RadioShack Posts Higher 3rd Quarter Profit and Sales
Kiosks continued to outperform core stores in sales of wireless products at RadioShack 3rd quarter, the chain said Fri. Core-store wireless sales, though lower than a year ago, managed to improve sequentially each month of the quarter, the company said. Total wireless sales in the quarter jumped 15%.
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RadioShack said net income in the quarter climbed 56% to $108.5 million (75 cents per share) from $69.7 million (43 cents) a year earlier on an 8% jump in sales to $1.19 billion and a 1% rise in same-store sales. Net income in this year’s quarter was boosted by a noncash, one-time gain of $56.5 million on the reversal of a tax contingency reserve. Sales in categories other than wireless rose 5%, mainly on gains in personal electronics and services.
CFO David Barnes told analysts in a conference call that the chain enjoyed higher revenue from sales of Sprint handsets, which commanded “improved per-unit economics.” But subscriber growth in the wireless industry -- particularly postpaid additions -- was “lackluster,” Barnes said: “No new technology features have emerged this year like last year’s camera-enabled handsets, which were very popular with consumers. Due to this less-robust technology cycle, average selling prices were lower.”
Verizon sales at RadioShack also were “substantially lower than last year” due partly to supply shortages on popular handsets, Barnes said. “While this situation improved modestly in September, we still saw a significant impact from short product supply in the quarter,” he said. Moreover, “given our virtually flat unit growth at the core store level, we did not achieve incentive bonuses from our carrier partners, which we earned last year,” Barnes said. The wireless business also suffered because “the mix of our wireless handsets sales continue to shift toward prepaid, and we make less revenue on prepaid units,” Barnes said.
On the chain’s new wireless carrier agreement with Cingular, CEO Dave Edmondson said about 60 members of RadioShack’s middle management were based at its Ft. Worth hq to assure “a very smooth transition as their number one business priority.” He said RadioShack is “confident we will open and be ready to do wireless business effective January 1.” As for the phase-out of Verizon, a team is “monitoring Verizon’s results daily in order to modify promotional plans and inventory levels,” he said. “We are planning our end-of-life program for Verizon,” including a promotional plan on handsets and accessories, he said: “And we are managing contingencies with Sprint and our prepaid partners in the event that we see weakened Verizon performance as we near year-end.”
Meanwhile, a Cingular team is “designing and rolling out the training program content and tools through which it will be delivered,” Edmondson said. “They are setting expectations and accountability for RadioShack training to meet our customer needs. We are detailing handset activation procedures, planning Cingular point-of-sale material displays, and many other activities.” He assured analysts that RadioShack has “successfully managed major wireless transitions in the past. Before any national carrier even existed, we dealt successfully with hundreds of local wireless service providers. And in particular, we went through a major transition of over 3,000 stores when we transitioned to Verizon in 2000.”