RadioShack in ‘Constructive’ Talks to Resolve T-Mobile Dispute

RadioShack is in “constructive” talks with T-Mobile to resolve a dispute, having extended an April 4 deadline for “curing” an alleged breach of contract, analysts said. RadioShack executives weren’t available for comment. But in an earnings release Monday, the retailer said it expects a settlement.

RadioShack, which has sold T-Mobile cellular service since August 2009, said in February the carrier had “materially breached” a contract, but declined to release details. RadioShack, which also offers AT&T and Sprint service, has been at odds with carriers before (CED Oct 26 p1). RadioShack’s Q1 gross margin declined to 44.8 percent from 47.2 percent a year earlier due, in part, to the “underperformance” of T-Mobile’s post-paid cellular business, the retailer said. RadioShack’s Q1 mobility sales rose 11 percent, the company said. The mobility segment includes cellphones, netbooks, tablets, e-readers and prepaid wireless airtime.

Meanwhile, RadioShack said it had Target Mobile cellular sales kiosks in 887 Target stores Q1, up from 104 a year earlier. Its goal is having kiosks in 1,450 Target locations by mid-year. RadioShack had 417 kiosks in Sam’s Club stores March 31, but will transfer those to Sam’s Club ownership by June 30, RadioShack said. RadioShack’s company-operated stores and kiosks posted a 0.6 percent decline in Q1 same-store sales.

RadioShack’s Q1 net income narrowed to $35.1 million from $50.1 million a year earlier on a $4.1 million loss redeeming 7.37 percent senior notes that were to mature on May 15, the company said. Sales were essentially flat at $1.06 billion compared with $1.04 billion. RadioShack stores’ operating income shrank to $152 million from $163.6 million as sales fell to $895.2 million from $899.7 million a year earlier. Kiosk operating income dropped to $2 million from $8.5 million despite a rise in revenue to $86.1 million from $57.2 million. RadioShack’s “other” category, which includes 206 stores in Mexico and Internet-based sales, posted a decline in operating income to $5.6 million from $10 million as sales slipped to $82 million from $84.8 million. RadioShack’s CE revenue declined 14.8 percent as a downturn in TVs, digital audio players and netbooks offset gains in notebook PCs, the company said. RadioShack’s new “signature” category, which includes GPS, scanners, batteries and digital converter boxes, posted a 6.3 percent revenue decline.