Radio Shack: In Line, But Margins Weak

Radio Shack (RSH) shares are sharply lower this morning after the company reported first quarter results consistent with Street expectations. Revenues were $949 million, which was above the Street consensus of $937 million. Profits of 30 cents a share matched the Street view.

Comp store sales were down 4%, primarily due to lower sales of Sprint Nextel (S) postpaid wireless service. Ex-Sprint, comp store sales were up 0.7%.

RBC Capital’s Scot Ciccarelli points out in a research note that earnings were lifted 2 cents a share by a lower tax rate; he also notes that gross margins of 47.4% were well below the 50.2% he expected.

Goldman Sachs analyst Matthew Fassler likewise noted that EPS without tax items would have come up short, and also made note of weaker-than-expected gross margins. Fassler also noted that operating margin declined for the first time in six quarters.

Radio Shack this morning was down $2.40, or 13.7%, to $15.10.