RadioShack’s Super Bowl Commercial Was Funny; Its Reality Isn’t
RadioShack (NYSE:RSH) was all jokes this past weekend during Super Bowl XLVIII, debuting a commercial that many considered among the best that aired on Sunday. In reality, though, RadioShack’s current financial situation is far from comical, and insider sources told the Wall Street Journal that the company is planning to close around 500 locations in the coming months in a report published Tuesday.
It is still unclear which of RadioShack’s roughly 4,300 stores will be closed, but the company’s stock promptly slipped 4.8 percent to $2.36 after jumping more than 7 percent on Monday morning following the Super Bowl.
It’s no secret that the retail chain has been struggling to stay above water amid an ever-changing tech industry in which consumers no longer visit RadioShack locations to load up on the latest gear. The Fort Worth, Texas-based company has worked to revamp its old-school electronics image, enlisting its comical Super Bowl commercial to help it do so. But investors still aren’t exactly laughing, and this latest report that Radio Shack will board up 500 of its locations isn’t pleasing many.
Radio Shack poked fun at its situation on Sunday, employing a crowd of old-school characters like Hulk Hogan, Erik Estrada, and Alf to show its recognition that the company needs an update, but executives have maintained all along that the company wouldn’t cut the number of its existing stores — now it doesn’t look like that may ring true.
According to the Journal,in October, RadioShack began its restructuring effort by securing $835 million in loans to refinance about $625 million of debt. Those funds were obtained by group a led by GE Capital, and they were also meant to unleash cash for RadioShack’s overhaul, which the company is still currently in the midst of.
Despite suffering quarter after quarter of disappointing earnings and sales losses, RadioShack executives have long maintained that the company will resist shrinking the store’s presence and instead focus on reinventing its image. Though certain locations in struggling areas could shut down, others in prosperous ones would pop up, keeping the number of outlets the same, the Wall Street Journal reports.
Now, however, it’s unclear whether RadioShack believes it can stick to its initial strategy of maintaining its footprint. Those plans were made before the company combatted a fiercely competitive shopping season, one that was shortened by six days, thereby hurting store margins and not helping store traffic.
RadioShack seemed happy with its restructuring progress as of Sunday, and the company recently named Dollar General Corp. (NYSE:DG) executive John W. Feray its new chief financial officer. Still, recent rumors of future RadioShack closings now have both consumers and investors questioning the company’s new plan of action.