* Says working with T-Mobile to resolve contract issues
* Q1 EPS 33 cents vs year-earlier 39 cents
* Q1 sales rise 2.1 pct to $1.06 bln, miss estimates
* Sees 2011 EPS $1.60-$1.80, prior view $1.60-$1.90
* Shares down 1.8 percent
(Adds analyst comment, background, same-store sales, share
By Dhanya Skariachan
NEW YORK, April 25 RadioShack Corp's RSH.N
quarterly earnings fell on weakness in its T-Mobile business
and higher costs, prompting the U.S. consumer electronics chain
to cut the top end of its full-year profit outlook.
The news dragged the company's shares down nearly 2 percent
in premarket trading.
RadioShack, which in February alleged that Deutsche Telekom
AG's (DTEGn.DE) T-Mobile USA unit had "materially breached"
their contract, said both sides continued to "work closely" to
resolve the issues.
Analysts have raised concerns about RadioShack's tie-up
"RadioShack gave up a lot of compensation from AT&T (T.N)
and Sprint (S.N) to carry T-Mobile, and this partnership
doesn't appear to be panning out the way management expected,"
RBC Capital Markets analyst Scot Ciccarelli said last week.
Sales at company-operated stores and kiosks open at least a
year fell 0.6 percent in the first quarter, and the company
blamed the decline mainly on weak T-Mobile postpaid wireless
In February, RadioShack said T-Mobile's product offerings
were not competitive with those of other carriers.
At the time, Jim Gooch, who will become RadioShack's chief
executive officer in May, said T-Mobile had materially breached
its contract during the fourth quarter, and legal discussions
were under way. RadioShack has not given any further details on
the alleged breaches.
The discussions have been "constructive," and RadioShack
expects the matter to be resolved, the company said in a
statement on Monday. But it added in a regulatory filing that
that the outcome could have "a material adverse effect" on
RadioShack has sought to counter weak demand for converter
boxes, antennas and other accessories by selling wireless
devices and calling plans.
But it faces stiff competition from larger rival Best Buy
Co Inc (BBY.N), online retailers like Amazon.com (AMZN.O) and
some carriers that sell phones directly to consumers.
Fort Worth, Texas-based RadioShack reduced the top end of
its 2011 profit outlook to $1.80 a share from $1.90, while
keeping the low end at $1.60. It still expects sales to rise at
a low-to-mid single-digit percentage rate in that period.
In the first quarter, it earned $35.1 million, or 33 cents
a share, down from $50.1 million, or 39 cents a share, a year
The chain saw higher costs from the rollout of its wireless
kiosks in Target Corp (TGT.N) stores. The results also included
costs of 2 cents a share from early retirement of debt.
Sales rose 2.1 percent to $1.06 billion, missing the
analysts' average estimate of $1.07 billion.
Shares of RadioShack were down 1.8 percent at $15.55 in
trading before the market opened.
(Reporting by Dhanya Skariachan, editing by Maureen Bavdek,
John Wallace and Lisa Von Ahn)