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RadioShack Q4 Earnings Fall 25%

2/23/2011 08:45:07 AM Eastern

Fort Worth, Texas - RadioShack's fourth-quarter profits fell 25 percent to $57 million on net sales of $1.4 billion, a 3.8 percent increase.

Comp sales at company-owned stores and kiosks rose 1.3 percent for the three-month period, ended Dec. 31.

The chain said gross margin was impacted by weakness in its T-Mobile business, a higher mix of lower-margin wireless handsets, and seasonal markdowns and product transitions in non-wireless categories. RadioShack noted that T-Mobile is presently in breach of contract with the chain, but hopes to resolve the issue quickly.
The increase in net sales was led by a $34 million, or 50.6 percent increase in kiosk sales, reflecting the rollout of wireless departments for Target.

The comp-sales gain was driven by higher postpaid wireless sales, particularly of smartphones, and by increased sales of prepaid wireless handsets, laptops and wireless accessories.

The increases were partially offset by a decline in T-Mobile postpaid wireless sales and by lower sales of GPS products, digital cameras, digital music players, and digital-to-analog TV converter boxes.

In a statement, outgoing chairman/CEO Julian Day said the company in 2010 "demonstrated our commitment to consistent long-term growth by building and expanding our wireless business." This year, noted his successor, president/CFO Jim Gooch, "Our priority is to continue to make operational improvements that enhance our mobility, innovation and service offerings for customers.

"Despite the disappointing performance of our T-Mobile postpaid business in the fourth quarter, we strongly believe mobility products are the cornerstone of our future," he said. "We also remain committed to our plans to improve our non-wireless product platforms and maximize our relationship with Target."

The retailer also entered into a new five-year, $450 million revolving credit agreement in January.

Looking ahead, the company said it expects total net sales and operating revenues to increase in the low to mid-single digit percent range in 2011, primarily driven by continued growth in the wireless product platform.

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