RadioShack's biggest challenge: Making you care

With numerous Wall Street analysts and debt ratings agency Moody's already predicting imminent bankruptcy for RadioShack, the company's financials rang even more alarm bells on Thursday, when it reported a staggering net loss of $137.4 million on a steep sales decline.

After initially predicting the retailer would not have enough liquidity to operate normally by the end of third quarter 2015, Moody's senior analyst Mickey Chadha said after reviewing the results that barring a capital infusion or recapitalization, the electronics chain could now see its liquidity dry up a couple of quarters earlier than expected.

Even with access to more capital, Chadha and other analysts stressed RadioShack needs to do more than just improve its balance sheet to execute a turnaround.

Employee Raymond Stevens demonstrates to a customer how she can try out speakers using a tablet at a RadioShack store in Washington, Sept. 8, 2014.
Linda Davidson | The Washington Post | Getty Images

That's because despite refreshed stores and updated, more on-trend products, RadioShack is facing one fundamental issue that's preventing its recovery—it's failed to get the message out to shoppers that things are any different.

"If you go into the remodeled [stores], the product assortment is good, but nobody knows about it," Wedbush analyst Michael Pachter said. "We all think RadioShack is the same as it's always been."

Time is running short. According to B. Riley & Co. analyst Scott Tilghman, the company's credit facility has a springing block provision that would cut availability by $35 million if borrowing availability slips below $150 million. The company noted availability was $152 million at the end of the quarter, so it's close to having that cut by another $35 million, he said.

Read MoreRadioShack in 'advanced discussions' to raise capital

Once known for its do-it-yourself electronics, RadioShack has struggled to stay relevant among consumers who prefer to visit an Apple store for the latest iTechnology, or who flock to the convenience of online shopping behemoth Amazon.

RadioShack first fought back by trying to rebrand its stores as "The Shack" in 2009, a change that ultimately fell flat with consumers. It's now in the process of refreshing 30 to 40 percent of its inventory with new products—including the latest Apple technology and accessories—and has remodeled and opened interactive concept stores across the U.S.

It's opened more than 40 of these concept stores in the past year, which put a greater emphasis on sound technology, such as Beats headphones. And on the company's call with analysts, CEO Joe Magnacca said these stores are "outperforming" the chain, and continue to show positive sales performance.

Remember RadioShack's heyday?
Remember RadioShack's heyday?

But despite these strides, UBS analyst Michael Lasser, who has a 12-month price target of 50 cents on RadioShack, said in a note before the company's earnings report that although these stores have seen better results, "we don't think it will be enough to impact the entire chain."

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Similarly, he said the company's attempt to rebuild its reputation "as having the latest and greatest tech items" has "been akin to throwing things against the wall to see what sticks." RadioShack is also expanding its "Fix It Here" program, which offers to repair consumers' mobile phones in stores.

Bankruptcy is necessary: Analyst

Magnacca told analysts and investors on Thursday that "we know we need additional financial flexibility to move ahead with our goals."

He said the company is in "advanced discussions" to raise capital, and that it is working with existing lenders, bondholders, shareholders and landlords to devise a long-term solution.

But Chadha said that more money won't fix RadioShack's business model. He pointed out that in just the fourth quarter of last year, RadioShack refinanced its debt and incrementally increased its liquidity position by a few hundred million.

"We're less than a year from that whole refinancing and we're back in the same position we were," he said.

The company ended the recent quarter with total liquidity of $182.5 million.

Pachter said he doesn't think the retailer will survive without first filing for bankruptcy. By staying in business, he said, landlords have no incentive to let the RadioShack terminate its leases; by entering into bankruptcy, the lease terminations would be completed automatically.

RadioShack earlier this year had announced plans to close 1,100 stores to lower expenses, but its lenders did not agree to the terms set forward. Instead, they agreed the chain could shutter 200 stores a year for the next three years.

"A creditor who advances funds now is going to see some of the funds used to pay rent for unproductive stores," Pachter said.

An Apple boost?

Magnacca also pointed to the company's positioning as a top-five Apple retailer as a bright spot for its mobile segment, which accounts for half of RadioShack's business and saw a 30.4 percent sales drop in the most recent quarter.

But despite demand for the new iPhone 6 and accessories, B. Riley's Tilghman, who has had a $0 price target on RadioShack since June, said he doesn't see the release moving the needle for RadioShack.

"It all depends on what type of allocations they get," he said, adding Apple will clearly get the best, followed by carrier partners second and retailers third. Best Buy will rank above RadioShack, he said, since it houses Apple shop-in-shops in its stores.

Read MoreRadioShack is running out of cash: Moody's

Tilghman added that what ultimately led to the "unraveling" of Circuit City was a lack of shipments from vendors. Though he hasn't yet seen this happen to RadioShack—which has said it still has strong relationships with its vendors—he will be looking for signs of this over the next two months.

"I think that's why we're seeing them scramble to try to find some way to try to appease the vendor community now," Tilghman said.

—By CNBC's Krystina Gustafson