RadioShack Files for Chapter 11 Bankruptcy After Striking Deal to Sell Some ... - New York Times

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A sign indicating a “Clearance Blowout” at a RadioShack store in Miami. The retailer had not turned a profit since 2011.Credit Joe Raedle/Getty Images

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Updated, 8:06 p.m. | For years, RadioShack — the retailer that helped bring personal computers to the masses — outlasted untold predictions that it would buckle in the face of bigger rivals and online competitors.

But its clock has finally run out.

RadioShack, a long-ailing 94-year-old electronics chain, filed for bankruptcy protection on Thursday after striking a deal to sell up to 2,400 of its stores to the wireless service provider Sprint and a hedge fund that is its biggest shareholder.

The Chapter 11 filing, made in federal bankruptcy court in Delaware, took few unaware. RadioShack had not turned a profit since 2011, and its fate had been a regular topic of speculation in the retail and corporate restructuring circles.

“The surprise is that they survived this long,” said Michael Pachter, an analyst at Wedbush Securities. “I didn’t think they’d last through Christmas 2013.”

But RadioShack is poised to live on, at least in much diminished form. Sprint and the hedge fund Standard General agreed to buy 1,500 to 2,400 of RadioShack’s 4,000 company-owned stores in the United States. Sprint is expected to run special “store within a store” departments in up to 1,750 of those stores.

As so-called stalking-horse bidders, Sprint and Standard General will have to compete with potential rivals in a court-supervised auction.

The remaining company-owned stores will then be closed.

Until then, RadioShack will continue to operate normally through the Chapter 11 process.

“These steps are the culmination of a thorough process intended to drive maximum value for our stakeholders,” Joe Magnacca, RadioShack’s chief executive, said in a statement.

The company’s roots suggest its origins in a long-gone world, taking its name from the small wooden shacks on ships that held radio equipment. Another predecessor, the Hinckley-Tandy Leather Company, sold leather shoe parts to cobblers.

But the retailer once stood at the vanguard of the technological revolution. In 1972, it sold an all-electronic calculator. And in 1977, it sold one of the first mass market computers, with an operating system designed by Bill Gates. It was later a pioneer in sales of early mobile phones and laptops.

But it has been roiled by the digital revolution, particularly with the rise of e-commerce, which has significantly diminished foot traffic to RadioShack’s thousands of brick-and-mortar stores. And sales of cellphones have slowed, giving rise to price wars and battering margins for third-party retailers like RadioShack.

It has posted losses for the last 11 consecutive quarters.

“The company has struggled to find its place in the market and, more important, with the consumer,” the retailer’s 2013 annual report read, calling the financial performance that year disappointing.

RadioShack hired Mr. Magnacca — a former president of Duane Reade, credited with having reinvented that brand before it was sold to Walgreen — as chief executive in 2013. In announcing the appointment, the company expressed hope that Mr. Magnacca would be a “catalyst for change” and resuscitate the company.

But the financial decline continued, despite new management’s efforts. Mr. Pachter of Wedbush pointed to a Super Bowl spot that RadioShack ran last year poking fun at the dated image of its stores and advertising that they had been updated.

The company’s single biggest problem, Mr. Pachter said, was its irrelevance. “Ask people under 30 what a radio is, and what a shack connotes,” he said. “It’s your grandmother’s store.”

In March, RadioShack said that it planned to close up to 1,100 stores but announced two months later that its lenders had overridden those plans. It wound up closing about 175 stores last year, the company reported in a quarterly earnings statement in December.

In jeopardy of running out of cash, the company scrambled to refinance its debt in the fall. Its biggest shareholder, Standard General — which also has a significant stake in American Apparel — stepped in to help. The fund provided $120 million in liquidity, which helped keep Radio Shack solvent for the 2014 holiday season and out of bankruptcy until now.

Standard General once again stepped in on Thursday.

Mr. Pachter said that RadioShack — which listed $1.2 billion in assets and nearly $1.4 billion in total debt — could still survive in a much smaller form. Many of its stores, in strip malls and lower-income areas, are well suited to selling prepaid mobile phones to customers with limited or poor credit.

On Wednesday afternoon, a handful of people browsed a RadioShack store in the New York Port Authority bus station as “Bad Girls,” the 1979 hit from Donna Summer, played. The store advertised no deep discounts or sales.

Guillermo Dominguez, a disc jockey from North Bergen, N.J., said he had heard about the store’s financial trouble and was browsing. “It’s mostly a phone store these days,” he said. “There’s nothing they have that I think of as a necessity. But the stores definitely don’t look like what they used to.”

Shares of RadioShack opened at 24 cents on Monday. As rumors of the impending bankruptcy filing swirled, the New York Stock Exchange said it would suspend trading in the stock and sought to delist it, saying that Radio Shack’s market value was too low to qualify its stock to trade on the exchange.

Mr. Pachter said he was puzzled by the trading activity. “It’s amazing the stock continued to trade at a positive value,” he said.

Gloria Diaz, one of RadioShack’s 27,000 employees, said on Wednesday in the New York Port Authority branch that she had no indication that the company was heading toward bankruptcy. “We’re in the clouds,” she said. “Hopefully business picks back up. Pray for us.”

Radio Shack’s Chapter 11 petition

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