RadioShack reports wider loss; Gymboree numbers boost bonds after-market; Quiksilver declines

By Stephanie N. Rotondo

Phoenix, Dec. 11 – A round of earnings in the retail space was helping to move around some of those names currently trading in the distressed realm on Thursday.

RadioShack Corp. came out with numbers early in the day, posting its 11th consecutive quarterly loss. Gymboree Corp. and Quiksilver Inc. then released earnings after the bell.

Gymboree reported a wider loss year over year, but there were some data points that investors seemed pleased with, such as an increase in same-store sales. Those bonds were being quoted up in after-market dealings, according to a trader.

Quiksilver was meantime weaker ahead of its quarterly report. But as the figures “looked a little bit weak,” it was expected the notes might be even softer come Friday.

Away from retail, the coal space was seen losing ground, even as oil prices continued to decline. A report from JPMorgan indicated that rising oil prices could be good for that space, which has been laboring under oversupply, lowered demand and depressed prices.

As for oil, West Texas Intermediate crude fell $1.38, or 2.26%, to $59.56 per barrel – the first time the commodity has traded below $60 since 2009. Brent crude declined 74 cents, or 1.15%, to $63.50.

Oil prices were said to be dragged down yet again as investors grew concerned about Saudi Arabia’s hesitance to cut production, even as OPEC cut demand for 2015.

More pain for RadioShack

RadioShack reported a wider loss in the third quarter, the company’s 11th consecutive decline in its bottom line.

But despite the dismal earnings, a trader said he was “kind of surprised there wasn’t more reaction.”

He said the 6¾% notes due 2019 didn’t trade much, though he did see them coming in at 17.

He opined that the debt was “actually a little better than that,” straddling 20.

Another trader also placed the issue at 17, down 5 points day over day.

For the quarter, net loss was $161.1 million, or $1.58 per share. That compared to a loss of $135.9 million, or $1.35 per share, the year before.

Adjusted loss was $1.23 per share, higher than the $1.04 per share analysts polled by Bloomberg were expecting.

Same-store sales declined 13%.

The company also looked to be burning through cash at a rapid rate. It ended the quarter with $43.3 million in cash and equivalents, leaving it with $62.6 million in total liquidity. That compared to $316.4 million of liquidity the previous year.

The financial results weren’t the only thing investors were eyeing. The Fort Worth, Texas-based electronics retailer’s credit default swaps widened to record levels Thursday, as the International Swaps and Derivatives Association's Credit Derivatives Determinations Committee met for a second straight day to discuss whether the company’s refinancing agreement with Standard General LP – inked in October – triggered a default. Salus Capital is alleging that a breach of covenant did occur on the $250 million term loan it provided when the refinancing was approved.

However, the committee failed to make a decision and will meet again on Friday.

Gymboree up after earnings

Gymboree was seen moving up in after-market trading, following the release of the company’s third-quarter earnings.

At the close, one trader said the 9 1/8% notes due 2018 were off half a point at 33. Another trader agreed that they went out around 33, but noted that the paper was “up 3 to 4 points” after the close.

For the quarter, net loss widened considerably to $522.1 million, versus $24 million the year before. However, net sales increased to $316.8 million from $309.8 million and same-store sales improved by 1%.

Part of the wider loss was attributed to a $591.4 million non-cash goodwill and intangible asset impairment charge.

Adjusted EBITDA was $29.8 million compared to $33.9 million for the same quarter of 2013.

Looking ahead, the San Francisco-based children’s clothing retailer said it was expecting to report full-year adjusted EBITDA of $90 million to $100 million.

“Based on this guidance, the company expects to have sufficient liquidity during the next 12 months to service its debt and invest in the business to drive long-term growth,” the company said in its earnings release.

Gymboree is also planning to shutter 40 stores in 2014, 14 of which have already closed. The company then plans to open about 50 new stores, 46 of which have already opened for business.

And, the company is forecasting that it will spend another $35 million to $40 million on capital expenditures. It spent $7.8 million in the third quarter.

Quiksilver loss narrows

A trader said Quiksilver’s 10% notes due 2020 were down 5 points from the beginning of the month, trading with a 55 handle.

Another trader said the paper was offered in the mid-50s, but there were no bids.

Like Gymboree, the clothing manufacturer and retailer posted earnings after the close. Loss for the fiscal fourth quarter narrowed to $49 million, or 29 cents per share, from $175 million, or $1.04 per share, a year ago. Revenue fell to $400.7 million from $475.9 million.

Analysts polled by FactSet had predicted a loss of 12 cents per share on revenue of $430 million.

The company also provided some guidance for 2015, forecasting revenue of $1.48 billion to $1.55 billion.

Analysts had previously estimated revenue of $1.62 billion.

Coal stays weak

Coal names remained weak despite assertions by some market players that falling oil prices are good for the sector.

A trader said Walter Energy Inc.’s 8½% notes due 2021 were down a deuce at 17½, while the 9 7/8% notes due 2020 dropped 3½ points from last week’s levels to trade around 20.

In Arch Coal Inc. debt, the 7¼% notes due 2021 were seen falling nearly 2 points to 30½, as the 7¼% notes due 2020 dropped 5 points to 36.

The 9 7/8% notes due 2019 meantime declined almost a point to 38.

However, the 7% notes due 2019 managed to tick up a shade to 34½.

In a new report, JPMorgan’s John Bridges maintained that the slide in oil prices could help the coal space perk up.

“With the coal index down 34% [year to date] and mainstream coal stocks like Arch Coal and Peabody Energy down 59% and 60%, respectively, things look quite dark,” Bridges wrote. “Yet the current problems in the E&P world appear to be telegraphing an inflection point for the shale oil/gas business, which has been a major thorn in coal’s side.

“Lower gas supplies should result in higher coal prices and a realization that coal must have a bigger role in U.S. power supply than was expected just a few weeks ago before the funding problems developed in the E&P space.”

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