Analyst on RadioShack: Bankruptcy Is ‘Imminent’

Analyst on RadioShack: Bankruptcy Is ‘Imminent’

"The creditors clearly are in control of the ship and, in our view, the ship is sinking."

You may not be aware of it because of their shrinking profile, but The Shack is a genuine piece of Americana, a long-term institution that was originally founded in the 1920s, when it was really about radios, and offered the genius bars of its day. Forbes referred to them as "the really, really brainy group that worked behind the counters of RadioShack stores in the 1920’s who offered help and sold the appropriate equipment to amateur radio enthusiasts who loved to banter about diodes and triodes. It was back then that RadioShack latched onto its reputation as the credible, friendly place to get 'parts, pieces, wires, and batteries,' all the ordinary, but necessary, things that make electronic stuff work."

Back in the 1980s, I believe Radio Shack was the most prolific chain in America, measured by the number of storefronts. They have long since been surpassed by Subway (25,000 and counting!), McDonald's, Starbucks and others, but the Shack is still among the leaders in the category excluding food-prep outlets. I think Dollar General is now the largest in that group with 10,000+ outlets, but after them it drops to a bunch of chains in the 7000s, like 7-Eleven, Walgreens, CVS, and Family Dollar. Radio Shack was right behind that group in 2013 with about 5000 outlets, which is significantly less than they had in their heyday, but still more than Walmart. More units than Walmart? That's still an impressive claim.

Still, times change, and storefront count does not determine success. It was only about 10 years ago that Blockbuster was a mighty retail powerhouse with 60,000 employees in some 9000 outlets worldwide. Blockbuster's demise demonstrated that controlling lots of bricks-and-mortar accomplishes nothing if there is no profitable business model creating a profit from all that visibility. Radio Shack seems poised to learn the same lesson. They are closing stores as I type, having announced back in March that they were closing another 1100 outlets.

I'm surprised that they have lasted this long and, to be brutally honest, I probably won't even notice when they are gone forever. I haven't been in one in decades, and could not tell you where the nearest one is.