RadioShack 3Q profit rises 56 percent from tax reserve gain
DALLAS – Electronics retailer RadioShack Corp. reported Friday its third-quarter profit rose 56 percent on a large one-time gain and increased sales.Net income for the Fort Worth company grew to $108.5 million, or 75 cents per share, from $69.7 million, or 43 cents per share, a year ago. The latest quarter included a gain of 39 cents per share from the reversal of a tax contingency reserve. Revenue rose 8 percent to $1.19 billion as sales at stores open at least a year grew 1 percent for the quarter.Excluding that item, the Fort Worth-based company posted earnings per share of 36 cents.On that basis, the results missed analysts’ expectations for earnings of 37 cents per share on $1.15 billion in sales, according to a Thomson Financial survey.Shares of RadioShack fell 84 cents, or 3.6 percent, to $22.80 in afternoon trading on the New York Stock Exchange.Chief Operating Officer David Edmondson said the company will emphasize sales of satellite radio, digital imaging MP3 and wireless products.”These are hot categories and very productive for RadioShack,” Edmondson told analysts in a conference call. “They drive traffic into the stores, and they also provide opportunities for selling profitable accessories.”The year has been replete with new products, deals and advertising representation. Last month, RadioShack began carrying Apple Computer Inc.’s popular Ipod.Edmondson said customers now connect RadioShack with the hand-held electronic devices.”We are selling all that we can get” of the Ipods and their accessories, he said. “They are coming in the back door and going out the front door.”William Baldwin, Dallas-based analyst for Baldwin Anthony Securities, said the move to carry the devices was late.”It’s a plus, and it will bring traffic into the stores, but why wasn’t it there two years ago?” he said. “They don’t have too many female shoppers, and Ipods appeal to everybody. If they get more female shoppers who see other things they like, it will help overall sales.”In August, the company signed wireless deals with Sprint PCS and Cingular Wireless, while cutting ties with Verizon. The changes take place Jan. 1, 2006.Edmondson assured analysts the company will be ready for the change.”We’ve gone through this transition before, not just with Verizon but other carriers,” he said. “We believe we will hit the ground running. We are going to, as of Jan. 1, be in very good shape.”Baldwin said it will take several quarters to replace income from Verizon.”It’s not going to happen the first quarter, and it may not happen the second quarter,” he said. “It’s also a big transition because there is a lot of education needed for the sales forces.”The company adjusted its full-year earnings forecast to a range of $2.14 to $2.24 per share, including the one-time gain from the third quarter. It previously forecast a profit of $1.80 to $1.90 per share. Analysts estimate full-year earnings of $1.85 per share.