Budgeting, Planning & Forecasting

Budgeting, Planning & Forecasting

April 28, 2011

RadioShack Posts 30 Percent Drop in Net Income

Technology products retailer RadioShack Corporation reported a 30 percent drop in first quarter net income, caused partly due to its attempt to pay off debt at the earliest convenience.

Fort Worth, Texas-based RadioShack has lowered the high end of its full-year earnings forecast. In a statement issued to announce the financial results for the quarter ended in March 2011. The company said it expects the business to improve in the second half of the year.

The net income declined to $35.1 million compared with net income of $50.1 million reported for the same period last year.

 “Despite a challenging economy and tough weather conditions, our first-quarter results were generally in line with our internal expectations. We expect the softness in our business to continue during the second quarter. Growth in our mobility business will be aided by our tablet computer offerings, which are being introduced this month," said Jim Gooch, President and Chief Financial Officer.

In February 2011, RadioShack informed T-Mobile (News - Alert) that it had materially breached its contract with the company. Yet, the retailer now says it is working closely with T-Mobile to resolve the dispute.

RadioShack ended the first quarter with a cash balance of $326.2 million. The cash position reflects the early redemption of the May 2011 notes for $310.9 million on March 4, 2011. Inventories stood at $737.9 million at the end of the quarter, up $14.2 million compared to inventory at year-end 2010 and up $49.2 million compared to the end of the 2010 first quarter.

The 2.1%, or $21.6 million, increase in total net sales and operating revenues for the 2011 first quarter was driven by a $28.9 million increase in sales generated by kiosks. This increase in sales was partially offset by a decline of $4.5 million in sales generated by U.S. company-operated stores and a decline of $2.8 million in other sales.  

Lower sales of television digital-to-analog converter boxes and related television antennas, digital televisions and digital music players contributed to the decrease in sales, the company stated.

RadioShack is facing stiff competition from online retailers like Amazon.com and bigger electronics chains like Best Buy.

RadioShack has about 4,675 company-run stores in the U.S. and Mexico, more than 1,300 wireless phone kiosks in the U.S. and about 1,175 dealer outlets worldwide.

RadioShack Corp. also announced Monday that it plans to sell $300 million in debt that will come. The company’s debt totals at $4.1 million ($2.5 million after tax).

Narayan Bhat is a contributing editor for TMCnet. To read more of Narayan’s articles, please visit his columnist page.

Edited by Rich Steeves

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