Dismal results heighten RadioShack's woes; shares drop

Tue Oct 23, 2012 9:18am EDT

(Reuters) - U.S. consumer electronics chain RadioShack Corp (RSH.N) reported a much wider-than-expected quarterly loss on Tuesday, hurt by weak margins in its smartphone business, and its shares fell 13 percent.

The dismal results came less than a month before the unofficial start of the all-important holiday season, raising fresh concerns about the future of the retailer, which lost its merchandising chief in June and its chief executive officer in September.

"Things went from bad to worse," BB&T Capital Markets analyst Anthony Chukumba said. "The company's rapidly deteriorating fundamentals provide an additional sense of urgency to its need to hire a new CEO, preferably one with significant turnaround experience."

The retailer also faces aggressive competition from the likes of Best Buy Co Inc (BBY.N), Amazon.com Inc (AMZN.O) and stores operated by mobile phone companies. And like larger rival Best Buy, RadioShack has been struggling to win U.S. shoppers who increasingly buy their gadgets online.

RadioShack has been struggling strategically and operationally, and the management reshuffles augment the challenges, RBC Capital Markets analyst Scot Ciccarelli said earlier this week.

RadioShack has been focusing increasingly on selling more calling plans and smartphones, particularly Apple Inc's (AAPL.O) iPhone.

The profit margin on iPhones is significantly lower than on mobile devices that use the Android operating system, analysts and other industry watchers have told Reuters.

Most of RadioShack's major wireless partners - Sprint Nextel Corp (S.N), the Verizon Wireless venture of Verizon Communications Inc (VZ.N) and Vodafone Group Plc (VOD.L), and AT&T Inc (T.N) - are now pushing the more heavily subsidized iPhone.

Interim CEO Dorvin Lively said he was "most disappointed" in the company's post-paid mobile phone business, where customers are billed monthly based on either the terms of a contract or on the amount of services they have used.

The net loss was $47 million, or 47 cents a share, in the third quarter, compared with year-earlier net income of $300,000, or nil per share.

Excluding impairment charges and other one-time items, the loss was 33 cents a share, while analysts on average were expecting a loss of 17 cents, according to Thomson Reuters I/B/E/S.

Net sales fell to $1 billion from $1.03 billion a year earlier. Sales at stores open at least a year fell 1.6 percent.

The company, which had suspended its dividend earlier this year to refinance and pay down debt, said its financial position and balance sheet were "strong" and that it had liquidity exceeding $900 million.

RadioShack shares were down 13 percent at $2.08 in premarket trading.

(Reporting by Dhanya Skariachan in New York; Editing by Lisa Von Ahn and Gerald E. McCormick)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.