Electronics retailer RadioShack has filed for its second bankruptcy in two years and will immediately close 187 more stores, about 12% of its remaining 1,500 locations.
The chain, based in Fort Worth, Texas, previously filed for bankruptcy in 2015, resulting in about 2,400 store closings. Subsequently, General Wireless, a joint venture of hedge fund Standard General and Sprint, acquired it and ran the remaining 1,700 stores.
In a Chapter 11 reorganization petition filed Wednesday in the U.S Bankruptcy Court in Delaware, General Wireless stated it planned to close 187 stores by March 13 and is "seeking to close and liquidate the inventory and other assets of between 530 and substantially all of their stores," the company said in its filing.
Sprint paid General Wireless a $12 million "wind down payment," and in return was transferred the leases for 115 stores, as well as equipment and furniture in 245 more stores where Sprint is the primary tenant.
The RadioShack stores that do not close March 13 will remain open and the company will continue evaluating options on them during the bankruptcy process. Also open: RadioShack.com, which promoted a clearance sale on its home page.
The first Radio Shack store opened in Boston in 1921, selling ham radios and other radio equipment, according to "96 Years of RadioShack History," compiled by TWICE (This Week in Consumer Electronics).
Over the years, RadioShack established itself as a neighborhood destination for loudspeakers, mobile phones, satellite TV, batteries and toys. It also sold the first mass-marketed, fully-assembled PC, the TRS-80, for which a young Bill Gates wrote an operating system before gonig on to found Microsoft.
As recently as 2013, the company was the eighth-largest consumer electronics dealer, according to Twice.
By 2014, RadioShack was losing $200 million annually in the mobility business alone, according to the bankruptcy filing. The company, which has been run as a privately-held company since the 2015 bankruptcy and had closed 200 stores in recent months, currently employs 5,900. RadioShack has not released a list of stores closing.
“Over the course of the past two years, our talented, dedicated team has worked relentlessly in an effort to revitalize the Company and the RadioShack brand, while providing outstanding service to our customers. We greatly appreciate their hard work and dedication," said RadioShack CEO and President Dene Rogers in a statement.
Last year, RadioShack reduced operating expenses by 23% while increasing gross profit by 8%, Rogers said. The chain sold more than one million RadioShack headphones and speakers in the U.S., while also adding FedEx services in 140 stores.
But the Sprint partnership, arranged in early 2015 to set up co-branded "Sprint Team at RadioShack" stores within RadioShacks, did not -- as hoped -- fuel a turnaround. Sprint sales dropped during the fourth quarter of 2016 and "it became apparent" RadioShack would not receive expected revenue from mobile commissions, the company said in the filing.
"For a number of reasons, most notably the surprisingly poor performance of mobility sales, especially over recent months, we have concluded that the Chapter 11 process represents the best path forward for the Company," Rogers said. "We will continue to work with our advisors and stakeholders to preserve as many jobs as possible while maximizing value for our creditors.”
RadioShack's second bankruptcy is "an unfortunate development for this storied retailer and valued partner," said Kevin Crull, Sprint's president for omnichannel sales in a statement.
He noted that the development is "not material to Sprint’s overall sales results" and the wireless provider "will redeploy to other Sprint stores assets such as signage, displays and inventory currently at RadioShack locations which are closing."
The company will also offer job opportunities for Sprint employees working at Sprint-RadioShack locations to transition to other Sprint stores, he said.
RadioShack had changed their format and product mix, focusing on the Sprint brand for mobile, said Joel Levitin, a partner in bankruptcy and restructuring practice at Cahill Gordon & Reindel LLP in New York.
Occasionally, a company can "get it right" with the second bankruptcy, he said. "The company has to figure out whether ... there is a sustainable business," he said.
In its bankruptcy filing, RadioShack stated that its assets totaled between $100 million and $500 million, as did its debts. Among the debts: $62.9 million in trade debt, liens of $25.5 million and $39.7 million, and unpaid rent of $10.2 million.
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