RadioShack Corp. posted a seventh straight quarterly net loss and said it received commitments for $835 million in new five-year financing to boost liquidity amid a turnaround effort.
The consumer-electronics retailer’s net loss widened to $112.4 million, or $1.11 a share, in the three months through Sept. 30, trailing the average loss of 37 cents anticipated by analysts. RadioShack said in a statement that it ended the fiscal third quarter with total liquidity of $613 million.
Chief Executive Officer Joe Magnacca had sought new financing to give vendors the confidence to supply him with exclusive products to distinguish RadioShack’s offerings from rivals’ merchandise. The retailer’s sales have declined as it lost customers to Best Buy Co. and Amazon.com Inc. and a stockpile of unwanted inventory forced it to sell merchandise at steep discounts.
The results “do not provide much reason for optimism,” Anthony Chukumba, an analyst at BB&T Capital Markets in New York, wrote today in a note. He recommends holding the shares and said the new financing gives the company “adequate liquidity to make it through the upcoming holiday selling season and attempt to execute” Magnacca’s turnaround plan.
RadioShack’s gross margin narrowed to 30.1 percent from 38 percent a year earlier.
The shares sank 18 percent to $2.89 at the close in New York for the biggest decline since July 25, 2012. The stock has gained 36 percent this year, compared with a 23 percent advance for the Standard & Poor’s 500 Index.
The new financing will comprise $585 million in a new asset-based lending facility and a $250 million secured term loan, RadioShack said. The lenders include GE Capital, Salus Capital Partners LLC, CIT Group Inc. and RBS Citizens NA. It will provide $175 million in additional liquidity, the company said.
RadioShack continues to have “ample liquidity,” with the new financing giving “us the time we need to complete our work” including remodeling stores, Magnacca told analysts today on a conference call. The financing was arranged at competitive rates, interim Chief Financial Officer Holly Etlin said.
The company also today said it named Paul Rutenis chief merchandising officer. Rutenis, who previously served as senior vice president for the home division at J.C. Penney Co., will be in charge of improving assortments of name brands and private brands in stores. Janet Fox, a former Under Armour Inc. senior vice president, joined RadioShack as senior vice president for global sourcing.
During the quarter, the retailer accelerated its effort to reduce slow-selling and duplicate merchandise, leading to an increase in costs of goods sold. A year earlier, the company posted a loss of $47.1 million, or 47 cents a share.
At the heart of Magnacca’s turnaround strategy is “Let’s Play!” -- an effort to make the retailer “a neighborhood technology playground.” Prototype stores have a cleaner look, a change from the tangled collection of cables, cords, adapters and batteries that many customers associate with RadioShack. Magnacca plans to reduce the number of stocked items at stores to 3,000 from 4,000.
Earlier this year, Magnacca, RadioShack’s fourth CEO in three years, hired turnaround adviser AlixPartners LLP where interim CFO Etlin is a managing director.
RadioShack began life in 1921 as a Boston-based mail-order retailer serving radio officers aboard ships and amateur ham operators. It opened the first U.S. audio showroom in 1947 and sold the first mass-produced personal computer, the TRS-80, in 1977.