RadioShack revenue tops Street view; shares soar

By Dhanya Skariachan

NEW YORK (Reuters) - Electronics chain RadioShack Corp <RSH.N> posted quarterly revenue that topped Wall Street expectations, helped by its push in mobile phones and calling plans, sending its shares up 16 percent to a year high.

Net sales totaled $990 million, well ahead of an average Wall Street forecast of $961.7 million, according to Thomson Reuters I/B/E/S.

While profit was slightly below estimates, the top-line performance revived confidence in a retail chain that has been hit by a pullback in consumer spending and tougher competition from the likes of Best Buy Inc <BBY.N>.

"Our financial performance improved in the latter part of the quarter, primarily driven by our strong mobility business combined with an economy showing some signs of potential stabilization," Chief Financial Officer Jim Gooch said in a statement.

The retailer recently signed a deal with wireless carrier T-Mobile USA Inc and is now focusing more on selling both handsets and air time as well as popular electronics products such as iPods. T-Mobile USA is a unit of Deutsche Telecom <DTEGn.DE>.

RBC Capital Markets analyst Scot Ciccarelli said the results were "quite good" despite the earnings miss, as same-store sales fell only by 2.9 percent while he was looking for a decline of about 12 percent.

RadioShack has seen a boost in converter box sales in the past year due to a mandatory switch of all U.S. televisions to digital in June. However, demand for the converter boxes started dwindling since the second quarter.

"If our converter box estimates are accurate, then the 'core' RadioShack business had to be significantly stronger than we would have expected," Ciccarelli said in a note to clients.

WIRELESS STRATEGY

RadioShack's move to strengthen its wireless business is also an attempt to combat fierce competition from national retailers like Best Buy, discounters like Wal-Mart Stores Inc <WMT.N>, wireless carriers and other new distribution channels.

Earlier this month, Wal-Mart said it will sell discounted mobile services nationwide, threatening to aggravate a price war and hurt profit margins across the U.S. wireless sector.

RadioShack said third-quarter net income fell to $37.4 million, or 30 cents a share, from $49.1 million, or 38 cents a share, a year earlier. Analysts on average were expecting 31 cents a share, according to Thomson Reuters I/B/E/S.

Sales fell 3.1 percent from the year-earlier $1.02 billion.

The retailer, which has about 4,470 company-operated stores, almost 1,300 dealer outlets and over 450 wireless phone kiosks throughout the United States, said sales at its stores and kiosks open at least a year fell 2.9 percent.

While sales of converter boxes, laptops and wireless accessories fell, demand for Sprint Nextel postpaid wireless offerings, prepaid wireless handsets and netbooks was steady.

RadioShack's gross margin improved by about 0.9 percentage point to 47.6 percent as the retailer included more higher-margin products, such as postpaid and prepaid wireless plans, and moved away from lower-margin products like converter boxes, laptops and GPS.

Its shares were up 16 percent at $18.17 in morning trade on the New York Stock Exchange.

(Reporting by Dhanya Skariachan; Editing by Derek Caney and John Wallace)

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