updated 2/27/2007 1:56:48 PM ET 2007-02-27T18:56:48

Shares of RadioShack Corp. surged Tuesday after the electronics retailer said fourth-quarter profit jumped 64 percent, with lower costs more than offsetting a decline in revenue and same-store sales.

The Fort Worth, Texas-based company also offered a bullish prediction for 2007 based on lower costs and higher profit margins.

The shares rose $2.89, or 12.87 percent, to $25.34 in early afternoon trading on the New York Stock Exchange, after hitting a 52-week high of $26.24.

Seven months into a turnaround under a new CEO, RadioShack said fourth-quarter earnings rose to $84.5 million, or 62 cents per share, compared with $51.2 million, or 38 cents per share, a year earlier.

Analysts were looking for net income of 43 cents per share, according to a survey by Thomson Financial.

But revenue fell 13 percent last quarter, to $1.46 billion from $1.67 billion a year ago, partly due to closing stores.

Sluggish sales of wireless service dragged same-store sales — sales at stores open at least a year — down by 7.7 percent. That's a key measure for retailers.

Wall Street had expected revenue to fall. RadioShack's crucial wireless business has struggled since switching to selling Cingular cell-phone service instead of Verizon Wireless, and the stores face more competition from big retailers such as Best Buy Co. and Circuit City Stores Inc.

For all of 2006, the company earned $73.4 million, or 54 cents per share, down from $267 million, or $1.79 per share in 2005. Revenue fell by $304 million to $4.78 billion, and same-store sales fell 5.6 percent.

RadioShack said it expects to earn $1 to $1.20 per share this year due to lower overhead, depreciation and interest expenses. Analysts were forecasting profit of 91 cents per share.

Chairman and Chief Executive Julian Day, a turnaround veteran hired last July to run the company, said wireless has obviously been a weak spot. He said RadioShack was working more closely with Cingular on promotions, and the business was making "a relatively slow but steady ramp-up."

Day said pre-paid wireless sales are growing at the expense of more profitable wireless service, and RadioShack is trying to figure out how to turn this trend to its advantage. Simply swapping regular service for prepaid business won't help, he said.

Some other items are selling well, including MP3 music players and accessories. The company is trying to adjust merchandise selections to local tastes.

Shoppers can go to RadioShack and still find CB radios, which were popular in the 1970s.

"It's just that it is noncore and should only go into the stores where it is a great seller," Day said.

Since taking over, Day has held only sporadic conference calls with analysts and done few interviews. That strategy has annoyed analysts, who have come to expect quarterly conference calls with corporate leaders, but Tuesday's call might have validated Day's strategy.

Near the end of the hour-long event, an unidentified voice could be heard barking a profanity. After an awkward silence, the operator turned the call back to Day for closing comments, but the line went dead.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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