RadioShack Q3 Earnings Fall 99%

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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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