RadioShack Swings to Profit Despite Sales Drop; Shares Gain 12%

RadioShack on Monday posted third-quarter earnings of $46.3M ($0.34/share) even as sales fell 9.4% to $960.3M on an 8.6% drop in same-store sales. The profit topped analysts' estimates for earnings of $0.26/share, on average, but revenue was shy of the $990M average analyst forecast. The electronics retailer had a loss of $16.3M ($0.12/share) in the year ago period. Gross margins expanded to 51% from 46.1% a year earlier, aided by improved inventory management, while selling, general and administrative expenses declined 13% as RadioShack tightened spending. Revenues continue to be challenging mainly due to weakness in post-paid wireless customers, which account for more than half of RadioShack's wireless sales and more than 15% of its revenue. CEO Julian C. Day said: "We are addressing those challenges energetically and hope that having configured the business for increased profitability, we will now prove successful in configuring it for growth," (full earnings call transcript later today). Competition from the likes of Best Buy and Circuity City also are hurting sales of wireless phones, which represent about 33% of the company's sales. Shares are up 6.3% in pre-market trading.

Sources: Press release, Reuters, Dow Jones, MarketWatch
Commentary: Is Radio Shack Poised for Another Double?
Stocks to watch: RSH. Competitors: CC, BBY, WMT, TGT

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