RadioShack 4Q Net Drops 39% On Falling Margins, Sales

   DOW JONES NEWSWIRES 
 

RadioShack Corp.'s (RSH) fourth-quarter net income dropped a bigger-than-expected 39% on falling margins, consumers shifting away from higher-margin cellphone activations and weak sales of some product categories.

Retailers have struggled with falling sales and tighter credit conditions, and the holiday sales season last year was one of the worst on record. Still, consumer-electronic chains including Best Buy Co. (BBY) and RadioShack could profit in the long run after Circuit City Stores Inc. (CCTYQ) announced last month it would liquidate its assets.

RadioShack reported net income of $62 million, or 50 cents a share, down from $101 million, or 77 cents a share, a year earlier.

Revenue dropped 7.7% to $1.26 billion as same-store sales fell 9.2%, hurt by weak results for items ranging from global positioning systems to memory players. Strong sales of digital converter boxes, postpaid wireless and flat-panel televisions partially offset the decline.

Analysts polled by Thomson Reuters expected per-share earnings of 73 cents on revenue of $1.38 billion.

Gross margin fell to 41.8% from 44.8% amid holiday markdowns and a shift in wireless business away from more-profitable new activations to lower-margin upgrades.

Capital expenditures totaled $85.6 million in 2008. The company estimates capital expenditures for 2009 to be $75 million to $100 million.

RadioShack is testing a specialty store concept focused on wireless devices and services, which some analysts say is a bid to capture more high-end sales and compete against Best Buy. The effort could help boost sales in the company's biggest segment, as a third of Radioshack's sales are generated by wireless phones and plans.

Shares closed Monday at $10.82 and were inactive in premarket trading. The company's stock has lost 44% of its value from September.

-By John Kell and Kerry E. Grace, Dow Jones Newswires; 201-938-5089; [e-mail]