RadioShack (RSH) posted stronger-than-expected fourth-quarter earnings and guided higher for 2007, saying its cost-cutting efforts are paying off.
The Fort Worth, Texas, home electronics retailer made $85 million, or 62 cents a share, for the quarter ended Dec. 31, up from the year-ago $51 million, or 38 cents a share. Sales fell to $1.45 billion from $1.67 billion a year earlier.
Analysts surveyed by Thomson Financial were looking for a 43-cent profit on sales of $1.47 billion.
"Our team put forth a tremendous effort executing our plan during the fourth quarter. We have made great progress in some areas, while other areas such as the wireless business remain a challenge. We have strengthened our balance sheet and cash position while enhancing profitability of the company. This gives us greater flexibility as we develop our longer-term strategy," said Julian Day, chairman and chief executive officer. "I look forward to 2007, as we continue our focus on improving our core operations in all facets of our company."
Fourth-quarter comparable-store sales fell 7.7%. Adjusted comparable-store sales, excluding the impact of the reclassification of prepaid wireless sales, decreased by 5.5%. The decline in comparable sales was mainly driven by lower sales in postpaid wireless and personal electronics, partially offset by increases in pre-paid wireless sales, MP3 players and accessories.
RadioShack said the drop in total sales was driven by the impact of closed stores and the decline in comparable-store sales. RadioShack had 4,467 U.S. company-operated stores at the end of the fourth quarter of 2006, down 505 from the previous year. Fourth-quarter 2006 net income was favorably affected by improved gross margin, a reduction in SG&A and reduced interest expense when compared with that of the prior year.
The company said quarter-end cash on hand more than doubled to $472 million.
The company said it expects to make $1 to $1.20 a share for 2007, above the 91-cent Thomson estimate, while spending $60 million to $80 million on capital projects.