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Radio Shack Profit Drops 79%

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FORT WORTH (AP) – Consumer electronics retailer RadioShack Corp. said Tuesday that fourth-quarter profit plunged 79 percent because of discounting during the holiday season and a sales shift toward less-profitable smartphones and tablets.

Executives also warned that they expect profit to fall this year, and Radio Shack shares dropped 69 cents, or 7.4 percent, to $7.29 in midday trading. Earlier in the day, the shares fell as low as $7.26, coming within 11 cents of their 52-week low.

The Fort Worth-based company had warned in January that its profit was being hurt by “significant declines” in the Sprint wireless business, saying there were fewer new and upgrade activations.

Radio Shack said Tuesday that net income in the October-December period was $11.9 million, or 12 cents per share, compared with $57 million, or 51 cents per share, a year earlier.

Analysts expected 13 cents per share, according to a survey by FactSet.

The company said increasing sales of tablets and higher-end smartphones such as iPhones hurt its profitability, because it keeps less of the revenue from those sales as profit than it does from other products. Retailers try to make up the difference through sales of the accessories, warranties and other services that go with the pricey phones.

RadioShack phased out sales of T-Mobile products and services in company-owned stores last year and launched offerings from Verizon Wireless.

Revenue rose 6 percent to $1.39 billion, matching analysts’ expectations, from $1.31 billion a year ago, thanks to the opening of stores inside Target stores that sell cell phone service and accessories.

Revenue at RadioShack and Target Mobile stores open at least a year rose 2.2 percent. That’s a key figure in retailing because it excludes sales from stores that opened or closed during the year.

Sales at RadioShack stores in the U.S. fell $16.3 million, dragged down by weakening sales of digital cameras and music players. But that was offset by a $93.4 million increase in “other sales” due to the rollout of Target Mobile locations.

James Gooch, the company’s president and CEO, said on a conference call with investors that the current quarter is expected to be “extremely challenging” and “even more difficult” than the fourth quarter of 2011.

But results should improve as the year progresses and depending on the timing of product launches, the company should be able to post sequential quarterly improvements in net income, he said.

(Copyright 2012 by The Associated Press.  All Rights Reserved.)

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