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NEW BRUNSWICK, NJ–RadioShack Corporation filed for bankruptcy on February 5, and disclosed that it had reached an agreement to sell as many as 2,400 of its 4,000 U.S. company-owned stores to hedge fund Standard General L.P.
The electronics retailer said it will close the remaining stores it owns, beginning with New Brunswick’s George Street location, and 49 others in New Jersey.
Other local stores on the initial closure list include Edison’s Wick Plaza and Meno Park Mall locations, the Brunswick Square Mall in East Brunswick, the Bridgewater Commons Mall in Bridgewater, and Raritan Crossing Shopping Center in Raritan.
General Wireless Inc., an entity formed to acquire the stores under the asset purchase agreement, and subsidiary of Standard General, has reached an agreement with Sprint to “establish a new dedicated mobility ‘store within a store’ retail presence in up to 1,750 of the acquired stores.”
In the release, RadioShack said:
RadioShack currently has approximately 4,000 company owned stores in the U.S. Its more than 1,000 dealer franchise stores in 25 countries, the stores operated by its Mexican subsidiary, and its Asia operations are not included in the Chapter 11 filing or the agreements announced today.
Discussions are underway with interested parties to sell all of the company’s remaining assets.
Joe Magnacca, RadioShack’s chief executive officer, said, “These steps are the culmination of a thorough process intended to drive maximum value for our stakeholders.”
RadioShack’s release makes no mention of its employees, including how many workers will be laid off in the deal.
According to court documents posted by RadioShack, the retailer plans to close at least 1,784 stores by March 31. The stores will close in three clusters or tranches.
The first tranche includes the George Street location, as well as 161 other stores that will close their doors for good by February 18.
The second tranche includes 986 stores set to be closed by February 28, and the final tranche includes 636 stores to be closed by March 31.
On February 12, RadioShack “kicked off a process to auction leases of about 1,700 stores,” according to a report from Reuters. This will get the embattled retailer out of paying roughly $7 million in March rent.
Radio Shack “received court approval… to borrow $10 million to support operations until it opens the bidding for its best performing stores,” says the report.
On February 3, Southern California public radio station KPCC aired a show titled “RadioShack reportedly not long for this world,” summarizing the company’s rich history.
“Back in 1921, two brothers – Theodore and Milton Deutschmann – opened up a small store and a mail order business to provide parts for ham radio enthusiasts and they called it RadioShack,” reads the KPCC website.
The company eventually grew to have as many as 7,000 stores at its peak, but that number has shrunk to about 4,000.
“For decades, it was the go to place for all those little electronic doo-dads you couldn’t find elsewhere, but in recent years, the company has been struggling to survive.”
Radio host Alex Cohen asked Bloomberg Businessweek’s Joshua Brustein to “give [her listeners] a sense of [the] company’s trajectory.”
“It really did reach near ubiquity, people where shopping for most of their electronic needs there, sort of in the pre-Best Buy era. This was kind of the place to go if you needed a lot of electronic goods, and that just petered off over time,” he said.
Brustein said frequent changes in leadership made it difficult to develop a strategy to help the company survive in the age of mega-stores like Best Buy and the growth of online shopping.
“Radio Shack over the first 50 years or so of its modern existence it was sold to a company to Tandy in 1963 and that’s really sort of the beginning of the modern RadioShack. They had three CEO’s and then, since about 2005, they’ve had six which makes it really hard to have any kind of consistent strategy.
“Over that time there was a lot of pressure from Wall Street because the stock wasn’t doing well, so you would see, a CEO sort of jump from strategy to strategy. Those don’t work, the pressure builds, executives leave, and it was just a self-reinforcing cycle,” said Brustein.
“There was a community built around this store, people liked to sort of go there, it was sort of like a hardware store for electronics… a place to go to get expert advice, how to get your television set working the way you wanted it to, and they ignored that – former executives I talked to.”
“In the quest to find things that were profitable they kind of ignored their core, not their core business but there core community,” he said.
“How bad did it get?” Cohen asked.
“Its lost essentially all of its market value. Its stock peaked in 2000 – its lost over 99.5 % of its value since then, which is to be expected since the stock is worth practically nothing. They stopped trading it on the New York Stock Exchange [on February 2] so it really does seem like the end,” responded Brustein.
“The real tragedy here is that it didn’t have to go down this way. Radio shack at its core really seems to hold some value in this world,” said Brusten.