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Who predicted this for the last three years? I’ll also be right about JC Penney and Sears. It’s just a matter of time. The retail scrap heap of history adds another retailer.

RadioShack Prepares Bankruptcy Filing

Struggling Electronics Chain, in Talks with Lenders, Could File as Soon as Next Month

By Matt Jarzemsky, Mike Spector and Drew FitzGerald

Updated Jan. 14, 2015 7:14 p.m. ET

RadioShack Corp. is preparing to file for bankruptcy protection as early as next month, people familiar with the matter said, following a sputtering turnaround effort that left the electronics chain short on cash.

A filing could come in the first week of February, one of the people said. The Fort Worth, Texas, company has reached out to potential lenders who could help fund its operations during the process, another person said.

Meanwhile, RadioShack is in talks with a private-equity firm that could buy its assets out of bankruptcy, the people said. They cautioned that the talks with the private-equity firm may not produce a deal and that the company may try instead for a more typical reduction of debt and restructuring of its operations in bankruptcy court.

Situations when companies are close to a bankruptcy filing can be fluid and even contentious, and plans can change at the last minute.

The retailer has made clear it is running dangerously low on cash after posting losses in each of the last 11 quarters, and its stock-market value has shriveled to less than $50 million. In December, it warned in a securities filing that it could be forced into bankruptcy court if it couldn’t raise new funds or get relief from lenders that have blocked its efforts to close hundreds of stores.

The company said in the filing that it had $62.6 million on hand as of Nov. 1—$43.3 million in cash and $19.3 million in borrowing availability—a thin cushion for a sprawling chain with about 4,300 company-operated stores in North America.

The 94-year-old chain that started in the 1920s with a store in Boston traced the rise of electronics in the life of Americans—from transistor radios and typewriters to Bluetooth headphones and smartphones. It grew into a nationwide icon but began spiraling toward irrelevance as electronics moved to the Web and technology moved on.

New Chief Executive Joe Magnacca tried to revamp the company’s store fleet and reposition it in part as a smartphone repair shop. But it wasn’t enough to hold off creditors or bring back shoppers. Nearly three years of losses and sales at their lowest levels in decades had forced the electronics chain to turn to hedge funds for financial lifelines to stay in business. Objections from some of those same lenders prevented the company from closing hundreds of stores it felt it needed to shut down to stay afloat.

What looked to be a tough holiday season—visits to stores revealed little traffic on key shopping days—may have been the last straw.

The struggles of RadioShack started well before its latest cash crunch. Current and former executives said the chain began to lose its cachet in the 1990s as it shifted its attention away from diehard electronics enthusiasts and gave its staff incentives to sell items like mobile phones.

By 2011, the smartphone business had grown to account for more than half of RadioShack’s sales. The big-ticket gadgets helped lift the chain’s overall revenue, but they did little to improve earnings as shoppers went elsewhere to buy more lucrative add-ons like cases and chargers.

Many RadioShack staples, such as cables and TV adapters, became just as easy to find online. A survey from investment bank William Blair before the holidays found Amazon.com Inc. offered nearly two-thirds of RadioShack’s inventory, mostly at lower prices.

Sales were already sliding when the company hired Mr. Magnacca, a former Walgreen executive. RadioShack tried to generate buzz with a 30-second Super Bowl ad last year that poked fun at the chain’s outdated image. The spot featured a series of throwback characters from the 1980s, including Hulk Hogan, Erik Estrada and Alf, tearing out the store’s aging shelves and dragging obsolete products back to their decade.

But the new products and fresher store design that the commercial highlighted hadn’t yet come to most stores when the ad ran, and the marketing push had no obvious impact on nationwide sales.

RadioShack then ran into more trouble with its lenders. In March the company announced plans to close up to 1,100 stores as it sought to reduce costs to stay in business. But creditors including hedge fund Salus Capital Partners balked at the plan. The terms of its loan agreement prevented the retailer from closing more than 200 stores. Without its creditors’ stamp of approval, the company continued to bleed cash.