RadioShack Revamps Business, Sees $124M Charge
FORT WORTH, Texas – Electronics retailer RadioShack Corp. said Wednesday it plans to sell its headquarters, discontinue products like car stereos and pagers, and close 35 underperforming stores in an effort to strengthen its business.
The chain of more than 7,300 company-owned and franchised stores said the moves, which also include exiting its commercial communications installation business, will result in a fourth-quarter charge of $124 million, or 50 cents a share.
RadioShack Chief Financial Officer Michael Newman said in a statement that the cash impact of the write-off is less than $10 million and puts the company "squarely on the path to achieve its long-term strategic objective, which is to lead the specialty category in shareholder return."
Excluding the charge, RadioShack said it sees fourth-quarter earnings from continuing operations at 66 cents a share, which is also Wall Street analysts' average estimate, according to research firm Thomson Financial/First Call. Forecasts range from 63 cents to 69 cents.
The company said the charge includes a $45 million loss on the sale of its Charles D. Tandy Center headquarters and a $26 million inventory charge to exit commercial electronic parts, car stereos, security systems, pagers and other product categories.
RadioShack said it will take a write-down of $40 million on its Amerilink unit, which installs cable, Internet and telephone service, and a $5 million charge to exit its commercial installation business to concentrate on the residential market.
The rest of the $124 million charge consists of an $8 million provision for closing 35 underperforming stores.
"These actions better align the company's assets with operations and merchandise initiatives in order to execute its anchor growth strategy in 2002 and beyond," Newman said.
RadioShack said its strategy is to deliver long-term earnings-per-share growth of 13 percent to 15 percent annually, dependent on higher growth rates of its main businesses, including accessories, batteries, and parts and wireless communications.
RadioShack said it plans to lease back its headquarters until it begins its move into its new space, also in downtown Fort Worth, in late 2004.
By 2005, the company expects the move to reduce operating expenses, improve earnings and substantially enhance workplace efficiency.