RadioShack Corp. surprised Wall Street with a quarterly loss on Tuesday, sending its shares down nearly 10 per cent, as the electronics retailer suffered from weakness in its Sprint postpaid wireless business and tepid demand for prepaid wireless handsets.
The first-quarter net loss was $8-million, or 8 cents a share, compared with year-earlier net income of $35.1-million, or 33 cents a share. Analysts, on average, were looking for a profit of 5 cents a share, according to Thomson Reuters I/B/E/S.
Sales fell 0.9 per cent to $1.01-billion, while analysts had expected $1.06-billion.
“We believe this weakness is partly the result of a more competitive retail environment as Best Buy Mobile grows stores, Amazon enters the fray more aggressively, and the carrier stores continue to remain a serious threat,” Janney Capital Markets analyst David Strasser said.
Like larger rival Best Buy Co. Inc. , RadioShack has been struggling to woo U.S. shoppers who increasingly buy their gadgets online.
“The first quarter was extremely challenging,” Chief Executive Officer Jim Gooch said, adding that RadioShack was now “acting decisively” to improve its marketing.
Sales at company-operated stores and Target mobile centers open at least a year fell 4.2 per cent, mainly because of a decline in Sprint subscription wireless calling plans. Sales of prepaid wireless handsets, laptops and home entertainment accessories were also weak.
RadioShack’s postpaid wireless business with Sprint has been struggling and continued to see weak sales in the quarter. This weakness was partially offset by higher sales at its AT&T and Verizon postpaid wireless businesses.
Analysts have talked about Sprint getting stricter about the credit scores people need to apply for its wireless plans.
RadioShack’s problems with Sprint come less than a year after the retailer severed ties with Deutsche Telekom AG’s T-Mobile, citing the underperformance of that partnership, in favor of No. 1 U.S. carrier Verizon Wireless.