http://www.businessweek.com/news/2012-02-01/radioshack-drops-most-in-30-years-as-profit-trails-estimates.html

Bloomberg News

RadioShack Drops Most in 30 Years as Profit Trails Estimates

February 01, 2012

(Updates shares in second paragraph.)

Jan. 31 (Bloomberg) -- RadioShack Corp. plunged the most in more than 30 years after the consumer-electronics retailer suspended share repurchases and reported preliminary fourth- quarter earnings that trailed analysts’ estimates.

RadioShack declined 30 percent to $7.18 at 4 p.m. in New York, the steepest drop since at least July 29, 1980. The shares tumbled 47 percent last year.

The quarterly results were hurt by promotions during the holiday shopping period amid “ongoing pressures” on consumer spending, according to a statement yesterday. RadioShack also cited “underperformance” in the Sprint Nextel Corp. wireless business, which in part prompted gross margin to shrink to 35 percent from 41 percent a year ago.

“RadioShack is seeing a somewhat dramatic shift to a structurally lower gross margin and we are unclear where this shift will bottom out,” David Strasser, an analyst at Janney Montgomery Scott in New York, wrote today in a note to clients. He downgraded the shares to “neutral” from “buy.”

Suspending stock buybacks “for the near term” will enable RadioShack to spend on its businesses including mobile phones, Chief Executive Officer James Gooch said in the statement. The Fort Worth, Texas-based chain also said it plans to continue paying a quarterly dividend.

Earnings probably fell to 11 cents to 13 cents a share last quarter, RadioShack said. Analysts projected 37 cents, the average of 19 estimates compiled by Bloomberg. Net income for 2012 will probably decline compared with 2011, according to the statement.

The company bought back $11.9 million of shares in the fourth quarter. It had cash of about $590 million at the end of the fourth quarter, compared with $569 million a year earlier.

RadioShack is scheduled to report fourth-quarter results on Feb. 21.

--Editors: James Callan, Robin Ajello

To contact the reporter on this story: Chris Burritt in Greensboro at orcburritt@bloomberg.net

To contact the editors responsible for this story: Robin Ajello at rajello@bloomberg.net.


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