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RadioShack Corp. (RSH), the electronics retailer whose shares have plunged 73 percent this year, said Chief Executive Officer James Gooch left after 16 months on the job and was replaced on an interim basis by its finance chief.
The board and Gooch, 45, agreed that he would step down, effective immediately, the Fort Worth, Texas-based company said in a statement today, without specifying a reason. The board plans to use an executive search firm to help find a successor.
RadioShack suspended its dividend in July after posting an unexpected loss amid sluggish consumer spending and increasing dependence on mobile-phone sales. Selling lower-margin Apple Inc. (AAPL) iPhones ate into the retailer’s profitability, Gooch said at the time. The company also is facing increasing competition from Best Buy Co., which is opening smaller stores dedicated to selling mobile phones, e-readers and tablets.
“Gooch simply was not effective, and a change clearly needed to be made,” Anthony Chukumba, an analyst at BB&T Capital Markets in New York, said in a note. He rates the shares hold. “We find the timing a bit curious given the fact Gooch was CEO for just over a year and the start of the crucial holiday selling season is less than two months away.”
RadioShack rose 1.6 percent to $2.60 at 4:15 p.m. in New York.
“The board decided the timing was right for this decision,” Eric Bruner, a RadioShack spokesman, said by e-mail. He declined to elaborate and said Dorvin Lively, who is now interim chief, wasn’t available for an interview.
“This was a mutual decision in the best interest of the company,” Bruner said.
Contracts protecting against RadioShack’s default rose 2.2 percentage points to 37.2 percent upfront as of 10:30 a.m. in New York, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market. That’s in addition to 5 percent a year, meaning it would cost $3.72 million initially and $500,000 annually for five years to protect $10 million of RadioShack’s debt.
Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. The contracts, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, rise as investor confidence deteriorates and fall as it improves.
Julian Day, RadioShack’s previous chief executive, hired Gooch as finance chief in 2006 after they worked together at Kmart Holding Corp. Gooch succeeded Day as CEO last year and had been working to spur stagnant sales. Analysts estimate the company will post a net loss of $27.2 million this year, according to data (RSH) compiled by Bloomberg.
“The real challenge of someone like RadioShack is driving traffic to their stores,” said Brian Nagel, a New York-based analyst at Oppenheimer & Co., who rates the shares market perform, the equivalent of a hold. “They have a store format that is largely ineffective -- it’s too big to sell wireless and too small to sell most other product categories.”
Lively, 54, joined RadioShack last year after being CFO at Ace Hardware Corp. He also worked at Maidenform Brands Inc. (MFB) and Toys “R” Us Inc.
Scott Young resigned as RadioShack’s chief merchandise officer in June, according to a regulatory filing.
The retailer has about 4,700 company-run stores in the U.S. and Mexico, as well as 1,500 wireless phone centers in the U.S. and 1,100 dealer and other outlets worldwide.
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