UPDATE 3-RadioShack posts profit, cites sales slowdown

* Q3 EPS of 39 cts beats analyst estimate 36 cts

* Sales rise 6.4 percent to $1.02 billion

* CEO says sales, earnings trends slowed in September

* Shares down 2 percent (Adds analyst comment, byline)

By Karen Jacobs

ATLANTA, Oct 23 (Reuters) - Electronics retailer RadioShack Corp (RSH.N) posted a better-than-expected quarterly profit on Thursday, but warned that earnings and sales trends slowed in September, and its shares were down about 2 percent.

RadioShack has closed unprofitable stores and cut staff in recent years to turn around its business, but faces a tougher industry environment as U.S. consumers pull back spending due to a housing slump and credit crunch.

New fears that the global economy faces a deep recession has weighed on retailers across the board, particularly as they head into the crucial holiday sales season.

"After strong months in July and August, our sales and earnings trends slowed in September," RadioShack Chief Executive Julian Day said in a statement. "We anticipate that this challenging retail environment will continue."

The slowdown was "a negative sign heading into the holidays," Deutsche Bank analyst Mike Baker said in a note.

Baker added that RadioShack's post-paid wireless business with Sprint Nextel (S.N) was weak, calling into question how same-store sales will fare once demand for digital television converters dies down, a trend expected to end in early 2009.

Television broadcasters must begin airing only in digital starting Feb. 17, 2009, ceasing their analog signals. That requires customers who don't subscribe to cable, phone or satellite television services to either buy a new television or a analog-to-digital converter.

RadioShack net earnings rose to $50.2 million, or 39 cents a share in the third quarter, from $46.3 million, or 34 cents a share, a year earlier. There were fewer shares outstanding as RadioShack repurchased stock.

Analysts expected profit of 36 cents per share, according to Reuters Estimates.

Sales rose 6.4 percent to $1.02 billion, helped by a 45 percent rise in online sales.

Same-store sales, or those at stores open at least a year, rose 7.7 percent, aided by digital TV converter boxes ahead of a mandatory switch of all U.S. televisions to digital in early 2009.

The retailer also cited strong sales of laptop computers and video games and growth in AT&T Inc (T.N) mobile phone activations.

RadioShack has added store help, and last month said it would upgrade 4,000 stores to include redesigned wireless and navigation system displays in time for the holidays.

Still, RadioShack faces competition from electronics retail leader Best Buy Co (BBY.N) as well as discounters such as Wal-Mart Stores (WMT.N).

RadioShack posted its best same-store sales performance since the 2000 fourth quarter and can still expect a boost from digital converter boxes in the next two quarters, Morgan Stanley analyst Gregory Melich said in a note.

But he expects the company will be under pressure next year since Best Buy recently expanded mobile-phone departments in its stores.

RadioShack said it completed the sale of $375 million of convertible senior notes during the quarter, and had $824 million in cash and cash equivalents and $325 million available under a revolving credit agreement as of Sept. 30.

RadioShack's shares were down 21 cents, or 1.6 percent, to $12.87 on the New York Stock Exchange after trading as low as $12.15. The shares have fallen 25 percent this year. (Editing by Derek Caney and Maureen Bavdek)