RadioShack Barely Beats, Non-Wireless Sales a Concern

RadioShack Corp. (RSH) declared fourth quarter 2009 financial results yesterday after the closing bell. Overall the company performed well as both its top-line and bottom-line increased over the prior-year quarter. However, serious concerns remain regarding RadioShack’s non-wireless product categories and RadioShack Kiosks sales.

GAAP net income, in the fourth quarter, was $75.7 million or 60 cents per share, compared to a net income of $60.1 million or 48 cents per share in the year-ago quarter. Fourth quarter earnings of 60 cents per share barely topped the Zacks Consensus Estimate of 59 cents.

Quarterly net revenue was $1,318.2 million, up 4.7% year-over-year. However, this was slightly below the Zacks Consensus Estimate of $1,325 million. The year-over-year increase in sales is primarily due to a 6.1% rise in comparable same-store sales for company-operated stores partially offset by lower sales in Kiosks.

Quarterly gross profit was $579 million, compared to $526.3 million in the prior-year quarter. Gross margin was 43.9% in the reported quarter, compared to 41.8% in the same quarter of the previous year. This was mainly due to favorable sales-mix for the high-margin products.

Quarterly selling, general, and administrative expenses were $425.7 million, compared to $401.6 million in the year-ago quarter. During 2009, RadioShack re-launched its “The Shack” brand of retail store chain and put its emphasis in wireless technology in order to stay aligned with future trends. Operating income in the fourth quarter was $132.2 million, or 10% of sales, compared with $101.8 million, or 8.1% of sales in the same quarter of last year.

During fiscal 2009, the company generated $245.8 million of cash from operations, compared to $274.6 million in the previous year. Free cash flow (cash flow from operations less capital expenditures) in fiscal 2009 was $164.8 million, compared to $189 million in the previous year.

At the end of fiscal 2009, RadioShack had $908.2 million of cash & cash equivalent, compared to $814.8 million at the end of fiscal 2008. Total debt, at the end of fiscal 2009 was $669.4 million, compared to $698.8 million at the end of fiscal 2008.

Segment-wise Sales

Quarterly revenue from Company-operated store segment was up 6.1% year-over-year to $1,128.3 million.

Within this segment, Wireless sales were up 56.4% primarily due to higher Sprint Nextel Corp. (S) and T-Mobile, a division of Deutsch Telekom AG (DT) postpaid wireless sales, higher prepaid wireless handset sales, offset by lower GPS sales. Service revenue was up 13.2% due to higher prepaid wireless airtime.

Accessory sales were down 19.6% due significant sales decline of digital-to-analog TV converter boxes, imaging accessories, and video game accessories. However, wireless accessories sales increased.

Modern Homes sales decline 8.8%, Personal Electronics sales decline 12.4%, Power sales decline 11.2%, and Technical sales decline 4%.

Kiosks segment revenue declined 15.3% year-over-year to $67.2 million. This was primarily due to fewer kiosk locations and the closure of Sprint-branded kiosks in August 2009.

Revenue from Other services segment increased 5.4% year-over-year to $122.7 million. RadiosShack de Mexico significantly contributed to the Other services segment.