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RadioShack considers Chapter 7 bankruptcy

A well-known electronics magnate is considering closing its doors for good, according to local reports. South Carolina residents are no doubt familiar with electronics retailer RadioShack, a company that once dominated the small electronics market but which has been encountered financial difficulties for several years. If restructuring is not successful, the company's ownership has said they will consider Chapter 7 bankruptcy.

RadioShack has been a household name in electronics for decades, but with the onset of the digital age, things began to change for the retailer. It has reported massive drops in revenue almost every quarter since the 2012 fiscal year. The last 18 months has seen the company undergoing considerable restructuring efforts as its agreements with lenders has not allowed it to close stores.

This year the company launched a very successful Super Bowl ad poking fun at the company's obsolescence. The ad, which featured appearances by celebrities including wrestler Hulk Hogan and television's ALF, was widely well-received, and the company's stock leaped by 7 percent. However, the success was short-lived. At this point, company ownership believes that a Chapter 7 filing might be the only recourse if restructuring efforts fail to help mitigate existing debt.

If the company chooses to go through with a Chapter 7 filing, the company's assets will be liquidated to help pay down the company's existing debts. As leadership will not allow stores here in South Carolina and elsewhere across the nation to be closed, a bankruptcy filing may be the only way for RadioShack to renegotiate the contracts keeping their nearly 1,100 stores open. With luck and proper planning, this will allow the former technology leaders to move ahead in a positive financial direction.

Source: GuruFocus.com, "RadioShack Corporation On The Verge of Bankruptcy Filing", , Sept. 12, 2014

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