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Vendor Initiatives, Price Hikes Help RadioShack In Q3

The tandem of vendor initiatives, buying disciplines and field execution teamed to drive higher profit at RadioShack during the third quarter, with the retailer recording $57.1 million in net income for the three months, up 27 percent from the $44.9 million reported in the year-ago period.

Total sales at RadioShack, boosted by movement of wireless communications products, climbed 2 percent in the third quarter, ending Sept. 30, reaching $1.06 billion, compared with $1.05 billion in the same three months in 2002. Comp-store sales increased 3 percent.

RadioShack reported a 50.1 percent profit margin for the third quarter, up from 49.8 percent in the same period a year earlier.

The combined improvement in sales and gross margin was a first for the past 19 quarters — with the retailer posting side-by-side higher numbers for these two key financial bellwethers.

“RadioShack is on the right track,” said Len Roberts, chairman/CEO. “Third quarter financials were the result of striking a very prudent balance between sales and profitability.

“We’re a more efficient organization,” Roberts told analysts in a conference call, tying efficiency to the growth in sales and earnings. He attributed much of the increase to a disciplined approach to doing business as well as new products, and he anticipates the turnaround will continue into the near future.

Third quarter selling, general and administrative costs were flat in the period, with the company enjoying more manageable insurance and rent and occupancy costs.

Looking at specific contributions to its third quarter effort, RadioShack told analysts the size of its average sales ticket improved 3 percent in the third quarter year on year, to $29.70. The retailer said it concentrated more on average ticket size, rather than the number of tickets.

At the same time, RadioShack recorded increasing third quarter sales in such hot accessories categories as wireless, power and home networking.

Wireless handset sales, another key category for RadioShack, enjoyed strong gains in the quarter, climbing 12 percent in the three months, compared with the same time frame a year ago, thanks to such customer attractions as cellphone camera functionality. Power accessories sales climbed 4 percent in the third quarter, while regular batteries and accessories moved up 3 percent.

With the Nov. 24 cellphone number-portability start-up date fast approaching, RadioShack sees this change as a benefit to its business, even with all the extra work about to be piled on store personnel. The chain told analysts it is ready to manage and execute a number of additional-work scenarios brought about by consumers wishing to change carriers.

RadioShack, which is placing less emphasis on computers, said it still maintained healthy sales of computer accessories during the third quarter. With digital cameras now more in favor than PCs, the retailer said the gross profit camera gain more than offset the gross profit dollar loss for computers.