RadioShack's Sales Up 3%, But Profit Off
By Jeff Malester -- TWICE, 5/9/2005
FORT WORTH, TEXAS — RadioShack blamed poor performance in its core store's wireless business for lower first-quarter earnings, with overall net income sliding to $55 million from a year-ago $68.3 million.
Total chain sales in the first three months, ended March 31, edged upward 3 percent, hitting $1.12 billion, from $1.09 billion in the same quarter in 2004. Comp-store sales in the three months were off 1 percent, compared with the prior year.
“We are disappointed that our business did not perform as we originally expected during the first quarter,” said David Edmondson, president/CEO-elect. “Our profits were lower” due primarily to the wireless drop-off; however, “our non-wireless businesses improved in first quarter 2005, compared with first quarter 2004.
“RadioShack remains a very profitable business overall, but our focus clearly must be on turning our wireless business around while continuing to improve non-wireless businesses,” said Edmondson.
The RadioShack results were not unexpected, however, since Edmondson late in March had gone on record to warn of a slowdown in the retailer's wireless and battery businesses for the first quarter (see TWICE, April 4, p. 24), nearly a month before complete official results were announced. In a conference call that followed the earnings release, the company noted that consumers have not embraced newer wireless technologies like video and Bluetooth-enabled handsets, although RadioShack's sales of non-wireless CE, including digital imaging, satellite radio and MP3 players, had grown 10 percent year-over-year.
Operating income in the first quarter also took a hit at RadioShack, dropping to $86.2 million from a year-earlier $116 million.
Looking ahead, RadioShack expects total sales to increase in 2005, with much of the growth coming from products and channels with gross margin lower than the company average.
At the same time, the retailer anticipates increases in its expenses and depreciation as it “makes investments in the future while maintaining cost control with our core business,” said Edmondson.
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