Electronics retailer RadioShack Corp. on Friday said fourth-quarter earnings dropped 62 percent and disclosed it plans to close 400 to 700 stores and two distribution centers as part of a plan to improve its financial performance.
“We must close underperforming, low-volume stores that are draining resources of the company,” president and chief executive Dave Edmondson told analysts Friday morning during the second of a two-day analyst meeting at the company’s Fort Worth headquarters. “We will be vigilant with costs and improve performance in a very sustainable way.”
The company said it could not project the number of job cuts until it identifies all the affected stores, but 88 employees will be affected from the distribution center closings in Charleston, S.C., and Southhaven, Miss.
RadioShack said the stores it plans to close are company-operated. There are nearly 7,000 RadioShack stores operated by the company or dealers, and more than 700 wireless kiosks. It also has more than 100 stores in Mexico.
Edmondson and the company’s board spent most of the week defending errors in the CEO’s resume, which were revealed in a Fort Worth Star-Telegram story. But Friday, he focused on the company’s performance.
The profit decline reflected a $62 million writedown in the value of its inventory, higher promotional expenses and a merchandise shift.
It earned $49.5 million, or 36 cents per share, in the three months ended Dec. 31, down from $130.9 million, or 81 cents per share, a year earlier. The company earned 38 cents per share in the latest quarter excluding the affect of an accounting change.
Revenue grew 5 percent to $1.67 billion from $1.59 billion, helped by a 4 percent increase in stores open at least a year.
“Sales results were good in many low-margin non-wireless categories; however, we experienced lower sales in high-margin categories,” Edmondson said in a statement. “In addition, wireless sales and profits were below our expectations.”
For the full year, the company earnings fell to $265.3 million, or $1.78 per share, from $337.2 million, or $2.08 per share. Revenue climbed to $5.08 billion from $4.84 billion.
The company said net income was lowered by $19 million from transition costs related to the termination of its agreement with Verizon Wireless, with most of those costs in the fourth quarter.
RadioShack Chief Financial Officer David Barnes told analysts the decline in profit came from inventory writedowns and cellular phone equipment sold at a loss.
“Some aspects are easy to quantify, some are not,” Barnes said. “What I can’t quantify is the impact of the wireless transition on our sales due to fact that we have less inventory and less active promotional activity.”
The analyst meeting ends a tumultuous week for Edmondson, which began with a published report highlighting the resume inaccuracies. Edmondson had stated that he earned degrees in theology and psychology from Pacific Coast Baptist College in California.
The school, which relocated to Oklahoma and renamed itself Heartland Baptist Bible College in 1998, said Edmondson completed two semesters and that it never offered psychology degrees.
On Tuesday, the company’s board issued an unsigned statement that it stood behind its CEO despite the discrepancies. Edmondson issued a statement Wednesday taking responsibility for the errors and, separately, the board said it would hire outside lawyers to investigate the errors.
Edmondson, 46, joined RadioShack in 1994 and has been CEO since May, when he was named the hand-picked successor to Leonard Roberts.
Earlier analysts said they were not concerned with the resume flap, saying RadioShack has more serious performance issues.