Fitch cuts RadioShack view to negative

Fitch Ratings said it changed RadioShack Corp.'s outlook to negative from stable and affirmed the company's issuer default, bank credit facility and senior unsecured note ratings at BB+ and commercial paper rating at B.

The outlook revision reflects RadioShack's weaker-than-anticipated operating results for the year to date and Fitch's concern about revenue trends and the company's ability to meaningfully cut costs.

The ratings continue to reflect RadioShack's weakness in the wireless business, competitive operating environment, ongoing turnaround efforts and adequate liquidity available to meet the company's near-term capital and debt service requirements, the agency said. As a result of the company's weak sales and lower operating margins, its credit metrics have deteriorated; total adjusted debt to EBITDAR increased to 4.5x for the 12 months ended Sept. 30 from 3.5x at the end of 2005.

Fitch said it anticipates there will be improvements in operating margins in 2007 due to the new management team's execution of the company's turnaround plan to reduce costs and improve operational efficiency, which includes closure of underperforming stores, reduction in headquarters staffing, an updated inventory mix and newly remodeled stores.

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