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RadioShack Corp.'s (NYSE: RSH) past problems are still lingering for the oddball retailer, but give it some credit (I think). The retailer's latest quarter showed profit growth amid changes like closing stores and selling more popular electronics items. With new leader Julian Day at the helm, under-performing stores are seeing the axe while a focus on personal electronics and wireless sales are helping the company stay afloat. I have to admit, many recent visits to the retailer have resulted in rabid-dog sales associates pushing new cellphones and contracts faster than I can say no. I hope RadioShack is not relying solely on wireless sales to prop up sales and profits, but that is the impression I've had lately.
Anyway, RadioShack did say that April same-store sales (as well as prior months) slid further even as profits surged due to cost cutting measures. At some point, cost cutting will have to subside and if same-store sales are still anemic. At that time, Mr. Day will have quite a challenge on his hands.
RadioShack's net income for the Q1 period ended up at $42.5 million, a dramatic upturn from $8.4 million during the year-ago period. Echoing my sentiments about RadioShack's apparent reliance on wireless sales, CFO Jim Gooch stated that, "While we recognize and are focused on our top-line sales challenges, particularly in the wireless business, we will continue to bring a disciplined approach to the management of our business, with the goals of improving profitability."
RadioShack has quite a few more moves to make if it wants to remain relevant, profitable and growing in the retail landscape these days. If you're an RSH investor, I'd be watching 2007 like a hawk to see exactly where this company is headed.
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