RadioShack (NYSE:RSH) recently released its preliminary Q4 results. The company indicated that its Q4 2011 gross margin is expected to be approximately 35%, compared to 41% in Q4 2010, and attributes this to a shift toward lower-margin smartphones and mobile devices and the effect of promotions over the holidays. The market punished the stock, which fell approximately 30% following the release. RadioShack competes with retailers like Wal-Mart (NYSE:WMT), Target (NYSE:TGT) and Best Buy (NYSE:BBY).
RadioShack expects Q4 sales of around $1.39 billion, representing a 6% increase over Q4 2010 and comparable store sales to increase 2%. RadioShack revealed that its Sprint wireless business did not perform well during this period with fewer new and upgrade activations, which will adversely affect its revenues. RadioShack’s President and CEO, Jim Gooch, asserted that the growing proportion of low margin smart phones and other mobile devices, mainly tablets and e-readers, has significantly altered the margin profile of its mobility business.
RadioShack has reset expectations for 2012 amid a challenging economic environment and intense competition from other players. It expects lower bottom-line numbers for 2012 compared to 2011 and anticipates a very challenging first quarter this year with recovery in the later half of 2012.
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