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R’Shack’s Q2 Profits Up Despite Slower Sales

Fort Worth, Texas – Continued cost-cutting at RadioShack
and easy year-ago comparisons helped boost the CE chain’s second-quarter
profits despite a slowdown in sales.

Net income rose nearly 18 percent to $48.8 million for the three
months, ended June 30, while net sales slipped 2.9 percent to $965.7 million
and same-store sales fell 4 percent.

Income was aided by reduced advertising and compensation, which
lowered selling, general and administrative (SG&A) from 37.7 percent of
sales to 34.8 percent of sales year over year.

Results were also boosted by leaner inventory – down $48.1
million to $578.2 million – and a one-time year-ago charge of $4.3 million
related to the lease of RadioShack’s corporate headquarters.

Weaker sales of wireless accessories, digital-to-analog converter
boxes, GPS products, music players and digital cameras contributed to the comp-sales
decline, and were partially offset by increased sales of netbooks, TV antennas,
prepaid wireless handsets and airtime, TVs and VoIP products, the chain said.

But the shift in sales mix toward lower-margin products like TVs
and netbooks lowered its gross margin rate by 110 basis points.

Broken out by sales channel, revenue at company-owned stores fell
4.6 percent, sales at dealer-owned stores fell 16.2 percent, and kiosk sales
slipped 3.2 percent due to a decrease in the number of Sprint and Sam’s club

The declines were partially offset by a 24 percent increase in
online sales and gains from the company’s Mexican operations.

Capital expenditures for the first half of 2009 totaled $43.9
million, and projections for the full year are in the range of $75 million to
$100 million.

In a statement, executive VP and chief financial officer Jim
Gooch said, “We are very pleased with the results we reported today, especially
considering the very challenging economic times. Our disciplined approach to
operating the company resulted in the strengthening of our balance sheet and
significant increase in operating income during the second quarter.”

Operating income rose 12 percent to $87.7 million after adjusting
for the one-time lease charge and a state sales tax settlement.

Chairman/CEO Julian Day added that last
week’s announced
addition of T-Mobile to the company’s carrier roster “strengthens
our ongoing efforts to offer consumers a greater range of choices in the
mobility space and will allow us to continue to bring innovative devices and
services to the marketplace.”

He also cited RadioShack’s recently announced partnership with cyclist
Lance Armstrong as “an important vehicle for continuing to build our brand.”