NEW YORK – RadioShack Corp posted a higher-than-expected quarterly profit Thursday on an unexpected increase in sales after several weak quarters, sending its shares up nearly 16 percent.
RadioShack's sales rebound comes as the retailer faces fierce competition from the likes of Best Buy Co Inc, and as discounters, including Wal-Mart Stores Inc, strive to boost sales of consumer electronics.
Net earnings were $41.4 million, or 32 cents a share in the second quarter, compared with $47 million, or 34 cents a share, a year earlier.
When the company's results were adjusted for a charge tied to the lease for its corporate headquarters and a gain from a tax settlement, it earned 35 cents a share, topping analysts' average expectation of 26 cents a share, according to Reuters Estimates.
There were fewer shares outstanding in the most recent period.
RadioShack's sales rose 6.4 percent to $995 million, breaking a persistent pattern of sales declines.
The increase was “substantial,” said RBC Capital Markets analyst Scot Ciccarelli.
“Although we sensed that sales were getting modestly better, we did not expect such a sharp improvement in the quarter,” Ciccarelli said in a note to clients.
Sales rose 7.5 percent in company-owned stores, while its online business reported a 29.8 percent increase.
Same-store sales, which track sales at stores open at least a year, rose 6.9 percent, helped by demand for items like GPS devices, video games and prepaid wireless phones, and an improvement in its AT&T Inc post-paid business.
RadioShack also reported strong sales of digital-to-analog converter boxes, ahead of the scheduled transition of TV broadcast signals to digital-only in early 2009.
“Converters (sales) should continue to accelerate throughout the year,” Bank of America analyst David Strasser wrote in a note.
RadioShack has been closing unprofitable stores and reducing staff since turnaround veteran Julian Day became chief executive in 2006.
“Our improved sales this quarter reflect our success in improving our merchandising, store operations and overall customer experience,” Day said in a statement.
Reflecting its investment to improve service levels, selling, general and administrative expenses rose $15 million.
RadioShack noted that its Sprint post-paid business was weak and continued to hurt sales. Excluding that business, its quarterly same-store sales would have increased 12.7 percent, the company said.
The company also announced a new $200 million share buyback plan.
RadioShack shares rose to $16.25 in premarket trading, from Wednesday's close of $14.02 on the New York Stock Exchange.
(Additional reporting by Karen Jacobs in Chicago; Editing by Steve Orlofsky and Maureen Bavdek)
