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RadioShack Q3 Earnings Fall 99%

Fort Worth, Texas
– RadioShack said third-quarter sales and earnings were impacted by its
September split from T-Mobile.

 Profits fell 99 percent to $300,000, net sales
rose 3 percent to $1 billion, and comp-store sales slipped 4 percent for the three
months, ended Sept. 30.

The mid-September
carrier transition, from T-Mobile to Verizon, cost the chain $23.4 million,
plus another $400,000 in T-Mobile inventory adjustments and costs related to a
plant closing in China. Excluding these one-time items, net income would have
fallen 67 percent to $14.9 million.

RadioShack
similarly attributed its comp-sales decline to the falloff in T-Mobile postpaid
wireless sales, although lower sales of TV converter boxes and related antennas,
wireless accessories, prepaid wireless handsets and GPS devices also
contributed to the downturn.

These were was
partially offset by an increase in sales of Sprint and Verizon Wireless postpaid
products and services, tablets, and “substantial improvements” in headphones,
tablet accessories and batteries due to enhanced assortment and better in-store
execution, president/CEO Jim Gooch said on an earnings call.

The net sales
gains were driven by the final rollout of RadioShack’s mobile centers to an
additional 962 Target stores year over year, for a total of 1,490 locations as
of Sept. 30. This contributed to a $77.8 million increase in “other” sales, as
traffic and sales per Target store continue to grow, Gooch said.

In comparison,
sales declined by $48 million, or 5.4 percent, at RadioShack’s company-owned
stores during the quarter. Broken out by category, wireless rose 1.3 percent;
accessories fell 6.3 percent; and CE, which includes GPS, digital imaging,
netbooks and digital music players, declined 20.9 percent. On the earnings
call, Gooch said the CE results reflect product cycle declines, and that
RadioShack will continue to “de-risk” the category while also employing it
opportunistically to drive traffic.

In a statement, the
CEO described the third quarter as “a transitional period” for the company, and
pointed to mobility, which currently represents about 50 percent of RadioShack
revenues, as an important component of its growth strategy.

“While it is clear
that it will take time for consumers to gain awareness of Verizon’s availability
at The Shack, the addition of the nation’s top carrier puts us in a stronger
position to offer customers a robust lineup of mobility products, services and
carriers this holiday season,” Gooch said.

Separately, the
company said it would tap into its strong cash flow to increase its dividend by
100 percent and buy back $200 million of common stock over the next 12 months
to better reward shareholders.

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