Posted on 02/17/2006 12:06:55 PM PST by iPod Shuffle
RadioShack to close up to 700 stores
Fri Feb 17, 2006 1:16 PM ET
By Nicole Maestri
NEW YORK (Reuters) - RadioShack Corp. (RSH.N: Quote, Profile, Research), whose chief executive has admitted to lying on his resume, on Friday said quarterly profit fell 62 percent after a switch in wireless providers led to an inventory write-down, sending its shares to a nearly three-year low.
The consumer electronics retailer, which said it was hiring legal counsel to investigate the admission by CEO David Edmondson, also announced a new turnaround plan that includes closing 400 to 700 company-operated stores and liquidating slow-moving inventory.
The company said it was "unwise" to issue earnings forecasts for 2006 given the uncertainty of the turnaround plan, which could cost up to $100 million.
"We have been very cautious on (RadioShack's) ability to execute the wireless transition smoothly and are skeptical on the just-announced turnaround," Lehman Bros. analyst Alan Rifkin said in a note. "We would not be owners of (the) shares at this time."
RadioShack shares were down $1.61, or 7.8 percent, at $19.14 in afternoon New York Stock Exchange trading after touching as low as $19.02.
FALLING EARNINGS
Fourth-quarter earnings fell to $49.5 million, or 36 cents per share, from $130.9 million, or 81 cents per share, a year earlier.
According to Reuters Estimates, excluding 22 cents per share for the inventory write-down and a 2-cent charge for an accounting change, profit would have been 60 cents, which compares with the analysts' average forecast of 66 cents.
Sales rose 5 percent to $1.67 billion, compared with analysts' target of $1.62 billion.
The results come two days after Edmondson admitted that he lied about his academic record on his resume and on the company's Web site. The discrepancy was first reported earlier this week by the Fort Worth Star-Telegram.
At an investor conference, Edmondson began by apologizing for any embarrassment the situation caused and said the issue was now in the hands of the board.
As for the quarterly results, Edmondson said sales were "good" in low-margin nonwireless categories like MP3 players, but were weak in high-margin categories, like batteries. Sales of wireless products, a key profit driver, were below targets.
Last year, RadioShack said it would switch phone carrier partners to try to revive its wireless sales. It agreed to sell Cingular Wireless phones and cut ties with long-time ally Verizon Wireless. It also signed a new 11-year deal with Sprint Nextel Corp. (S.N: Quote, Profile, Research).
But the transition, which took place at the end of the year, turned out to be more difficult than expected.
On Friday, RadioShack said it took an inventory write-down of $62 million in the quarter, and it is replacing old, slower-moving merchandise like speaker wire and outdoor antennas with new, faster-moving items
"Our business model for many years has been based on high- margin, slow-moving products," Edmondson said during an investor presentation. "These products are taking up valuable space in the store that can be much more efficiently utilized."
RadioShack said it would liquidate some products, take "aggressive" mark-downs on others and let some stay on store shelves until they sell out. It will continue to sell some of the products on its Web site, though not in the stores.
The company also expects to add about 200 kiosks in 2006, relocate some stores to better sites, and close two distribution centers.
RadioShack, which has 7,000 company-owned and dealer stores, estimated it would incur costs of $55 million to $100 million on the inventory write-downs and store closures in 2006, although it may take some of the costs in 2007, depending on when it closes the stores.
"While the execution of the turnaround plan will trigger the recognition of significant costs," Edmondson said, "we are confident that the steps we are taking will put RadioShack back on the track to sustained profitable growth."
bump!
No more redeeming the battery-of-the-month club cards at the 23 Radio Shocks near me.....
I am deeply saddened.
If you don't sell stuff people want you can't stay in business........
Could it be that everything I ever purchased at Radio Shack broke after 3 or 4 days of use.
I hope they manage to turn things around there at RadioShack. I've never been a regular customer of theirs, but it's a great place for when I'm on the road and I need to pick up some kind of computer/phone equipment or accessories in an emergency.
No surprise. I just bought a new HP a1310n PC. Looked at RS first and price was over $900!. Circuit City was $629-$50 rebate, $579! Everything there is way overpriced. They're good for wires or cables when in a crunch, but that's about it.
Cell Phone Shack is what they are. All the other stuff they sell is over-priced crap. I'm surprized they've hung on this long.
I always liked having to give them my name, address, and phone number to buy a battery.
I worked for RS over the Christmas holiday. Sales were lower than they had hoped. I suspect that was due to people finally taking a stand against Christ-less-ness of many stores.
I am glad to see Verizon go. To get them, you had to put down hundreds of dollars in deposit. Then, no matter when you left them, they chaged you $175! SPrint and now Cingular will offer a much better phone sale.
RadioShack seems to be run by God-fearing Texans, so I hope they survive and do good.
I think Heathkit is available.
I may be the exception but the products I've bought and recomended have worked fine. My scanner is going on 4 years without a problem.
You just have to confident you know more then the clerks in the stores
Yeah.. for me, it was always "Morry Lipschiz, PO Box 1, Reno, Nevada"
Lying on his resume? Isn't that actually rather normal? I mean, let's be honest here. Who is really 100% truthful on their resume?
If you guys want a great huge TV, check out the Cinego. Its not plasma or LCD so it won't wear out in three years. FOr $900 you can get an 11-foot projection screen, with surround sound and an awesome subwoofer...great for watching sports and war movies.
Radio Shaft?
They actually do still carry a good variety of electronic components. I've actually found them to be one of the best suppliers of components for my group at work (an engineering group). I buy all of my PLC backup batteries there as well as any smaller purchases of odd and end items.
They made Auto Shack change their name in the early 90's, now they're Autozone. Probably did them a favor......
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