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Consumer electronics retailer RadioShack Corporation today reported net income of U.S. $49.5 million or $0.36 per diluted share for the quarter ended December 31, 2005 versus net income of $130.9 million or $0.81 per diluted share for the quarter ended December 31, 2004. This is a fourth quarter 2005 decline of 62 percent in net income and 56 percent in diluted earnings per share. Before considering a change in accounting principle, fourth quarter 2005 diluted earnings per share were $0.38.
RadioShack (Fort Worth, Texas, U.S.) reported last month that fourth quarter 2005 comparable store sales were up 4 percent compared to the prior year. Total sales in the fourth quarter of 2005 were up 5 percent to $1.672 billion, compared to total sales of $1.593 billion for the previous year.
A Turnaround Plan Needed
"The poor fourth quarter performance caused us to take a much deeper look at the state of our business and resulted in the launch of a turnaround plan including the significant fourth quarter inventory write-down," said David Edmondson, president and CEO.
For fiscal year 2005, RadioShack reported net income of $265.3 million or $1.78 per diluted share versus net income of $337.2 million or $2.08 per diluted share in fiscal year 2004. This represents a fiscal year 2005 decline of 21 percent in net income and 14 percent in diluted earnings per share.
Fiscal year 2005 comparable store sales were up 1 percent versus the prior year. Total sales in fiscal 2005 were $5.082 billion versus $4.841 billion in fiscal 2004, an increase of 5 percent.
“RadioShack failed to achieve its financial objectives in 2005,” Edmondson said. “We implemented several key changes including executive management, advertising, store operations, merchandise assortment, long-term wireless agreements, and more. We believe that the company’s strategy is sound. But we must move at a much faster pace with a greater sense of urgency, and that is what necessitates our turnaround plan.”
400-700 Stores Close
In the next 18 months, RadioShack intends to:
increase the average unit volume of its core store base
rationalize its cost structure
grow profitable square feet in its store portfolio
The company will replace old, slower-moving merchandise with new, faster-moving merchandise within higher growth categories. It will concentrate its efforts and investment on improving top-performing stores in order to deliver a great customer experience. To do so, it will close 400-700 company-operated stores.
In addition, the company will look for ways to cut costs, as well as expand its kiosk business and relocate stores.
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