Meet the new RadioShack.
After a brush with liquidation last week, a reincarnated version
of the chain will debut later in April under the ownership of hedge
fund Standard General LP with an assist from Sprint Corp.
According to plans filed with the bankruptcy court, the stores
will look a lot like the streamlined outlets RadioShack Corp. had
hoped to build before running short on cash earlier this year. The
stores' top management will also have a new face after Chief
Executive Joe Magnacca, hired two years ago to remake the company
into a flashy specialty retailer, resigned this week.
Sales of cellphones, a crucial traffic driver that nevertheless
had long since stopped being very profitable for the chain, will be
outsourced to Sprint. To reduce clutter, products like laptops,
tablets and digital cameras will be cut back, as will name brands
that don't have much of a following. That will leave RadioShack to
focus on higher margin house-brand chargers, batteries and
speakers.
The culling will leave a lot fewer items in the stores--around
1,000, down from more than 4,000--and there will be far fewer
stores, too. Standard General plans to take over only about 1,700
locations out of the more than 4,000 the chain ran last year.
All this was approved Tuesday by a bankruptcy judge who signed
off on the hedge fund's plans.
One thing still up in the air: the name. Standard General will
operate the stores, but Salus Capital Partners, which is owed $150
million, has first claim on RadioShack's trademarks, patents and
customer data. Unless Standard General can persuade Salus to sell
it the intellectual property that defines the brand, the new
RadioShack may not be called RadioShack for long.
Once the go-to destination for gadget fans and do-it-yourself
electronics buffs, RadioShack sank into bankruptcy court in
February after a long, failed effort to get more shoppers into its
stores. The chain experimented with snazzy new formats, but never
built enough of them. It also struggled to reduce its reliance on
sales of cellphones. In the end, it ran low on cash when lenders
prevented it from closing the large number of stores it needed to
shut in order to stay afloat.
Whether any amount of tinkering can make the chain relevant
again for shoppers who have long since moved on to the Web is an
open question. The chain will ratchet down its presence in markets
saturated with Web-savvy consumers. Manhattan, which once fit more
than 30 RadioShack stores, will have fewer than half a dozen.
Sprint's presence in the deal gives the chain some support. The
wireless carrier will share more than 1,400 locations, taking up
about a third of the space and staffing it with its own employees.
Sprint will pay fees to help cover overhead, distribute commissions
on each item it sells and help with advertising.
Sprint's logo will dominate most locations, with the RadioShack
logo more of a footnote.
RadioShack's intellectual property will be the focus of new deal
activity in the continuing bankruptcy case, according to
intellectual-property valuation expert David Peress of Hilco
Streambank. That includes a database of customer information
collected over the chain's decades of business.
"Sliced and diced" by RadioShack's homegrown systems, Mr. Peress
said, the data include names, addresses and transactions for some
65 million customers, and email addresses of 8.5 million
customers.
Standard General initially wanted to take RadioShack's customer
data as part of the buyout. Salus protested, arguing that splitting
the customer list from the trademarks damaged the value of the
intellectual-property package as a whole.
Standard General may try to buy it later. There are limits on
who can buy RadioShack's customer list due to the company's
original privacy agreements. That new owner could be Standard
General, or it could be another buyer interested in using the brand
and the customer list to sell products online.
Standard General has a six-month royalty-free license to use the
RadioShack name and necessary patents. The idea is to give
RadioShack a couple of months to market the intellectual property
and make the most of the assets. If someone else outbids Standard
General for rights to the brand, the hedge fund will have a couple
of months to take down the RadioShack name and replace it with
something else.
Write to Peg Brickley at peg.brickley@wsj.com and Drew
FitzGerald at andrew.fitzgerald@wsj.com
Access Investor Kit for RadioShack Corp.
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