RadioShack quarterly profit rises

NEW YORK (Reuters) - Consumer electronics retailer RadioShack Corp. (RSH.N) reported higher quarterly profit on Tuesday after cutting costs and closing unprofitable stores, sending its shares up as much as 17 percent.

The company also forecast stronger-than-expected earnings for 2007 and analysts said the improvements showed the company's new chief executive was managing to turn around the struggling business.

Fourth-quarter earnings rose to $84.5 million, or 62 cents a share, from $51.2 million, or 38 cents a share, a year earlier.

Analysts on average expected profit of 41 cents a share, according to Reuters Estimates.

Amid declining sales of wireless products, the Fort Worth, Texas-based RadioShack is trying to stabilize its business by closing stores, clearing slow-moving inventory and replacing it with more popular products.

"The quarter's expense performance, driven in large part by an anticipated decline in advertising dollars, validates our view that CEO Julian Day can extract significant costs from this business," Goldman Sachs analyst Matthew Fassler said in a research note.

In July, RadioShack installed Day, a turnaround veteran, as chief executive to replace David Edmondson, who resigned last February after admitting he lied about his academic record.

Quarterly sales fell to $1.46 billion from $1.67 billion as the company closed stores and comparable-store sales declined. RadioShack said it had 4,467 U.S. company-operated stores at the end of the fourth quarter, down 505 from the previous year.

Analysts also noted substantial cuts in quarterly selling, general and administrative (SG&A) expenses. Fourth-quarter SG&A costs fell $89.5 million from a year earlier to $482.8 million, driven by job cuts at the company's headquarters, lower advertising expenses and store closings.

The company's cash balance totaled $472 million at the end of the fourth quarter, up 111 percent from a year earlier.

The company forecast earnings of $1 to $1.20 a share for 2007, helped by improved profit trends and lower expenses. Analysts on average were expecting 90 cents, according to Reuters Estimates.

It also forecast capital spending of $60 million to $80 million in 2007.

RadioShack shares closed up $2.68, or 11.9 percent, at $25.13, despite heavy losses in the broader market. Earlier in the session, the stock rose to $26.24, its highest since September 2005.

Kaufman Brothers analyst SooAnn Roberts said the results showed "the Shack is back," but downgraded the shares to "hold" from "buy" as the shares surged to around 21 to 26 times the company's 2007 earnings estimate.