RadioShack Files for Bankruptcy
A deal would see Sprint set up mini-shops in as many as 1,750 RadioShack stores.
A diminished RadioShack will live on, but its future may lie with Sprint.
Struggling consumer electronics chain RadioShack, founded nearly a century ago, filed for Chapter 11 bankruptcy protection late Thursday. It plans to sell 1,500 to 2,400 stores to its largest shareholder, Standard General, and has filed a motion to proceed with closing the remainder of its 4,000 U.S. stores.
Wireless carrier Sprint Corp. has a deal with Standard General to open mini-shops in as many as 1,750 of the RadioShack stores Standard General is buying. Sprint would occupy about one-third of the retail space in each RadioShack location, and Sprint employees would sell mobile devices and Sprint plans.
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And Sprint would be the primary brand on those RadioShack storefronts and marketing materials.
Sprint has more than 1,100 company-owned retail stores, which would more than double if the transaction is approved. It is expected to be finalized in the coming months. But other parties could bid for RadioShack's stores in the bankruptcy process.
The Fort Worth, Texas company is also having discussions to sell all of its remaining assets overseas.
RadioShack Corp. introduced one of the first mass-market personal computers and used to be the go-to stop for consumers' home electronics needs. But it struggled as shoppers increasingly shifted to making purchases online and growth in its wireless business slowed. It has suffered years of losses.
The New York Stock Exchange suspended trading of its shares on Monday and sought to delist it. The NYSE requires companies meet certain market capitalization thresholds to remain on the exchange.
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RadioShack had warned of a possible bankruptcy in September, but received rescue financing that kept it afloat. Still, its CEO recently cautioned the chain might not be able to find a long-term plan to stay in business.
RadioShack worked hard on its turnaround efforts, hiring Walgreen Co. executive Joe Magnacca as its CEO and former Treasury Department adviser Harry J. Wilson as chief revitalization officer. It also developed relationships with popular brands like Beats Audio and redesigned almost half of its U.S. locations — some 2,000 stores — in an effort to entice younger shoppers.
The company, which has not turned a profit since 2011, employs about 27,500 people worldwide, according to its last annual report filed with the U.S. Securities and Exchange Commission.
It is seeking court approval to keep paying employees and honor customer programs and keep operating as it restructures.
RadioShack said on Thursday that it also has more than 1,000 dealer franchise stores in 25 countries, stores operated by its Mexican subsidiary, and operations in Asia operations, which are not included in the Chapter 11 filing. It wants to sell them.
RadioShack, which was founded in Boston in 1921, started as a distributor of mail-order ship radios, ham radios and parts. In the 1950s, it entered the high-fidelity business, touting a device called the "Audio Comparator," a then-novel switching system that allowed the customer to mix and match components and speakers in the listening room.
In 1977, the chain started selling the TRS-80, known affectionately by its users as the "Trash 80," making the RadioShack as important in microcomputers as IBM or Apple.