RadioShack Corp. (RSH) has declared third quarter 2010 financial results mostly in line with the Zacks Consensus Estimates. Comparable store sales for the company-operated stores and kiosks (stores and kiosks opened at least a year) grew 6.2% year-over-year. This is a key retail performance indicator, measuring growth from existing sales locations.

GAAP net income in the third quarter 2010 was $46 million or 37 cents per share, compared to a net income of $37.4 million or 30 cents per share in the year-ago quarter. Quarterly EPS of 37 cents beats the Zacks Consensus Estimate of 35 cents. The company’s strategy to put emphasis on innovative mobile and technology products helps RadioShack improving its bottom line.

Quarterly net revenue was $1,051.8 million, up 6.2% year-over-year and also above the Zacks Consensus Estimate of $1,038 million. The year-over-year increase in revenue was primarily due to continued growth in the postpaid wireless segment together with the improvement in non-wireless segments of Accessories and Power.

Quarterly gross profit was $477 million, compared to $471.1 million in the prior-year quarter. Gross margin was 45.4% in the reported quarter compared to 47.6% in the same quarter of the previous year. This was mainly due to adverse sales-mix towards low-margin products.

Quarterly Selling, General, and Administrative expenses were $371.1 million compared to $380.7 million in the year-ago quarter. Operating income in the third quarter 2010 was $85 million, or 8.1% of sales, compared to $69.4 million, or 7.0% of sales in the same quarter of the last year.

During the first nine months of 2010, RadioShack generated $156.8 million of cash from operations compared to a cash generation of $123.6 million in the prior-year period. Free cash flow (cash flow from operations less capital expenditures) in the same period was $110.1 million compared to $61.5 million in the year-ago quarter.

At the end of the third quarter of 2010, RadioShack had $720.3 million of cash & cash equivalent compared to $856.7 million at the end of the prior-year quarter. Total debt, at the end of the same quarter was $677.8 million compared to $687.7 million at the end of the year-ago quarter. At the end of the third quarter 2010, debt-to-capitalization ratio was 0.26 compared to 0.38 at the end of the year-ago quarter.

Segment-wise Results

Quarterly revenue from U.S. RadioShack company-operated store segment was up 6.6% year-over-year to $894.3 million.

Within this segment, Wireless sales were up 25.8% primarily due to higher Sprint Nextel Corp. (S), AT&T (T), and T-Mobile postpaid wireless sales, higher prepaid wireless handset sales, offset by lower GPS sales. Service revenue was up 3% due to higher prepaid wireless airtime. Accessory sales were down 12% due lower sales of digital-to-analog TV converter boxes and related TV antennas.

However, wireless accessories sales increased. Modern Home sales declined 7.2%, Personal Electronics sales declined 12.5%, Power sales increased 3% due to higher contribution from battery chargers, and Technical sales also increased 0.8%.

Kiosks segment revenue increased 1.1% year-over-year to $57.7 million. This was primarily due to initiation of Kiosk roll out in Target Corp. (TGT) Stores, which will be completed by mid-2011.

Revenue from Other services segment increased nearly 6% year-over-year to $99.8 million. RadioShack de Mexico significantly contributed to this segment.

We maintain our long-term Outperform recommendation for RadioShack. Currently it is a short-term Zacks #2 Rank (Buy) stock.

 
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