RadioShack confirms 2005 earnings will miss goal, 4Q total sales rose 5 percent | VailDaily.com
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RadioShack confirms 2005 earnings will miss goal, 4Q total sales rose 5 percent

FORT WORTH, Texas – RadioShack Corp. says revenue rose in the fourth quarter, but sales of wireless phones and highly profitable accessories were disappointing, and the electronics retailer still expects to miss earnings targets for all of 2005.The company said Thursday that total sales rose 5 percent in the fourth quarter, to $1.67 billion, and sales at stores open at least one year – a key measurement for retailers – increased 4 percent.But much of the gains came in low-profit gadgets such as MP3 music players and digital cameras, and they weren’t enough to salvage the full-year results. RadioShack said it would miss its goal of earning $2.14 to $2.24 per share – around $300 million – for all of last year.Analysts expect RadioShack to earn $1.69 per share, according to the consensus of a survey by Thomson Financial. The company is scheduled to report final 2005 results on Feb. 17.The company had warned in December it was “unlikely” to hit its earnings goal, which took some of the sting out of Thursday’s announcement. Shares of RadioShack fell 31 cents to close at $21.49 on the New York Stock Exchange.RadioShack switched from Verizon Wireless to Cingular Wireless at the end of the year while retaining sales of Sprint PCS. The retailer expected its Verizon sales to dip but was disappointed that sales of Sprint phones, which it heavily promoted, didn’t rise enough to make up the difference.Sales of high-margin accessories such as cigarette lighter adapters and phone batteries also suffered, officials said.Chief Executive David J. Edmondson said the transition from Verizon to Cingular was “more painful than we expected” but will pay dividends because RadioShack won the right to open stores under the Sprint and Cingular brands.”If the world is worried about customers going to wireless-only stores, we’re going to own a lot of those wireless company stores,” Edmondson said.RadioShack already operates more than 700 wireless-product kiosks in shopping malls and Sam’s Clubs and plans hundreds more. Edmondson said they average more than $5,000 in sales per square foot, compared with RadioShack’s average of $350 per square foot at big-box electronics retailers.The deal will also nearly double, to about 15 million, the number of wireless customers who don’t sign up at one of the wireless companies, Edmondson said, and it gives the retailer a line of GSM phones, the leading world standard for cell phones although CDMA is dominant in the United States.Bill Sims, an analyst for Citigroup, said RadioShack faces big hurdles this year and could experience more earnings volatility. Besides the new wireless lineup, stores seemed to stock too much of the wrong items, and RadioShack might have to mark down items such as remote-control cars to clear out excess inventory, he said.Full year sales rose 5 percent, to $5.08 billion from $4.84 billion in 2004, while same-store sales rose 1 percent, the company said.Vail, Colorado


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