R'Shack Q1 Profits Up 16%

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Fort Worth, Texas - RadioShack said its focus on mobility, connectivity and brand re-building helped fuel a 16.2 percent increase in net income for the three months ended March 31.

Sales for the period rose 4 percent to $1 billion, and comp-store sales including kiosks increased 4.7 percent.

The sales gains included a 4.3 percent increase, or $37.2 million, at company-owned U.S. stores, which was partially offset by an 8.2 percent decrease, or $5.1 million, in kiosk sales, due to fewer locations and the closure of its Sprint-branded kiosks in August.

The downturn in kiosk sales was partially offset by comp-store revenue gains in Sam's Club kiosk locations, RadioShack said.

The balance of the sales gains, or about $7.5 million, was primarily due to sales growth in company-operated stores in Mexico and higher sales to independent dealers.

In a statement, chairman/CEO Julian Day said, "Our performance this quarter highlights the success of our strategy to increase our focus on mobility, connectivity, and innovative products and services, while continuing our progress in brand building and delivering a consistent, high-quality, customer experience."

Broken out by category, wireless revenue was up nearly 49 percent, driven by increased Sprint Nextel postpaid wireless sales, the addition of T-Mobile as a postpaid wireless carrier, and increased sales of prepaid wireless handsets.

The second-largest increase came from services, which was up 24.8 percent and driven largely by sales of prepaid wireless airtime.

The company's remaining merchandising categories all experienced declines during the quarter led by accessories, which fell 26 percent on declining sales of digital converter boxes, and "modern home," which fell 14.3 percent on decreased sales of TVs and DVD players.

Inventories were up $18.1 million to $688.7 million at the end of the quarter, compared with the prior three-month period, and were up $112.9 million compared with the year-ago quarter, due to greater investments in wireless products to support strong category growth.

Consolidated selling, general and administrative (SG&A) expenses were $380.7 million, or 36.5 percent of sales, compared with $365.8 million, or 36.5 percent of sales, for the year-ago quarter. The increase resulted primarily from investments in employee incentive compensation and advertising, the company said.

More recently, the retailer was rumored to be an acquisition target, completed its nationwide rollout of iPhone, and said a decision will be made this year whether to expand or shut its 100-store test of mobile departments within Target stores.


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