RadioShack to close up to 1,100 stores
Fort Worth, Texas — RadioShack Corp. said it plans to close up to 1,100 stores, approximately one-fifth of its total, and also announced a disappointing holiday season and a wider quarterly loss. The shutterings will leave the chain, whose turnaround appears to be still far off, with over 4,000 locations, including more than 900 dealer franchise locations.
“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,” said Joseph C. Magnacca, CEO. “The result of that review is our plan to close up to 1,100 underperforming stores.”
Joe Magnacca, a former Walgreens executive, took the helm of RadioShack in February 2013 and launched an ambitious turnaround plan to reinvigorate and reposition the struggling brand. He has said he expects the turnaround to take several quarters.
"Our brand equity remains strong, reflected in the sales growth we’re seeing in our new Concept Stores, which redefine the RadioShack store experience," Magnacca said. "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."
RadioShack attributed its poor performance in the quarter to a decline in shopper traffic, deep promotions by competitors, and weak sales in phone-and-tablets.
The chain reported a net of $191.4 million in the fourth quarter, ended Dec. 31, from $63.3 million in the year-ago period.
Sales dropped to $935.4 million in the quarter, from $1.17 billion last year. Wall Street expected revenue of $1.12 billion. Same-store sales plunged 19%.
RadioShack reported a full-year loss of $400.2 million, versus a loss of $139.4 million for the year-ago period.
Annual revenue fell 10% to $3.43 billion, from $3.83 billion.
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 figurewhich 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.
Amazon warehouse workers’ case to be heard by Supreme Court
New York — The U.S. Supreme Court has agreed to hear a case brought by former Amazon warehouse workers that could determine whether companies have to compensate employees for time spent undergoing end-of the-shift security searches.
The case, Integrity Staffing Solutions v. Busk, involves former temporary employees of Integrity Staffing Solutions, which provides temporary workers for Amazon’s huge warehouses. The workers said they spent nearly 30 minutes some days waiting for the checks, time for which they were not compensated. (Amazon requires everyone entering and leaving its warehouses to pass through the security screens to prevent theft.)
The employees filed the suit in 2010, contending that the Fair Labor Standards Act required Integrity to pay them for activities that are “integral and indispensable” to an employee’s job. In April, the U.S. Court of Appeals for the 9th Circuit ruled that the workers’ suit could go forward, which led similar cases being filed against Amazon directly and other third-party warehouse contractors. The Supreme Court is reviewing a federal appeals court decision that allowed that lawsuit to proceed.