Electronics retailer RadioShack
Day's program for the company, which includes strict inventory management and store rationalization, yielded quarterly earnings of $84.5 million, or $0.62 per diluted share, versus $51.2 million, or $0.38 per share, in the year-ago quarter. That earnings improvement occurred despite a 7.7% decline in same-store sales. Factoring out an income statement reclassification involving the sale of prepaid wireless airtime, the same-store sales decline would have been 5.5%.
With Day's cost-cutting coming home to roost, RadioShack's operating income for the quarter increased 77% to $145.8 million. The company's selling, general, and administrative expenses were cut by $89.5 million year over year, to $482.8 million. Thanks in part to those cuts, the company's gross margin increased 450 basis points year over year, to 45.6%.
Day, whose prior cost-cutting stops have included troubled retailers Safeway
In announcing the company's results, Day said: "We have made great progress in some areas, while other areas such as the wireless business remain a challenge. We have strengthened our balance sheet and cash position, while enhancing profitability of the company. This gives us greater flexibility as we develop our long-term strategy."
Cash and equivalents at RadioShack increased to $472 million at quarter's end, more than doubling from $224 million year over year. Conversely, long-term debt declined to $345.8 million, compared to $494.9 million in the prior-year period.
Despite RadioShack's substantially improved margins and more robust balance sheet, I'd urge Fools not to assume that the company has emerged from the woods just yet. The company still competes head-to-head with larger electronics retailers such as Best Buy
That said, Julian Day and his team have clearly made an excellent start in turning the company around, and I'd encourage Fools to keep an eye on its progress.
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