Shares of RadioShack (RSH) are down 55 cents, or 7%, at $7.33 this morning after the company reported Q4 revenue in and profit per share in line with expectations, after the company warned last month it would miss profit expectations because of weaker sales of Sprint-Nextel (S) postpaid wireless accounts, and because of heavy promotions during the holiday season.
Some analysts have said that in addition to dealing with Sprint, RadioShack is struggling with the lower profit it makes selling Apple’s (AAPL) iPhone, a fact the company seemed to confirm in remarks during its conference call.
Revenue in the three months ended in December rose 6%, year over year, to $1.39 billion, yielding EPS of 12 cents, which was the in the middle of the range given last month of 11 cents to 13 cents. That exactly matched the consensus estimate.
During a conference call with analysts, CEO Jim Gooch reiterated an expectation that net income will decline this year from last year’s level, as the company grapples with the costs of selling smartphones and with changes to other parts of its business, such as its relationship with Target (TGT).
He said this quarter will be particularly rough, remarking, “We are anticipating the first-quarter results to be even more difficult than the fourth quarter of 2011.”
Gooch said RadioShack continued to struggle, and would struggle in future, with the fact that Sprint has raised the requirements for creditworthiness of customers crimped new activations and upgrades.
Sprint’s changes in their customer and credit models continued to impact our Mobility sales and gross profits in the quarter. We’ve discussed in prior quarters Sprint’s customer model changes beginning in the second quarter; this continued to impact us in the third, but we expected an improvement in trend going into the fourth quarter. In fact, the trend worsened as tightening of the credit model combined with the early upgrade change to further deteriorate our trend.
But Gooch also called out Apple’s iPhone in particular as a source of pain:
Second, several factors negatively impacted our Mobility platform gross margin rate — a higher mix of lower margin Smartphones, that was the most significant; the expansion of iPhone into three carriers combined with the launch of iPhone 4S resulted in a dramatic increase in the mix of iPhone sales. This helped to drive our positive comp store sales but negatively impacted our margin mix.
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