RadioShack successor enters bankruptcy as retail woes mount

A sign for a RadioShack store in the Brighton Beach section of the Brooklyn borough in New York on March 4, 2014.
A sign for a RadioShack store in the Brighton Beach section of the Brooklyn borough in New York on March 4, 2014.PHOTO: REUTERS

NEW YORK (BLOOMBERG) - The company that set out to revive the fortunes of RadioShack, the venerable consumer-electronics chain, filed for bankruptcy after failing to keep up with changing consumer habits.

The company, formed by Sprint Corp and former RadioShack owners and known as General Wireless, filed for Chapter 11 protection on Wednesday in a US court.  

The business was contrived to help the RadioShack name live on, following the original chain's 2015 bankruptcy filing. It operates Sprint stores within RadioShack locations, as well as franchising the name to other stores. 

Pressures on the business, including sluggish foot traffic at shopping centres and a shift to e-commerce, persisted after the previous bankruptcy. 

Bloomberg News reported last week that General Wireless was preparing for bankruptcy and that a filing would probably result in liquidation, according to people familiar with the matter who asked not to be identified because the process was not public.

In its filing, General Wireless listed assets and liabilities of US$100 million (S$141 million) to $500 million each.

When RadioShack entered Chapter 11 two years ago, it closed about half of its 4,000 stores and sold 1,700 to creditor Standard General, which teamed up with Sprint to form General Wireless. The deal created 1,400 mini-stores plus several hundred franchised units.

Investment firm Standard General backed the first bankruptcy of American Apparel, which filed again for bankruptcy within two years. The clothing chain's assets were sold to Gildan Activewear this year and its retail business is being wound down.

The 2015 RadioShack revival set out to renovate locations and update inventory.

The Sprint partnership also was meant to give the stores an edge. At the time, the business lined up a financing package that included a US$50 million asset-backed credit line, led by RBC Capital Markets, as well as a US$25 million term loan from Great American Capital Partners.

The attempted revival was taking place during a broader pullback in brick-and-mortar commerce.

Best Buy, the largest electronics chain, delivered a disappointing outlook at the beginning of March, a sign that even the biggest retailers are struggling to adapt. Smaller rival HHGregg filed for bankruptcy on March 6, days after announcing plans to close 88 stores.