RadioShack Attacks Comp Sales

"We have the team hard at work to improve comps of our stores in malls," David Edmondson, president and CEO, said in yesterday's earnings call. The Fort Worth-based corporation's 970 mall locations, with "significantly weaker" sales, are in line for inventory changes to weed out non-mall merchandise like CB antennas and restock shelves with product that has strong appeal for younger shoppers while making more effective use of its window space.

Edmondson declined to "get specific" about the sales differences, but did say "it's significant enough that it requires our attention." Unlike other areas of planned change, the strategy will go into play far enough in advance to get a foothold before the holiday shopping season begins. "It is drawing down comp store sales for our chain," he admitted.

But the sagging numbers aren't solely to blame on mall stores. The inventory investment totals $972 million or $116 million more than it did last year at this time. The CEO said much of that is attributed to stocking shelves at 651 kiosks. In Q2 2004, there were only 10 kiosks on line. Not to be ignored is the fact that some kiosks are in direct competition with mall stores, but corporate chiefs are standing behind a test study that projects the cannibalization factor at less than 10%.

In the "back half of the year," Edmondson said he's optimistic numbers will improve when the yearend count is complete. The fourth quarter will bring the launch of a new advertising campaign, another 2,500 stores in line with "standard operating procedures," more digital inventory for holiday shoppers, more "new format" shops and a new and improved radioshack.com shopping experience. "There is a broad range of initiatives to get the front end moving," he stressed.

From the financial perspective, Q2's total sales were up 4% or $1.09 billion versus $1.05 billion a year ago. In the big picture, core stores' sales rose 5%, except for its wireless business. However, total wireless sales were up 2%, but that clearly was credited to kiosk sales. Net income dropped to $52.3 million in comparison to last year's $68.3 million. As for guidance, execs still contend the year will end with $1.80 to $1.90 diluted earnings per share.

On the bright side, the chain's 5,000-plus stores were producing 63 tickets per day or one more than in Q2 2004. The average sale rose to $33.97, up 2% from a year ago.