RadioShack Q3 Profits Up 23%

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Fort Worth, Texas - Increased smartphone demand and lower advertising expenditures helped drive third-quarter sales and earnings growth at RadioShack.

Total net sales and operating revenues rose 6.2 percent to $1 billion for the three months ended Sept. 30, while net income increased 23 to $46 million.

Comparable store and kiosk sales also rose 6.2 percent, due to increased sales of post-paid smartphones, prepaid wireless handsets, power products and wireless airtime, plus the addition of the T-Mobile carrier business.

The gains were partially offset by a year-over-year decline in sales of digital converter boxes and related television antennas, from $30.2 million to $7.7 million, as the transition from analog-to-digital broadcasts concluded.

Accessories were also impacted by the completion of the broadcasting changeover. The category fell 12 percent during the quarter but declined 2.1 percent excluding the impact of converter boxes.

Gross margin slipped from 47.6 percent to 45.4 percent year over year due to a higher mix of lower-margin handsets and product assortment transitions during the quarter. The gross margin decline was partially offset by declining sales of lower-margin converter boxes.

Consolidated selling, general and administrative expenses (SG&A) were pared back to $371.1 million, or 35.3 percent of sales compared with 38.5 percent of sales for  the year-ago period due to lower advertising and insurance expenses. But the lower expenses were partially offset by higher employee commissions due to increased wireless sales, plus additional compensation for employees hired to support the rollout of wireless kiosks to all Target stores, which is  xpected to be complete by the end of June 2011.

"We are pleased with our third-quarter results," chairman/CEO Julian Day said in a statement.  "In addition to the continued growth in our wireless business, we are encouraged by the improvements in our non-wireless product categories, including accessories and power. We plan to maintain our focus on enhancing the quality of our operations and service, strengthening our product offerings, and revitalizing and contemporizing our brand, while at the same time looking for further opportunities to broaden the base of customers we serve."

Executive VP and chief financial officer Jim Gooch added that the company's strong balance sheet allowed it to make strategic investments in "a more contemporary and productive product assortment in our non-wireless platforms" as well as in the Target Mobile program.

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