Can RadioShack avoid bankruptcy?

Radio Shack boss Joseph C. Magnacca's plan today to shut 1,100 "underperfoming" U.S. stores after reporting bigger-than-expected losses and a 20% drop in yearly sales (to $935 million) recalls Circuit City's convulsions in the months before its 2008 shutdown, analyst David Strasser at Janney Capital Markets told clients in a note this morning. Like Circuit City, Radio Shacks' revamped stores "are great, but simply not enough" to "warrant survival of the whole company," given falling sales and rising inventories, he added.

The slowdown in the wireless-phone upgrade business will make a RadioShack turnaround even tougher; so will severance and closed-store buyout costs; "they simply don't have the gross profit to cover it," Strasser concluded.

Magnacca met with investors and acknowledged the company's lenders won't allow it to close more than 200 stores a year -- given the expense of paying off landlords and workers -- without special permission, or a bankruptcy filing. He said he hopes landlords will give "ample rent reductions" to avoid losing RadioShack altogether. He added that the company has more than enough cash and credit to make it through another year. He sidestepped the question of whether Radio Shack's most-updated stores -- the company hopes to open dozens more this year -- are profitable.

It's not clear RadioShack rents have room to fall any further: At around $20 a sq ft, are already below shopping center averages, notes Janney's Michael Gorman in a second report.

"The only leverage the Company has is bankruptcy," if it really wants "to accomplish this store closure goal," Strasser concluded.

Which stores will close? The company hasn't put out a list yet, Philadelphia retail store broker MSC's principal Douglas J. Green noted. Could be weeks.