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RadioShack, the third largest US consumer electronics store, saw its shares fall over 5 per cent in New York on Friday, after it said it was “unlikely” to achieve a 2005 earnings forecast issued in October of $2.14 to $2.24 per diluted share.
The company raised its guidance from $1.80 to $1.90 in October. Most analysts have continued to forecast earnings around $1.80.
The company blamed weaker than expected sales and profits from its important wireless business, including the expected impact of the decision to end its vendor relationship with Verizon in favour of Cingular, with effect from January 1.
It said sales or higher margin batteries and accessories had also been weak, in part due to lower sales or wireless units.
It also said sales growth up to the end of November had been driven by higher priced, lower margin products such as MP3 players and digital imaging.
David Edmondson, chief executive officer, said the company had “made significant progress in executing our improvement initiatives this year”.
“Yet it’s clear that we need to move much faster, more aggressively and with more urgency to enhance company performance. The management team is working on ways to transform the core RadioShack business and improve profitability.”
Roughly one third of RadioShack’s revenues comes from wireless sales at its network of over 7,500 stores and kiosks. But it is facing growing competition from direct sales from stores opened by the wireless companies themselves.
RadioShack’s shares were trading at $22.44 during the late morning in New York, down 5.4 per cent.
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