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."
On the Left Coast they have big electronics outlets like Fry's but here on the East Coast RS is about it if you need a component. Unfortunately, RS has become mostly a novelty or toy store and the people who work there are simpletons. I can understand why they are in trouble.
I thank my lucky stars whenever I need such components.
I have a little Mom and Pop electronics supplier 1 mile from my house.
When I need shrink tubing, resistors, caps, SCRs, PC cooling fans, 3 conductor 1/8" male/female stereo connectors, LEDs, solder or any one of a thousand other things....they've got it. Even if they don't, they can order it.
I needed 2 dozen 6-wire coiled microphone cords for a restoration project I had undertaken...Rat Shack employees didn't even know what I was talking about. My local supplier ordered them for me...I received them in 3 days and he only charged me $1.50 each.
I can't wait to tell him the local Rat Shack may be closing.
This is my latest experience. I am on a Fire Dept (Vol). When my county went to 800 MHZ trunked radio I investigated and bought a scanner that was PC programmable. I sent 10 other people to RS with the proper part number and model number so I could simply clone my scanner to theirs using a cable. 2 out of the 10 were sold a different scanner that could not be PC programmable. They were incorrectly assured that the scanner they bought was compatable when it was not.
And they don't seem a very inviting place either. Sort of like the post office: one in every town, and job security no matter what -- at least until now.
Radio Shack is waaaaaaaaay overpriced. The price premium used to at least have some value, because they employed intelligent salesmen who were knowledgeable about the products.
More and more, however, they're employing the same morons that every other retail outlet employs.
Too bad in a way, because when I was a kid I used to LOVE going to Radio Shack. Intense competition and changing tastes have doomed the Shack, I fear. That they've managed to stay afloat this long is a miracle.
The name made sense when they started out in the business in 1921 when they catered to ham radio operators and experimenters. Hams have always called their equipment location their "shack" regardless of where it actually was. Some actually had shacks for the purpose (wives wouldn't let the stuff in the house). What with the evolving technology and vastly changed consumer electronics market, it's a wonder they have survived as long as they have.
I hate that part VERY much.
The only thing worse that radio shack prices is compusa prices for bits and cables.
The problem is there is no other brick and mortar store for "odd parts" or project boxes.
I'm jealous!
Not many places like that left though. You are indeed lucky to have a place like that nearby.
I never went to a Radio Shack where the salesperson knew anything or the item was in stock. Haven't stepped foot inside one in years.
You wouldn't believe what unbuilt Heathkits are bringing on eBay these days!
When did the CEO admit his wrongdoing. The last story I read, he was claiming that the school had lost his records.
Yes, but will they still continue with the free battery card - or is that still even available any more?
I think they should re-vamp and focus on selling all the parts needed for someone to build his own computer (or other electronic gadget like a shoe phone), either by general components or bit by bit. Select quality parts so the end result makes the effort worthwhile and economical. Wrote to them about this once, but they did not seem interested.
When they essentially stopped selling (stocking) electronic components, all that was left in the stores was crap that no one wanted.
I was a real fan of Lafayette Electronics for those like me older than dirt. Good products and parts with a smart sales force.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.