RadioShack blames T-Mobile for poor first quarter

Fort Worth-based RadioShack Corp. (RSH) reported a 30% decline in first-quarter profits this week and points at its agreement with T-Mobile USA Inc. (DTEGY) as the culprit. The chain said it has lowered expectations for earnings to $1.60 to $1.80 per share, a decrease from the previous top projection of $1.90 per share.
RadioShack reported a profit of $35.1 million for the first quarter, compared with a profit of $50.1 million for the Q1 2010.
The consumer electronics store says it will cut back on projected use of T-Mobile in its stores, telling the wireless service provider in February that it had “materially breached” its contract and the two needed to renegotiate. While sales of televisions, digital music players and netbooks also declined, RadioShack blamed its 0.6% decline in same-store sales to postpaid wireless sales from T-Mobile.
RadioShack cited strong sales of AT&T Mobility (T) and Sprint Nextel Corp. (S) contracts in the quarter ending March 31, with an additional increase in prepaid wireless phone, headphone and laptop sales. Total sales increased 2.1% for the first quarter to $1.06 billion from $1.04 billion one year ago. RadioShack credits the positive side of their sales to the rollout of mobile departments in Target stores, where it operates at 887 stores and plans to be in a total of 1,450 stores by July.
RadioShack is also in the tablet business, deciding to add the Blackberry Playbook, Motorola Xoom, and the Velocity Micro T103 Cruz in addition to its current stock of the iPad.
There are 4,675 RadioShack stores in the United States and Mexico and more than 1,300 wireless phone kiosks, including those in the Target mobile business and another 1,175 are dealer-operated stores.