U.S. News

Moody's Cuts RadioShack to Junk on Weak Sales, Performance


Moody's Investors Service on Monday cut its ratings on RadioShack into junk territory, citing weak sales and operating performance at the electronics retail chain.

"The downgrade reflects RadioShack's recent struggles to overcome lackluster sales and operating performance, much of which stem from the switch in cellular phone carriers in late-2005, and which have resulted in leverage that is inconsistent with an investment grade credit profile," Moody's said in a statement.

"In addition, while the new senior management team has articulated a turnaround plan, it remains to be seen how the plan will impact future operating performance," Moody's said.

RadioShack last month reported higher fourth-quarter profit after cutting costs and closing unprofitable stores.

"Fourth-quarter performance on a year-over-year basis reflects improvement, but it is also clear that much work remains to be done, especially on the phone side," Moody's analyst Charlie O'Shea said in the statement.

Moody's cut RadioShack's senior unsecured debt one notch to "Ba1," one level below investment grade, from "Baa3." The outlook is stable, indicating an additional ratings change is not anticipated over the next 12 to 18 months.

RadioShack's 7.375% bond due 2011 last traded at 104.97 cents on the dollar on March 2, according to MarketAxess.