Earnings Preview: RadioShack to report 1Q results Monday

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April 25, 2008

NEW YORK—Consumer-electronics retailer RadioShack Corp. reports earnings for the fiscal first quarter on Monday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: RadioShack has struggled with tough competition from other consumer electronic retailers and discount stores such as Target Corp. It also faces persistent weakness in its wireless phone business.

The company is in the midst of a turnaround plan led by Chief Executive Julian C. Day to bolster results. Since 2006, the company has closed more than 500 stores and trimmed other expenses.

BY THE NUMBERS: Analysts polled by Thomson Financial predict a profit of 29 cents per share on revenue of $937 million.

ANALYST TAKE: RBC Capital Markets analyst Scot Cicarelli said in a note to investors Friday that RadioShack's sales difficulties are persisting.

"At about 30 percent of sales, wireless remains critical to the company's overall level of success," he wrote. "Given Sprint's ongoing subscriber challenges and RadioShack's less-than-optimal product selection with AT&T (lacking Apple's iPhone for example), we believe RadioShack is at a competitive disadvantage."

He also said customer traffic trends have been weaker in the first quarter compared with the fourth quarter. In addition, rival Best Buy has started a store-within-a-store concept called Best Buy Mobile, which could hurt RadioShack's wireless business further. He rates the company "Underperform."

Goldman Sachs analyst Matthew Fassler said in a client note Friday that RadioShack's revenue was improving as of mid-February, though sales of Sprint wireless products remain a "significant drag."

March was likely weaker than February, he said, but he expects any shortfall to be "moderate."

He affirmed his "Neutral" rating on the stock.

WHAT'S AHEAD: Like several other retailers, RadioShack will offer a bonus to people who use their fiscal-stimulus check, which begins arriving next month, in its stores.

STOCK PERFORMANCE: The stock fell about 4 percent during the quarter.