A report released by Debtwire revealed that RadioShack Corp. (NYSE:RSH) is considering hiring a financial adviser to explore correcting its balance sheet.
The leading national retailer of mobile products and services has had five straight quarters of negative net income, and its shares fell 18 percent on Thursday after the Debtwire report was released.
The electronics chain is on the verge of a liquidity crisis facing a string of debt maturities, the report says, escalating cash burn and bloated inventory levels. RadioShack was not immediately available to comment but issued a statement Friday in response to recent media reports involving the company.
“We continue to have a strong balance sheet with total liquidity of $820 million at the end of the first quarter,” RadioShack’s statement said. ”Like many companies, we have discussions with investment banks from time to time to help us evaluate ways to further strengthen our balance sheet and manage it efficiently. That has been the sole focus of these discussions. As we noted on our last earnings call, we are focused on executing our turnaround and serving our customers.”
Despite the statement, it is not surprising that investors reacted so strongly after the release of Debwire’s report. RadioShack has been fighting an uphill battle against retail giants like Target (NYSE:TGT), Wal-Mart (NYSE:WMT) and Amazon (NASDAQ:AMZN), but its free cash flow has run negative for three of the last four quarters.
Analysts say RadioShack has not done enough to rebrand itself as a destination for purchasing mobile phones or to cater to younger customers, who appear to prefer buying products online or at stores run by telecommunications companies.
As of March 31 RadioShack had $434.9 million of cash and cash equivalents, and $26.5 million of restricted cash, according to a quarterly report filed with U.S. regulators in April. The company also said it was able to access $384.9 million under a credit facility.
RadioShack employs approximately 30,000 customer service staff globally, and its retail network includes more than 4,300 company-operated stores in the U.S., 270 company-operated stores in Mexico, and approximately 1,000 dealer and other outlets worldwide.
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