RadioShack reports 2Q profit By MATT SLAGLE, AP Technology Writer

RadioShack reports 2Q profit By MATT SLAGLE, AP Technology Writer
1 hour, 32 minutes ago



DALLAS - A yearlong turnaround effort at RadioShack Corp. appeared to falter Monday as the electronics retailer swung to a second-quarter profit but saw revenue decline 15 percent because of softening sales of cellular phones and other key products. Its shares sank 11 percent.

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RadioShack reported net income of $47 million, or 34 cents per share, for the three months ended June 30 versus a loss of $3.2 million, or 2 cents per share, a year ago.

Revenue fell to $934.8 million from $1.10 billion in the previous year. Its same-store sales — sales at stores open at least a year — fell 8.9 percent during the quarter, hurt by its post-paid wireless business.

Shares plunged $3.25, or 11 percent, to $25.55 Monday after sinking as low as $24.63 earlier in the session.

RadioShack's stock price had more than doubled this year until early July, when it began slumping. Despite the recent drop, the shares were still up 72 percent for the year through Friday.

Analysts polled by Thomson Financial had expected earnings of 25 cents per share on higher revenue of $982.5 million. The earnings estimates typically exclude one-time items.

Julian Day, a turnaround expert hired last year, has cut spending — mainly by shuttering 387 stores and 25 kiosks in the past year — but has been unable to reverse RadioShack's slide in sales of wireless phones, a key part of its business.

RadioShack still operates 4,443 standalone stores and 752 kiosks, which tend to be located in shopping malls and Sam's Club warehouses.

The Fort Worth-based retailer has struggled since breaking ties with Verizon Wireless and faces competition from big-box retailers such as Best Buy Co. and Circuit City Stores Inc.

Since Day took over, the company has stopped holding conference calls with reporters and analysts after posting results. The earnings release did not include any forecast for the upcoming quarter.

Some analysts had expected RadioShack to post better results due to store closings, layoffs and other cost-cutting moves.

The previous three quarters had been positive ones for the company, making these results look particularly disturbing, said RBC Capital Markets Corp. analyst Scot Ciccarelli.

"Julian Day has done a great job of cutting costs, but by the same token the central problem is you're just not relevant to consumers," Ciccarelli said. "The reasons to go to RadioShack just aren't as large as they used to be, and I don't know how they get over that."

The latest quarter's results included a $10 million gain from the reversal of an income tax contingency reserve.

Even the most optimistic analysts have said the company would struggle to meet financial targets after the second quarter unless it could boost sales. Monday's report seemed to cast doubt on the chain's ability to do that.

"Because they have a small box format, ideally their product is physically small, of high value and high margin. The problem is there are not that many products that fit that description. Cell phones fit, so do jewelry, perfume and watches, but those kinds of things are so far away from what they sell," Ciccarelli added.

RadioShack ended the quarter with $132 million in cash flow but didn't say what it planned to do with the money.

In a statement, Day suggested that more service-based offerings could be coming but offered no specifics.

"We are increasing our focus on opportunities to offer our customers solutions to their needs, whether those needs can be met with a simple 'one product' solution, or whether a more complex solution requiring our expertise in connectivity is needed," Day said.

Tim Allen of Jefferies & Company Inc. said the company still has an edge in smaller, rural areas where big-box retailers like Best Buy Co. don't have much of a presence yet.

But increasingly, a myriad of retailers including drug stores and office supply centers are selling batteries and other electronic accessories that used to be RadioShack's bread and butter.

"Other retailers have moved in on RadioShack's space, and in terms of the wireless business, people are going elsewhere," Allen said. "They're going directly to the carrier or even a Best Buy or a Circuit City for that matter."