Radio Shack: Goodbye old friend

February 04, 2015 by Colin Berkshire

Colin here. I learned about electronics by buying parts at Radio Shack and building concoctions. I remember Radio Shack being the king of CB radios in the days of Smokey and the Bandit. Despite having dorky brands like “Realistic” and “Micronta” and “Optimus” they were a fun place to get gadgets. They were as much of an icon as McDonald’s or Denny’s.

[Editor’s note: Colin wrote this post last month before the rush of news about RS]

Today I visited Radio Shack for the last time, and I actually teared up as I left. I asked my wife to take a photo of me in front of the store. I knew it would be the last time I shopped there. It was like rising a lifelong friend at the hospital when neither of you will talk about the obvious approaching end.

Radio Shack is dead. They die this year, probably in a month. I recommend that you visit them to remember what they look like before they plaster their windows with liquidation signs. There isn’t much to buy inside of them because they can’t afford much inventory. But you can find a power cord, or something. Do it.

I don’t know when Radio Shack’s impending death and liquidation will be. I don’t think they get to make it to next Christmas. My guess is that it happen pretty soon.

How do I know they are going to fold? Well, I have no insider information and it’s always possible that somebody like Amazon will decide to buy them simply to have a retail presence. But the numbers tell me that they are dead.

Let me explain so you understand what I see: They are consistently losing about $1 a share per quarter and their stock is selling for 38-cents. They lost $1 a share in 2012, and $3.59 a share in 2013. Their quarterlies for 2014 show that their losses will exceed $3.50 a share in losses. This is for a stock selling for 38-cents a share.

In the August quarter they had net negative cash flow of $80 Million. In November it was negative $66 Million. And, it’s been monster numbers like this for a long time. They burn cash.

In 2013 they had $180 Million in cash and $800 Million in inventory. in 2014 they had $41 Million in cash and $666 Million in inventory. (Nothing ominous about having $666 million is there?) This is liquidity that is down by hundreds of millions of dollars.

Let me make this simpler:

They have 100-Million shares outstanding and the share price is 38-cents. Somebody could buy Radio Shack for less than $40 Million. That’s like $10,000 per store. It would be the cheapest way for Amazon to gain retail presence (Paying $10,000 per store is like buying the entire company for the value of the plastic sign in front of it.)

Now, I am not a CFO and perhaps I am mis-reading the numbers. Insert lots of disclaimers here.

But when you go and visit you will probably smell what I did…that acrid smell unmistakeable as eminent death.

Goodbye Radio Shack, old friend. Thank you for teaching me so much, and for introducing me to electronics, and for being a part of American Culture for over fifty years. I will genuinely miss you.

I expect liquidation to happen in March, and I don’t expect the brand to remain. It will pass into history.