RadioShack announced Thursday that if it can't fix its financial troubles, then it may have to file for Chapter 11 bankruptcy, a plan that can restructure its finances through reorganization approved by the bankruptcy court.
The Fort Worth, Texas retailer said in a regulatory filing that it is talking with its lenders, shareholders, bondholders and landlords to improve its financial state, according to The Associated Press. The company has spent the last 18 months trying to improve its business by cutting costs, renovating and closing stores and making changes to management.
Joseph Magnacca, CEO of RadioShack, said the company may have to consider options like restructuring its debt and closing more stores in order to keep its business going. He added that several alternative solutions are being reviewed, and that some would require consent from the company's lenders to carry out.
RadioShack said its total cash went down to $30.5 million on Aug. 2, but it still has $152 million under a line of credit, The Wall Street Journal reported. The company added that several challenges, such as shoppers going to other stores and the lack of success with its mobile phone business, may get worse this year. Competing with websites and stores with lower costs also played a part in the retailer's struggle to keep a strong position in the electronic gadget market for the past few years.
Sales at stores that have been open for at least a year declined by 20 percent in the three months that ended Aug. 2. This drop resulted in RadioShack's overall revenue falling by 22 percent to $673.8 million.
In one attempt to ease financial troubles this year, RadioShack tried to shut down at least 1,100 of its U.S. stores, which was opposed by some of its lenders, according to The Wall Street Journal. The company is only allowed to close 200 stores this year without getting consent from its lenders.