Radio Shack shares slide on Q4 profit warning, Sprint gets the blame

Blaming disappointing results from Sprint's post-paid business, Radio Shack announced after the closing bell on Wall Street, that it will report much lower than expected Q4 earnings. The retailer said that it had fewer new activations and upgrade activations due to policy changes at the carrier. Revenue from Sprint's post-paid customers declined both year-over-year and sequentially. Radio Shack now expects fourth quarter revenue of $1.39 billion, ahead of the Street's 1.35 billion estimate. But earnings per share will come in at 11-13 cents, much lower than the Street's prediction of 37 cents a share.

Same store sales were up 2%, but gross margin in the period should come in at 35%, down from the 41% reported last year. The decline in margin comes from a change in the mobility products being sold as buyers gravitated toward lower margin smartphones and mobile devices. Besides blaming Sprint's post-paid business, Radio Shack also noted that "further unanticipated changes in Sprint’s customer and credit models" had an impact on revenue.

Radio Shack isn't passing the hat around just yet. At the end of the quarter, it had $590 million in cash, up $21 million from the 2010 quarter. It also has $421 million available to draw down on a $450 million revolving credit facility. Still, in order to continue paying dividends and invest in the business, Radio Shack will stop share repurchases.

Radio Shack shares are down 20% after-hours to $8.21.

source: Forbes

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