Consumer electronics retailer RadioShack Corp. (RSH) on Tuesday reported a plunge in profit for the fourth quarter, primarily reflecting the under-performance of the company's Sprint postpaid wireless business that offset an increase in sales.
A highly promotional holiday season and tight consumer spending also impacted the quarter's results. However, the results were in line with the company's forecast announced in January.
The increase in net sales was driven by a $93.4 million increase in other sales, reflecting the roll out of the company's Target Mobile centers to 1,496 locations by the end of the quarter. This compares to 850 locations at the end of the year-ago quarter.
The increase was partially offset by a $16.3 million decrease in sales generated by U.S. RadioShack company-operated stores.
Comparable store sales for company-operated stores and Target Mobile centers rose 2.2 percent during the quarter. Comparable-store sales is a key retail industry performance metric to gauge activity at store locations that have been open for at least a year.
The increase in comparable store sales was primarily due to higher postpaid wireless sales of AT&T Wireless as well as Verizon Wireless products and services. Tablet devices also contributed to the increase. These increases were partially offset by a decline in Sprint and T-Mobile postpaid wireless sales, in addition to lower sales of digital cameras and digital music players.
RadioShack relies heavily on wireless growth due to the steep drop in demand for non-wireless products. However, it faces stiff competition in the category from rival Best Buy Co. (BBY).
The company's fourth-quarter net income was $11.9 million or $0.12 per share, down from $57.0 million or $0.51 per share in the year-ago period. On average, 16 analysts polled by Thomson Reuters expected the company to report earnings of $0.12 per share. Analysts' estimates typically exclude one-time items.
Total net sales and operating revenues for the quarter grew 5.9 percent to $1.39 billion from $1.31 billion in the year-ago period. Analysts had a consensus estimate of $1.39 billion.
Gross margin declined to 34.8 from 41 percent in the year-ago period, partly reflecting a shift towards certain lower margin smartphones and mobile devices.
For fiscal year 2011, RadioShack's net income was $72.2 million or $0.70 per share, down from $206.1 million or $1.68 per share in the previous year.
Excluding one-time items, net income fell to $98.4 million or $0.95 per share from $206.1 million or $1.68 per share last year. Analysts expected the company to earn $0.92 per share.
Net sales and operating revenue for the year increased to $4.38 billion from $4.27 billion in the prior year. Analysts expected revenues of $4.40 billion.
In late January, RadioShack forecast net income for fiscal year 2012 to be lower than the preceding year, assuming the Sprint business remained at its current run rate. The company also said it has decided to suspend share repurchases for the near term.
RSH closed Friday's trading at $7.88. In Tuesday's pre-market, the stock is adding $0.02 or 0.25 percent to $7.88.
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