Radio Rentals to shut all stores

Shares in Thorn Group rallied on ­Thursday after it announced that its 62 Radio Rentals stores would close permanently.

A Radio Rentals store. Picture: LEONIE PADAM

Shares in finance and rentals business Thorn Group rallied more than 60 per cent on ­Thursday, despite the company becoming one of the first major retail victims of the coronavirus pandemic when it announced that its 62 Radio Rentals stores would close permanently — rather than a temporary closure.

Thorn said it would shift its focus to a digital model, which would mean a loss of more than 300 jobs.

The company said would restructure its operations after years of underperformance that saw its share price plummet by more than 95 per cent.

The closures and the resultant redundancies of casual and full-time staff at the outlets and head office would occur over the next three months.

While many retailers have closed down to ride out the health crisis, Radio Rentals will not return as a bricks-and-mortar business.

Thorn said it would run down the Radio Rentals’ loan book, worth approximately $123m as at March 31.

The move would create value and not draw down capital.

“The run-down is expected to immediately generate significant cash, above the redundancy and other costs,’’ Thorn said in a statement to the ASX.

In a strategy update the company, which also operates a leasing finance business, said the core of the Radio Rentals’ business would continue to operate and would be leveraged to develop a new, digital business model.

Radio Rentals’ online store will be enhanced with a relevant product range to more closely match the needs of its customer base.

Thorn also introduced new credit policies and collection processes, as well as cutting head office costs, to ensure the business model remained sustainable in the face of the adverse business conditions.

Chief executive Peter Lirantzis said: “I am disappointed that we have been forced to make hard decisions regarding our staff and store network.

“However, they have had to be made to ensure Thorn Group continues to operate and thrive in the future.

“We intend to redevelop both the Radio Rentals’ digital business model and Thorn Business Finance once the COVID-19 crisis has passed.”

The adverse business conditions created by the COVID-19 crisis were causing increased arrears in both Radio Rentals and Thorn Business Finance and would result in corresponding write-offs, the company said.

Thorn’s shares closed up 4.9c at 13c.