FORT WORTH, Texas – Electronics retailer RadioShack Corp. said Monday its first-quarter profit surged on cost-cutting, sending the stock up 7 percent in midday trading.
But revenue fell more sharply than analysts expected, as sales of wireless phones remained weak and RadioShack closed hundreds of stores.
Investors focused on net income, which jumped to $42.5 million, or 31 cents per share, from $8.4 million, or 6 cents per share, in the prior-year period. One-time items, mostly the recapture of federal phone excise taxes, contributed 2 cents per share to profit, the company said.
Analysts surveyed by Thomson Financial were looking for earnings of 14 cents per share.
RadioShack shares rose $1.94 to $29.66 in midday trading on the New York Stock Exchange after hitting $31.20, their highest level in more than two years. The shares had already gained 65 percent this year through Friday.
Profit was helped by cutting operating expenses 17.7 percent to $441.8 million from a year ago. Profit margins also rose because the stores sold more high-margin products and did a better job of controlling inventory, the company said.
Revenue, however, fell 14.4 percent to $992.3 million on lower sales of wireless phones and personal electronics devices.
At its company-operated stores, sales fell 14.8 percent and sales of wireless phones and devices dropped by 25 percent after considering the effect of store closures. This was partly due to a shift from traditional phone plans to prepaid phones, which carry lower profit margins.
Sales fell for satellite radios and toys but rose for digital cameras and music players, the company said.
Sales were also hurt by having 506 fewer stores and kiosks than it did a year ago, RadioShack said.
Same-store sales, or sales at stores open at least a year, plunged 9.2 percent. Same-store sales are a key measure for retailers.
In a statement issued by the company, Chairman and Chief Executive Julian C. Day blamed the drop in same-store sales on widespread discounting that boosted sales in early 2006. The company declined to hold the usual conference call with analysts.
RadioShack also said the company and some of its current and former directors and officers are targets of two shareholder lawsuits filed in March in federal district court in Fort Worth. The lawsuits charge that the company withheld damaging information about its financial affairs.
The lawsuits were mentioned in a filing Monday with the Securities and Exchange Commission. The plaintiffs are seeking class-action status on behalf of investors who bought RadioShack stock between January 2003 and June 2006.
Day, a turnaround veteran, became CEO in July 2006, after the company had already begun closing stores in a cost-cutting move. The Fort Worth-based company has also laid off workers.
