Before the opening bell today, RadioShack Corp. (RSH) declared its fourth-quarter 2011 financial results, mostly in line with the Zacks Consensus Estimates. The Comparable store sales for the company-operated stores and kiosks (stores and kiosks opened at least a year) increased 2.2% year over year. This is a key retail performance indicator measuring growth from existing sales locations.
GAAP net income, in the fourth quarter of 2011 from continuing operations was $11.9 million or 12 cents per share compared with a net income of $53.1 million or 48 cents per share in the year-ago quarter. Quarterly EPS of 12 cents was exactly in line with the Zacks Consensus Estimates. Quarterly net revenue was $1,386.9 million, up 5.9% year over year, surpassing the Zacks Consensus Estimate of $1,375 million. The year-over-year rise in revenue is primarily attributable to the completion of the roll out of the company’s Target Corp. (TGT) Mobile centers.
Quarterly gross profit was $482.4 million compared with $537 million in the prior-year quarter. Gross margin was 34.8% in the reported quarter compared with 41% in the prior-year quarter. This was mainly due to unfavorable sales mix toward lower margin smartphones and other mobile devices coupled with more promotional holiday season.
Quarterly Selling, General, and Administrative expenses were $431.1 million compared with $420.9 million in the year-ago quarter. Operating income in the fourth quarter of 2011 was $30.5 million, or a mere 0.07% of sales compared with $96.9 million, or 7.4% of sales in the year-ago quarter.
During 2011, RadioShack generated $217.9 million of cash from operations compared with $155 million in 2010. Free cash flow (cash flow from operations less capital expenditures) in 2011 was $135.8 million compared with $74.9 million in 2010. At the end of 2011, RadioShack had $591.7 million of cash & cash equivalent compared with $569.4 million at the end of 2010. Total debt, at the end of 2011 was $670.6 million compared with $331.8 million at the end of 2010. At the end of 2011, debt-to-capitalization ratio was 0.47 compared with 0.28 at the end of 2010.
Segment wise Results
U.S. RadioShack Company-operated store segment, which is the prime contributor of total revenue, was down 1.4% year over year to $1,124 million.
Within this segment, Mobility sales were up 15.7%, primarily due to higher AT&T Inc. (T) and Verizon wireless smartphone and tablet sales. Verizon Wireless is a joint venture between Verizon Communications Inc. (VZ) and Vodafone Group plc. (VOD). Signature revenue was down 1.1% due to lower sales of digital-to-analog TV converter boxes and related TV antennas, media storage systems, partially offset by higher headphone sales. Consumer Electronics sales were down 29.7% mainly attributable to lower sales of digital TVs, digital music players, and digital cameras.
Other segment revenue increased 55.1% year over year to $262.9 million. This was primarily due to Kiosk roll out in Target Stores. On December 31, 2011, RadioShack had 1,496 Kiosks inside Target stores.
We maintain our long-term Underperform recommendation on RadioShack. Currently, it holds a short-term Zacks#5 Rank (Strong Sell) on the stock.
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