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RadioShack 4Q Profit Plunges 79%, In-Line With Dour Preview

02/21/2012 | 07:47am US/Eastern
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   By Matt Jarzemsky and Mia Lamar 
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RadioShack Corp.'s (>> RadioShack Corporation) fourth-quarter profit fell 79%, in-line with company's January warning of weaker-than-expected performance, as the company's mobile phone business weighed on the bottom line.

The consumer-electronics retailer last month warned that changes in how Sprint Nextel Corp. (>> Sprint Nextel Corporation) deals with customers put a damper on phone activations. The company also cautioned that discounting and the relatively low margins it earns on smartphone sales hindered results.

The disappointing forecast heaped further doubt on RadioShack's mobile device-focused strategy. It faces competition from Best Buy Co. (>> Best Buy Co., Inc.) in that category and weak demand for other types of consumer electronics.

On Tuesday, RadioShack reported a profit of $11.9 million, or 12 cents a share, down from $57 million, or 51 cents a share, a year earlier.

Net sales rose 5.9% to $1.39 billion. The results met the company's January forecast of an 11- to 13-cent per-share profit on $1.39 billion in revenue.

Same-store sales increased 2.2%, roughly in-line with the company's forecast, on higher sales of tablets and mobile phones with contracts from AT&T Inc. (>> AT&T Inc.) and Verizon Wireless. Declining sales of Sprint and T-Mobile phones weighed on the result, RadioShack said.

Gross margin plunged to 34.8% from 41%. The company attributed the drop to low-margin smartphones and other mobile devices accounting for a larger share of sales, in addition to increased holiday discounting.

Mobile-device sales at U.S. company-operated stores jumped 16%. Meanwhile, sales of consumer electronics such as digital music players and GPS gadgets fell 30%. RadioShack's "signature" category, which includes headphones and PC and wireless accessories, saw a 1.1% decline.

Shares closed Friday at $7.88 and were inactive in recent premarket trading. The stock is down 50% the past year. U.S. stock trading was closed Monday in observance of Presidents Day.

-By Matt Jarzemsky and Mia Lamar, Dow Jones Newswires; 212-416-2240; matthew.jarzemsky@dowjones.com

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