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."
I still use them for resistors and small electronic parts. That's what they were originally for........
Man, those Tandy PCs were terrible back in the day.
Oops! I meant that I bought a new Colby DVD player at BrandsMart for just 15 bucks. The prices at BrandsMart for electronics are rock bottom lowest.
They can not do that. People would go there looking for leatherwork kits.....
Right, I used to practically live at the RS years ago and my first PC was a Tandy. If I need to repair an electronic device they are the place to go. I always seem to need strange batteries, too. As someone else pointed out, every time I go now it seems to be Cellfone Shack.
True, but there may be a means for Radio Shack to reinvent itself into the component supplier of choice for industrial tech buyers like me. There's little market for them in the "civilian" sector, but guys like me (and there are many) really can use a small-volume, storefront supplier of these items.
Grainger and McMaster-Carr are great, but there are times when I simply cannot wait for things to be delivered the next day.
Actually, its referenced again in the article right here:
"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. "
Electronic innards are no fun anymore, though. It's all hidden in some cheap chip that usually performs nowhere near the level of the discrete circuits of the past. And those were fun to poke at and fix if there were problems. Now you just throw the item out and buy a new one if it breaks.
I was just thinking about this company the other day after hearing their ad on the radio. My thought? Radioshack is a name and idea whose time has come and gone. Radioshack? What is it, a 1930's hot button name? Come on guys, you are about 80 years behind the times.
Problem was Radio Shack didn't know the first thing about selling it and instead let thousands get sold instead through the back door to independent computer stores and mail order shops.
That is what bothered me. THey latch on to fad electronics and expect to build a loyal following without being loyal to a brand. With that kind of marketing, they are worse than Best Buy...because they do charge a premium price. But, if you find the old white guy who works there because he lives, breathes and bleeds electons, he will save you a lot of headaches and will be able to answer just about every question you throw at him. Stay away from the young kids, though. THey could no care less if you talk to them, unless you are buying a cell phone where they make a huge spiff.
Same here. It used to tick me off, and I was a regular customer. So I finally went in under the premise of buying a computer (which, obviously I would never do) They had the carton on the counter, and when they asked for my personal info, I walked out. Next day I went back for some soldering supplies...not a peep out of them.
I used to help my Dad put his Heathkit gear together about 30-40(?) years ago.
And it sits in my attic as we speak. :-)
Excellent point as I'm in the same boat ;-)
Darn, I didn't think refusing to give them my phone number would have had that much of an adverse effect on them.
"Who is really 100% truthful on their resume?"
I was, which explains why I don't have a better job. LOL
OK, whatever.
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