RadioShack Meets Zacks Estimate – Analyst Blog
RadioShack Corp. (RSH) has declared second quarter 2010 financial results mostly in line with the Zacks Consensus Estimate. Comparable store sales for the company-operated stores and kiosks (stores and kiosks opened at least a year) grew 6.7% year over year. This is a key retail performance indicator measuring growth from existing sales locations.
GAAP net income, in the second quarter of 2010, was $53 million or 41 cents per share compared with a net income of $48.8 million or 39 cents per share in the year-ago quarter. Quarterly EPS of 41 cents was exactly in line with the Zacks Consensus Estimate. Management strategy to put emphasis on innovative mobile and technology products helps RadioShack to improve its bottom line.
Quarterly net revenue was $1,011.4 million, up 4.7% year over year, but slightly below the Zacks Consensus Estimate of $1,017 million. The year-over-year increase in revenue was primarily due to continued growth in the postpaid wireless segment and introduction of new products like Apple Inc’s (AAPL) iPhone 4.
Quarterly gross profit was $480.6 million compared with $444.8 million in the prior-year quarter. Gross margin was 47.5% in the reported quarter compared with 46.1% 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 $365.5 million compared with $335.7 million in the year-ago quarter. Operating income in the second quarter was $96.3 million, or 9.5% of sales, compared with $87.7 million, or 9.1% of sales in the same quarter of the last year.
During the first half of 2010, RadioShack generated $42 million of cash for operations compared with a cash generation of $143.4 million in the prior-year period. Free cash flow (cash flow from operations less capital expenditures) in the reported period was $16.3 million compared with $99.5 million in the year-ago quarter.
At the end of the second quarter of 2010, RadioShack had $931.1 million of cash & cash equivalent compared with $930.8 million at the end of the prior-year quarter. Total debt, at the end of the same quarter was $680.4 million compared with $720.1 million at the end of the year-ago quarter. At the end of the second quarter of 2010, debt-to-capitalization ratio was 0.22 compared with 0.41 at the end of the year-ago quarter.
Segment Wise Results
Quarterly revenue from U.S. RadioShack Company-operated store segment was up 6.4% year over year to $873.9 million.
Within this segment, Wireless sales were up 61.4% primarily due to higher Sprint Nextel Corp. (S), AT&T (T), and T-Mobile postpaid wireless sales, higher prepaid wireless handset sales, offset by lower GPS sales. Service revenue was up 6.5% due to higher prepaid wireless airtime. Accessory sales were down 25.4% due significant sales decline of digital-to-analog TV converter boxes, and imaging accessories. However, wireless accessories sales increased. Modern Home sales declined 26.3%, Personal Electronics sales declined 19.8%, Power sales declined 5.1%, and Technical sales declined 3%.
Kiosks segment revenue declined 12.5% year over year to $55.5 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 1.4% year over year to $82 million. RadioShack de Mexico significantly contributed to this segment.
We maintain our Neutral recommendation for RadioShack. Currently, it is a Zacks #3 Rank (Hold) stock.
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