RadioShack hit hard in Q4, store closures planned
A 19% fourth-quarter same-store sales decline and a steep decline in profitability prompted RadioShack to announce the closure of 1,100 stores while CEO Joseph Magnacca maintained the retailer’s brand equity remains strong and a profitability plan is in place.
Sales during the fourth quarter ended Dec. 31, declined to $935 million from $1.17 billion and same-store sales declined 19%. The company recorded a net loss of $191.4 million, or $1.90 a share, compared to a loss of $63.3 million, or 63 cents a share. The profit picture wasn’t pretty even on an adjusted basis to exclude certain expenses with a net loss in the fourth quarter of $129.9 million compared to a net profit of $6.8 million the prior year. The decline in sales resulted in gross margins dropping to 29.8% of sales from 35.8% the prior year. The opposite effect was evident in expenses which increased to 41.6% of sales from 32.7%.
"Our fourth quarter financial results were driven by a holiday season characterized by lower store traffic, intense promotional activity particularly in consumer electronics, a very soft mobility marketplace and a few operational issues,” said RadioShack CEO Joseph Magnacca. “Even in this environment, we're continuing to make progress on the five pillars of our turnaround plan: repositioning the brand, revamping the product assortment, reinvigorating the stores, operational efficiency and financial flexibility.”
The decision to close up to 1,100 stores will leave RadioShack with roughly 4,000 U.S. locations, a figure which includes roughly 900 dealer franchise locations. Despite the big reduction in store count and sharp decline in sales and profitability, Magnacca asserted that RadioShack’s brand equity remains strong and its new concept stores are performing well.
"We have also been encouraged by the positive response to our new brand positioning around ‘Do It Together,’ which we kicked off with our award winning Super Bowl commercial. Importantly, our key hires during the fourth quarter in merchandising, global sourcing, planning and allocation and, more recently, our new chief financial officer, round out our new leadership team as we continue to re-build the business,” Magnacca said. "Our focus on the brand, our operations, and the in-store experience has been unfolding in parallel with a strategic review of our store footprint. Over the past few months, we have undertaken a comprehensive review of our portfolio from many angles — location, area demographics, lease life and financial performance — in order to consolidate our store base into fewer locations while maintaining a strong presence in each market. The result of that review is our plan to close up to 1,100 underperforming stores.”
Magnacca added that he didn’t want to minimize the company’s challenges ahead, but added that, “we have a detailed strategic path to profitability based upon the five pillars of our turnaround. Our entire team is focused on execution as we work to improve our performance in the coming year.”
The company ended the fourth quarter with total liquidity of $554.3 million, including $179.8 million in cash and cash equivalents and $374.5 million of availability under its 2018 credit agreement. The Company's total debt was $614 million as of December 31, 2013, with maturities between 2018 and 2019.