankruptcy.
The Fort Worth-based electronics retailer said it lost $161.1 million for the three months ended Nov. 1, compared with a loss of $135.9 million in the comparable quarter last year. It was the 11th straight quarter of widening losses.
Sales declined by 16 percent to $650.2 million, and comparable-store sales declined by 13.4 percent. The company cited traffic declines and softness in its mobility business.
But Chief Executive Joseph Magnacca said sales in other categories — such as speakers, headphones, batteries and fitness technology — did much better, and gains continued during the recent Black Friday shopping weekend.
Magnacca’s generally upbeat tone did not extend to a sober appraisal of RadioShack’s feud with a major lender, Salus Capital, which sent the company a notice of default alleging new refinancing terms violated its loan agreement — a claim the chain rejects.
“We faced significant challenges, including from our term-loan lenders who claimed last week that the October third recapitalization agreements breached their credit documents,” Magnacca said during a conference call with analysts. While he declined to go into detail, he reiterated that “we disagree and to date have continued to receive support from our revolving credit lenders.”
Magnacca said RadioShack has begun “a set of cost-reduction initiatives designed to enhance earnings by over $400 million annually, encompassing a range of operating-cost reductions related to headquarters, field, stores and store support to improve operational efficiency and right-size our business.”
Magnacca said 175 underperforming stores have been closed so far in the current fiscal year, inching the chain closer to shuttering 1,100, which he noted still requires creditor approval, a major stumbling block. The company ended the quarter with total liquidity of $62.6 million, including $43.3 million in cash and cash equivalents.
Magnacca sounded upbeat on the three-day Thanksgiving holiday sales, noting that the chain’s sales were down just 2 percent, compared to the reported industry 11 percent slump. “Our result was notably strong result in comparison,” he said, adding that it would have been even better if not for poor cellphone sales.
“We started cost reductions near the end of the third quarter, but you will see more results from these efforts in the current quarter,” he said.
With cash running low after two years of losses, RadioShack was able to avoid a bankruptcy filing during the quarter by securing new financing in a restructuring led by the New York hedge fund Standard General. The deal provided an additional $120 million in capital to fund the critical year-end shopping season.
This month, the company received a notice of default from lender Salus Capital, which alleges that the refinancing violates terms of its lending agreement. The company has publicly disputed the assertion and says it will contest the default.