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RadioShack Reports Soft Q2 Amidst Bankruptcy Fears

RadioShackRadioShack reported declining sales in Q2 2014 and an operating loss of $119.4 million — more than double the prior year. The electronics chain reported total net sales and operating revenues of $673.8 million, compared to$861.4 million last year. The company also reported a 20% decline in comparable store sales, driven, by traffic declines and soft performance in its mobility business.

The results prompted industry analysts to predict the retailer could be close to bankruptcy, prompting some to offer predictions even before the retailer released its Q2 results. Wedbush Securities, for example, lowered its target stock price for RadioShack to $0 on Sept. 9.

“In May, RadioShack announced that it was unable to successfully negotiate consent from its lenders under the 2018 Credit Agreement and Term Loan to close up to 1,100 stores,” wrote Michael Pachter, an analyst with Wedbush Securities. “The terms offered by lenders were not acceptable to the company. RadioShack’s operational decisions are now being vetted by creditors and equity investors are no longer relevant to management decisions — the creditors clearly are in control of the ship and, in our view, the ship is sinking.”

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In response to the financial results, RadioShack CEO Joseph C. Magnacca stated: “We are actively exploring options for overhauling our balance sheet and are in advanced discussions with a number of parties. We are also working with our key financial stakeholders, including our existing lenders, bondholders, shareholders and landlords seeking to create a long-term solution. This may include a debt restructuring, a store base consolidation program and other measures to make significant reductions in our cost structure.”

In a separate announcement, RadioShack appointed Holly F. Etlin as its interim CFO — replacing John Feray, who resigned on Sept 12. A Managing Director of AlixPartners, Etlin previously served as RadioShack’s interim CFO from July 2013 through Feb. 2014.

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