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RadioShack Sales Increase 8%

Fort Worth, Texas — Wireless sales through kiosks jumped 15 percent at RadioShack during the third quarter, helping the retailer post an overall 8 percent sales gain in the three months, rising to $1.19 billion from a year-ago $1.1 billion.

Healthy sales of wireless products through RadioShack’s freestanding kiosk channel helped offset a 5 percent decline in wireless sales in company stores, said the chain.

Non-wireless sale rose 5 percent in the third quarter, ended Sept. 30, due to an 18 percent gain in personal electronics, such as MP3 players, digital imaging, satellite radio and certain toys. Services, such as prepaid air time, increased 35 percent.

Comparative-store sales edged upward 1 percent in the quarter. RadioShack said it expects to continue to drive comp sales the remainder of the year through improved store operations, better merchandising, a new advertising campaign, more wireless kiosks and better run and inventoried stores.

Third quarter operating income at RadioShack dropped to $88.9 million, from $117.2 million in the same three months in 2002, while net income jumped to $108.5 million, from $69.7 million year-on-year. Third quarter net income was favorably impacted by a non-cash, non-recurring gain of $56.5 million, due to the reversal of a tax contingency reserve.

Gross margin in the quarter declined 3 percentage points, to 47.6 percent, primarily due to an aggressive inventory clearance sale, inventory markdowns and lower gross margins in non-core channels.

Expenses climbed 8 percent due to the cost of running kiosks and professional fees. Advertising expenses were down due to seasonal timing.

“We made important progress during the third quarter to better position ourselves for the holiday selling season and the long term,” said Dave Edmondson, president/CEO. “We made aggressive moves on inventory and finished deploying operating procedures which will improve the customer experience in our stores. We also finalized long-term wireless agreements.”

For the nine months, RadioShack revenue hit $3.4 billion, up from $3.2 billion in the same period the prior year. Operating income decreased to $267.5 million for the nine months from a year-earlier $345.8 million, while net income moved up slightly to $215.8 million, from $206.3 million in the first nine months of 2004.

During the third quarter, the retailer purchased 20 million shares of its stock for $500 million. Year-to-date, 25 million shares have been purchased for $631 million.

“Our outlook for the fourth quarter reflects accelerated comp-store sales driven primarily by rapidly growing categories which tend to carry lower gross margins than the company average,” said Edmondson.

Fewer kiosks will be deployed by the chain in the coming months, compared with last year, when over 500 were launched in the fourth quarter alone. This pull-back will decelerate expenses in the fourth quarter, which were $100 million higher in the third three months of this year, compared with the same period in 2004.