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."
They have excellent training. I learned everything I could about cabelling. When the cable installer tried talking down to me when my cable modem wasn't working, I ran rings around him and got straight answers.
Wow...you're seriously kidding yourself.
RadioShack: "You've got questions, we've got dumb looks."
or:
"You've got questions, we just want your zip code."
"Could it be that everything I ever purchased at Radio Shack broke after 3 or 4 days of use."
YOU ARE SO RIGHT!
If a manufacturer makes a component and it doesn't meet their specs they won't put their name on it --- they sell it nameless to radio shack.
I think Heathkit is available.
Maybe they should choose something simple, like Tandy.
The basic problem with Radio Shack is that they OVERCHARGE for almost everything. Cell phone battery car chargers that you can buy for $5 or $10 elsewhere will run you around $30 at Radio Shack.
I'm only surprised it's taken this long. My wife and I never even bother looking at them because their prices are so much higher than other outlets. Don't know why, but it's been consistently true for some time now.
No, overall, there was less sold this season, at more than just RS. Walmart got a lot of business though. RS fell about 20% below its daily sales expactations.
And you can't sell stuff at four times the price your competitiors do and expect to stay in business either. I avoid Radio Shack like the plague personally. About the only thing I even darken the doors for are those pesky cordless phone batteries, which RS seems to be the only retailer to stock.
"I think Heathkit is available."
You mean the name Heathkit is available, the last Heathkit product I bought was 20 years ago.
We've got a whole generation of kids who know nothing about electronic inerds.
BrandsMart has the BEST electronics prices. The day after Thanksgiving I bought a brand new Colby CD player for just 15 bucks.
"They actually do still carry a good variety of electronic components."
Yeah, I used to buy some components there when I was in school. To get a good multi-meter and a breadboard, I had to go elsewhere, though.
Not a big segment of the population bying individual electronic components.
All of my mess of S-Video cables and such come from RadioShack (or, "The Source", at it's now called in Canada).
Anybody who thinks Radio Shack's reduction in sales was from not having pictures of Jesus Christ or "Merry Christmas!" in red letters hanging from the ceiling, or not having employees in Red Santa hats, is in some surreal alternate universe.
I am. Then again, maybe that explains why I have so much time to surf the Internet during the day. LOL.
I quit going in Radio Shack years ago, cause even just to make a simple purchase required that you give them your entire life history.
I always say '90210' in response to that question. If they give me a nasty look, I follow it up with: You don't recognize me?
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