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R’Shack’s Q3 Sales, Profits Rise

10/23/2008 11:04:00 AM Eastern

Fort Worth, Texas — Strong demand for digital converter boxes and a sharp spike in online sales helped RadioShack’s third-quarter revenue rise 6.4 percent to $1 billion.

Profits increased 8.4 percent to $50 million for the three months, ended Sept. 30, while same-store sales grew 7.7 percent at company-owned locations.

“We are pleased with the overall outcome of our third quarter, especially in light of the difficult economic environment,” said chairman/CEO Julian Day. “Our increase in sales and revenues during the third quarter reflects our commitment to grow sales that are profitable.”

Day said that sales of converter boxes “significantly contributed” to the company’s results during the last six months, underscoring RadioShack’s strength in providing consumers with digital technology solutions.

The chain is positioning itself for longer-term growth by refining its merchandise strategy, enhancing the visual appeal of its stores and improving the productivity of store operations, he said.

However, sales and earnings trends slowed in September after a strong July and August, and Day expects the “challenging retail environment” to continue.

“We are managing through a difficult economy and that will require an even greater focus on efficiency and productivity,” he said.

During the quarter RadioShack raised $375 million through the sale of convertible senior notes, giving it $824.1 million in cash and cash equivalents. The company also has access to an additional $325 million under a revolving credit facility.

“We are pleased to have realigned our liquidity and debt in advance of the adverse changes in the credit market,” said chief financial officer Jim Gooch.

The 6.4 percent net sales gain included an 8.0 percent increase at company-owned stores, a 5.9 percent increase at dealer/franchised stores and a 45.2 percent increase in online sales.

Kiosk sales, which consist primarily of handset sales, postpaid and prepaid commission revenue, and related wireless accessory sales, declined by $1.8 million, or 2.5 percent, due to “significant decreases” in its Sprint kiosk business, which were partially offset by an increase in sales generated by its Sam’s Club kiosks.

Besides converter boxes, the company attributed the nearly 8 percent gain in same store sales to growth in AT&T post-paid wireless upgrade activations, video gaming, GPS devices and laptop computers.

The strength in converter-box sales was offset by the “disappointing performance” of the company’s Sprint post-paid business. Excluding both, same-store sales were up 4.4 percent year over year.

Broken out by category:

·         Sales in the company’s wireless platform (including postpaid and prepaid wireless handsets, commissions, residual income and communication devices such as scanners and GPS) decreased 0.8 percent. Gains in AT&T postpaid wireless, GPS products and prepaid wireless handsets, were more than offset by declines in the “disappointing” Sprint Nextel postpaid wireless business, RadioShack said.

·         Sales in its accessory platform (including media storage, power adapters, digital imaging products, headphones, and accessories for home entertainment, wireless, music, computer, video game and GPS) increased 35.5 percent, driven by sales of digital converter boxes and video game accessories.

·         Sales in its modern home platform (including residential telephones, A/V end-products, home satellite systems, and computers) decreased 8.8 percent, due primarily to declines in sales of flat-panel TVs, DVD players and recorders, and cordless telephones, and partially offset by increased sales in laptop computers.

·         Sales in its personal electronics platform (including digital cameras, digital music players, toys, satellite radios, video gaming hardware, camcorders, general radios, and wellness products) decreased 8.1 percent, driven primarily by sales declines in toys and digital music players, and partially offset by increased sales of video game consoles.

·         Sales in its power platform (including general and special purpose batteries and battery chargers) decreased 0.7 percent, due primarily to decreased sales of certain special purpose batteries, plus a decline in general purpose battery sales in previous quarters.

·         Sales in its technical platform (including wire and cable, connectivity products, components and tools, as well as hobby and robotic products) increased 0.5 percent.

·         Sales in its service platform (including prepaid wireless airtime, extended service plans and bill payment revenue) increased 4.9 percent, driven primarily by increased sales of extended service plans.

“Other” sales (including sales to independent RadioShack dealers, outside sales through the company’s service centers, online sales, sales to its Mexican joint venture, sales to commercial customers, and outside sales of its global sourcing operations and manufacturing facilities) decreased $1.1 million or 1.3 percent.

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