Radio Shack Reiterates Profit Estimate

Radio Shack

(RSH)

reiterated Thursday that 2005 earnings will fall short of its previous guidance, as a solid fourth-quarter sales performance was offset by higher sales of low-margin products.

For all of 2005, Radio Shack said, earnings won't reach its previous goal of $2.14 to $2.24 a share. The forecast is a repeat of

guidance Radio Shack issued on Dec. 16. As then, the company cited a preponderance of lower-margin sales.

In its release Thursday, Radio Shack said full-year sales were $5.08 billion, up from $4.84 billion in 2004, including fourth-quarter sales of $1.67 billion. Analysts surveyed by Thomson First Call expected earnings of $1.69 a share on sales of $5.06 billion in 2005, and earnings of 68 cents a share on sales of $1.65 billion in the quarter.

Same-store sales rose 4% in the fourth quarter over a year ago, the company said.

"We drove strong sales in satellite radio, MP3 players, and digital imaging -- three of the categories on which we focused our resources the most during the holiday season," the company said. "Sales results were higher in these low-margin non-wireless categories; however, we also experienced lower sales in high-margin categories. In addition, wireless was negatively impacted in our core stores due to our carrier transition from Verizon Wireless."

Breaking it down by segment, Radio Shack said wireless rose 6% in the fourth quarter; accessories sales rose 3%; personal electronics rose 13%; power equipment rose 10%; and services sales rose 30%. At wireless, "higher sales from the kiosk channel offset significantly lower sales of Verizon Wireless."

The stock closed at $21.80 Wednesday.