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RadioShack Net Plunges, Will Close Up to 700 Stores
By Mark Clothier
Feb. 17 (Bloomberg) -- RadioShack Corp., the third-largest U.S. electronics chain, said fourth-quarter profit plunged 62 percent after a disappointing holiday season. The retailer may close up to 700 stores as part of a turnaround plan.
Net income dropped to $49.5 million, or 36 cents a share, missing analysts' estimates. A year earlier, the company earned $130.9 million, or 81 cents. Sales rose 4.9 percent to $1.67 billion, Ft. Worth, Texas-based RadioShack said in a statement today.
RadioShack reported weak sales of wireless calling plans and struggled to compete against Best Buy Co. and Wal-Mart Stores Inc. for holiday electronics sales. Chief Executive Officer David Edmondson, who this week admitted lying about his college degrees, announced a plan today to revive profit that includes closing stores, shutting two distribution centers and trimming overhead. The plan may cost as much as $100 million.
``Wireless sales struggled,'' RBC Capital Markets' Scot Ciccarelli wrote in a research note Feb. 14. The slowdown ``was exacerbated by Verizon-related transition issues and the inability of Sprint to pick up the slack. The first half of 2006 will remain challenging.''
Ciccarelli, top rated by StarMine Professional, estimated fourth-quarter profit of 68 cents, which is the consensus estimate of 15 analysts surveyed by Thomson Financial. Thomson doesn't provide the parameters for the estimates in its survey.
Gross Margin
RadioShack shares fell 52 cents to $20.75 in New York Stock Exchange composite trading yesterday. The shares declined 38 percent in the year through yesterday.
Comparable store sales rose 4 percent for the quarter. Gross margin, or the amount of sales left after subtracting the cost of goods sold, narrowed to 41.1 percent from 49.3 percent as the company wrote down the value of $62 million in inventory and offered more discounts during the holidays.
Selling, general and administrative costs rose to 34.4 percent of sales from 34.2 percent.
Edmondson said he lied about his academic degrees on his resume and the company's Web site. ``I clearly misstated my academic record and the responsibility for these misstatements is mine alone,'' he said in a statement on Feb.15.
The company hired an independent legal counsel for the probe. Edmondson, 46, claimed he earned degrees in theology and psychology from Pacific Coast College in California, the Fort Worth Star-Telegram reported in its Feb. 14 online edition. The school told the newspaper that Edmondson attended only two semesters and that it never offered psychology degrees.
Wireless Plans
Wireless calling plans, which make up about one-third of RadioShack's sales, rose 6 percent as sales at kiosks in malls and stores performed well, RadioShack said last month. Wireless sales in RadioShack stores were lower, the company said.
Sales of personal electronics, including less-profitable products such as MP3 players and digital cameras, rose 13 percent, RadioShack said last month.
Edmondson cut his 2005 profit forecast twice. Analysts estimate fiscal 2005 profit of $1.69, excluding a tax gain of 38 cents. RadioShack earned $2.08 per share a year ago. The company said in December that it probably wouldn't achieve its earnings goal for the quarter.
RadioShack said last month that same-store sales rose as less profitable products such as digital music players and satellite radios sold well. Sales of more profitable items such as cell phone chargers, batteries and other accessories, weren't as strong, the company said.
Verizon Deal
Ciccarelli expected a same-store sales increase of 2 percent and a total sales gain of 2.9 percent. Ciccarelli, based in New York, rates the shares ``sector perform.''
In August, RadioShack extended a 10-year agreement with Sprint and did not renew a resale agreement with Verizon Wireless that expired Dec. 31. The company also has a 10-year agreement with Cingular.
RadioShack sales, which have grown an average of less than 1 percent the prior three years, have suffered as consumers shopped more at Best Buy and Circuit City, which stock more items including digital and flat-panel televisions.
Sales at Best Buy grew an average of 16 percent in three years. At Circuit City, sales have increased an average of 3 percent in the same period.
Of the 20 analysts tracked by Bloomberg, two rate RadioShack shares as ``buy,'' 16 say ``hold,'' and two say ``sell.''
(RadioShack's earnings conference call begins at 9:30 a.m. New York time. See the investor relations page of http://www.radioshackcorporation.com/ .)
To contact the reporter on this story:
Mark Clothier in Atlanta at mclothier@bloomberg.net
Last Updated: February 17, 2006 08:10 EST
RadioShack Net Plunges, Will Close Up to 700 Stores
By Mark Clothier
Feb. 17 (Bloomberg) -- RadioShack Corp., the third-largest U.S. electronics chain, said fourth-quarter profit plunged 62 percent after a disappointing holiday season. The retailer may close up to 700 stores as part of a turnaround plan.
Net income dropped to $49.5 million, or 36 cents a share, missing analysts' estimates. A year earlier, the company earned $130.9 million, or 81 cents. Sales rose 4.9 percent to $1.67 billion, Ft. Worth, Texas-based RadioShack said in a statement today.
RadioShack reported weak sales of wireless calling plans and struggled to compete against Best Buy Co. and Wal-Mart Stores Inc. for holiday electronics sales. Chief Executive Officer David Edmondson, who this week admitted lying about his college degrees, announced a plan today to revive profit that includes closing stores, shutting two distribution centers and trimming overhead. The plan may cost as much as $100 million.
``Wireless sales struggled,'' RBC Capital Markets' Scot Ciccarelli wrote in a research note Feb. 14. The slowdown ``was exacerbated by Verizon-related transition issues and the inability of Sprint to pick up the slack. The first half of 2006 will remain challenging.''
Ciccarelli, top rated by StarMine Professional, estimated fourth-quarter profit of 68 cents, which is the consensus estimate of 15 analysts surveyed by Thomson Financial. Thomson doesn't provide the parameters for the estimates in its survey.
Gross Margin
RadioShack shares fell 52 cents to $20.75 in New York Stock Exchange composite trading yesterday. The shares declined 38 percent in the year through yesterday.
Comparable store sales rose 4 percent for the quarter. Gross margin, or the amount of sales left after subtracting the cost of goods sold, narrowed to 41.1 percent from 49.3 percent as the company wrote down the value of $62 million in inventory and offered more discounts during the holidays.
Selling, general and administrative costs rose to 34.4 percent of sales from 34.2 percent.
Edmondson said he lied about his academic degrees on his resume and the company's Web site. ``I clearly misstated my academic record and the responsibility for these misstatements is mine alone,'' he said in a statement on Feb.15.
The company hired an independent legal counsel for the probe. Edmondson, 46, claimed he earned degrees in theology and psychology from Pacific Coast College in California, the Fort Worth Star-Telegram reported in its Feb. 14 online edition. The school told the newspaper that Edmondson attended only two semesters and that it never offered psychology degrees.
Wireless Plans
Wireless calling plans, which make up about one-third of RadioShack's sales, rose 6 percent as sales at kiosks in malls and stores performed well, RadioShack said last month. Wireless sales in RadioShack stores were lower, the company said.
Sales of personal electronics, including less-profitable products such as MP3 players and digital cameras, rose 13 percent, RadioShack said last month.
Edmondson cut his 2005 profit forecast twice. Analysts estimate fiscal 2005 profit of $1.69, excluding a tax gain of 38 cents. RadioShack earned $2.08 per share a year ago. The company said in December that it probably wouldn't achieve its earnings goal for the quarter.
RadioShack said last month that same-store sales rose as less profitable products such as digital music players and satellite radios sold well. Sales of more profitable items such as cell phone chargers, batteries and other accessories, weren't as strong, the company said.
Verizon Deal
Ciccarelli expected a same-store sales increase of 2 percent and a total sales gain of 2.9 percent. Ciccarelli, based in New York, rates the shares ``sector perform.''
In August, RadioShack extended a 10-year agreement with Sprint and did not renew a resale agreement with Verizon Wireless that expired Dec. 31. The company also has a 10-year agreement with Cingular.
RadioShack sales, which have grown an average of less than 1 percent the prior three years, have suffered as consumers shopped more at Best Buy and Circuit City, which stock more items including digital and flat-panel televisions.
Sales at Best Buy grew an average of 16 percent in three years. At Circuit City, sales have increased an average of 3 percent in the same period.
Of the 20 analysts tracked by Bloomberg, two rate RadioShack shares as ``buy,'' 16 say ``hold,'' and two say ``sell.''
(RadioShack's earnings conference call begins at 9:30 a.m. New York time. See the investor relations page of http://www.radioshackcorporation.com/ .)
To contact the reporter on this story:
Mark Clothier in Atlanta at mclothier@bloomberg.net
Last Updated: February 17, 2006 08:10 EST
posted by Jones Lang LaSalle NJ News Blog at 10:08 AM
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