Although sales declined by 13% in the quarter ended Dec. 31, 2006, Radio Shack reported that fourth quarter profits rose 65% to $84.5 million, or 62 cents for share, giving the firm its first glimpse of profitability since fiscal 2005.
The reduction in store count, which left the firm with 4,467 company-owned stores by year's end, combined with a drop in electronic and wireless sales and a change in the way the company records sales of pre-paid wireless airtime, sent sales down, however. Sales dropped $214 million to $1.458 billion in the quarter compared to sales of $1.672 billion for the same period in 2005. Sales at stores open at least a year were also down by 7.7%.
Despite those sales numbers, Jim Gooch, chief financial officer, said in a conference call that the company was pleased with the results, calling them "a solid beginning toward improving the company's operating performance."
"We expect these improvements to drive increased profitability for 2007," said Gooch, adding that earnings for the year are expected to range from $1 to $1.20 per share.
Chief executive Julian Day, who was brought on board last year, is being credited for the turnaround. Day, whose efforts helped turn the tide at Kmart and Safeway, said he plans to increase profitability in 2007 by improving the in-store experience of customers, aggressively managing expenses and allocating capital to projects that will maximize the firm's investment return.
"Sales themselves are not the goal. Gross profit dollars is," he said.Radio Shack has been facing challenges from larger competitors such as Best Buy and Circuit City in recent years but Day believes with improved customer service and a better mix of product offerings, including flat panel TVs, the company can return to profitability.
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