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R’Shack’s Q1 Sales, Earnings Rise

4/23/2009 09:49:00 AM Eastern

Fort Worth, Texas — Strong performances in its digital converter-box and mobile businesses, and a big boost from its online and Mexican operations, pushed RadioShack’s net sales and operating revenues up 5.6 percent to $1 billion for the first quarter, ended March 31.

Net income for the three months rose 11 percent to $43.1 million, and operating margin was 8 percent, the chain’s strongest first-quarter showing since 2004, reflecting a 25 percent increase in operating income to $80.1 million. 

Same-store sales for company-operated stores and kiosks increased 5 percent during the period, and would be 6.3 percent after adjusting for an additional selling day during the year-ago quarter.

RadioShack chairman/CEO Julian Day said the company is “very pleased with the results we reported today,” and also pointed to the chain’s strengthened balance sheet — a result he said, of “our disciplined approach to working capital management.

“We continue to believe that a strong balance sheet is important in trying economic times,” he said.

The sales gains included a 5.5 percent increase at U.S. company-owned stores; a 10 percent decrease in kiosk sales due to fewer Sprint kiosks; and a 23.9 percent increase in “other” sales, which included revenue from its new RadioShack de Mexico subsidiary and a 27.6 percent increase in online sales, which offset a 7.9 percent decline in sales at franchised dealer stores during the quarter.

 RadioShack partly attributed the comp-store increase to sales of over 1 million digital converter boxes during the quarter, which generated about $70 million in revenue but negatively impacted the gross profit rate by about 1.3 percent.

The company also enjoyed brisk sales in postpaid wireless and flat-panel TV, although those gains were partially offset by a decline in its GPS, wireless accessories, digital imaging and digital music player businesses.

RadioShack didn’t explain why or where its previously faltering wireless business improved, but Goldman Sachs retail analyst Matt Fassler attributed it in a research note to seasonal momentum and “improved economics from new activations" with at least one of its postpaid carriers.


Credit Suisse analyst Gary Balter lauded RadioShack's results but questioned whether the gains will be sustainable after converter box demand dwindles following next month's digital broadcast changeover. "RadioShack seems to be positioned to survive in the near term, and a solid balance sheet is a big plus in this market, with RadioShack still offering one of the best free cash flow yields in our universe," he wrote in a research note. "Yet it does not change what remains a tough growth story over time, as the company searches for its next sales driver."


Cash and cash equivalents more than doubled to $873.2 million year-over-year, and inventories were down $87.6 million to $575.8 million by the end of the quarter.


Consolidated selling, general and administrative expenses (SG&A) were up slightly to $365.8 million, or 36.5 percent of sales, from $362.4 million, or 38.2 percent of sales, last year, due to increased incentive compensation and the full consolidation of RadioShack’s Mexican operations as a wholly owned subsidiary following the acquisition of its RadioShack de Mexico joint venture in December 2008.

The chain presently has about 4,400 company-operated stores, 1,400 dealer outlets and 700 wireless phone kiosks in addition to its 200 company-operated stores in Mexico.

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