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Shift in Postpaid, Weak Sales Hit RadioShack Earnings

By Staff Author | February 24, 2009

RadioShack Corporation announced a larger-than-expected 39 percent drop in fourth-quarter net income on weak product sales, seasonal markdowns and a shift from high-margin postpaid wireless activations to lower-margin existing customer upgrades.

The electronics retailer posted net income of $62 million, or 50 cents per diluted share for the fourth quarter ended Dec. 31, 2008, compared with $101 million, or 77 cents per diluted share in the same period last year. The decline in sales and gross profit was partially offset by measures taken to cut selling costs, general costs and administrative expenses.

The company missed analysts’ estimates of 70 cents per share.

RadioShack reported that comparable same-store sales fell 9.2 percent in the fourth quarter after sales of digital converter boxes and flat-panel televisions failed to offset weak sales of GPS devices and electronic toys. The steepest decline was in company-operated stores, where sales fell 10.2 percent. Total kiosk sales fell 2.2 percent after an uptick in sales at Sam’s Club kiosks failed to compensate for fewer Sprint kiosks.

The company got a boost from an additional month of sales generated by RadioShack de Mexico, which the company acquired in December 2008. Though online sales rose a healthy 53.9 percent in the fourth quarter, that revenue was partially offset by declines in dealer sales, which fell 4 percent.

Overall revenue fell 7.7 percent to $1.3 billion compared with $1.4 billion last year.

For the full year, net income fell 18.75 percent, to $192.4 million, or $1.49 per diluted share, compared with last year’s net income of $236.8 million, or $1.74 per diluted share. Comparable same-store sales fell 0.6 percent for the full year on a 2.3 percent decline in revenue, to $4.2 billion from $4.3 billion last year.

In a statement, the company attributed its results to ongoing, nationwide slumps in retail sales caused by ongoing economic turmoil.

“Our financial results for the fourth quarter obviously reflect the recessionary retail trading environment we face. That said, we take comfort that we operated our business prudently in the fourth quarter, particularly in the areas of cost control and minimizing our inventory markdown exposure,” said RadioShack Chairman and CEO Julian Day.

“We are pleased with the progress we made on our initiatives in 2008, including strengthening our balance sheet in a difficult economy. Our strong cash balance gives us confidence that we are well positioned to take advantage of any opportunities the recessionary environment may offer in 2009.”

More FirstNews 02/24/09:
•  Visto Ups Arsenal Against RIM
•  Shift in Postpaid, Weak Sales Hit RadioShack Earnings
•  Nokia Seeks 1,000 Voluntary Layoffs
•  Wilson Joins NARM as Strategy Director
•  Kindle 2 Ships Early
•  Antenna Software Releases Cross-Platform IM Solution
•  FirstNews Briefs for Feb. 24, 2009

 

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