RadioShack Still Shaky

It swings to a loss as same-store sales plunge nearly 10%.
Author:
Publish date:

Radio Shack

(RSH)

fell on its face again Wednesday, posting an unexpected third-quarter loss on a sharp sales decline driven by weak wireless sales.

The Fort Worth, Texas, electronics retailer lost $16 million, or 12 cents a share, for the quarter ended Sept. 30, reversing the year-ago profit of $109 million, or 75 cents a share. Sales dropped 11% from a year ago to $1.06 billion, as sales in stores open a year fell 9.6%.

The latest quarter was hit by a $29 million wireless kiosk writedown and an $18 million turnaround expense.

Analysts surveyed by Thomson Financial were looking for a 17-cent profit on sales of $1.13 billion.

"Though too early in the management transition to see fundamental change in business trends, RadioShack made some important achievements in Q3 towards improving its operations," said CEO Julian Day. "During the quarter, we streamlined costs; better aligned people and roles; and strengthened our balance sheet."

Comparable store sales adjusted for prepaid wireless airtime were down 6.8%. This decline was mainly driven by lower post-paid wireless sales partially offset by increases in personal electronics and accessories.

RadioShack used $45 million in free cash flow through the first nine months of 2006 versus a use of $102 million for the same period in 2005. Compared to last year, this year's improved cash utilization was driven by improved inventory management and more prudent capital expenditures offset by lower net income.

Day said, "The company has elevated its level of scrutiny for its capital expenditures with a view to improving financial returns. Capital will be allocated to projects which will yield the highest demonstrable return."