Cash Situation Worsens for RadioShack Corporation; Firm on verge of Bankruptcy
All is not well with RadioShack Corporation, an American franchise of electronics retail stores, which is making serious efforts to seek financing and escape bankruptcy.
The troubled electronics retailer said that it may need to file for bankruptcy if its cash situation worsens, after reporting that it has suffered three years of declining sales and 10 straight quarterly losses.
The company is also exploring other options, including a sale or an investment, to overhaul its balance sheet, it said in a regulatory filing on Thursday. The company also added that it was in advanced talks with creditors and other parties on a potential rescue package.
After the yesterday's news of potential financing, the shares of the company went up by 9.6% to $1.02 in New York trading.
The decline in sales is the result of the fact that the company's stores have become increasingly irrelevant to shoppers who now prefer to get their mobile devices and electronic doodads from e-commerce sites or Wal-Mart Stores Inc. (WMT).
An input of fresh capital in the company would not only protecting debt and stockholders' investments but will also give RadioShack more time to close underperforming stores and pursue a comeback. But analysts largely feel that bouncing back won't be easy for the company and it may need to draw on every last asset to make it work.
In the 1980s, the RadioShack brand enjoyed widespread recognition and the company evokes nostalgia for many Americans who spent their childhood browsing for radio-controlled cars or stereo equipment at the retailer outlets.
Scott Tilghman, an analyst for B. Riley in Boston, said, "RadioShack's biggest advantage is its convenience. If they can better capitalize on that differentiation, there could be a reason for at least a scaled-down RadioShack business to exist".
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