Look for more investors to come a knockin' for RadioShack shares after the consumer electronics chain predicted its business will keep on rockin' the retail world in 2007.
RadioShack announced its fourth quarter profit was up 64 percent as the company cut costs even as total revenues and same-store performance fell. Same-store sales were adversely affected by a poor performance in the wireless service portion of the business.
Cost reductions were largely the result of RadioShack closing hundreds of locations and slashing the number of workers at its headquarters in Fort Worth, Texas.
William Baldwin, an analyst with Baldwin Anthony Securities, told The Associated Press, "They've done a real good job of getting costs down" but what they still need to address is "what they're going to do to generate top-line growth."
"That's going to be the tall order for RadioShack," said Mr. Baldwin.
The wireless area has been a major concern for the chain, which faces competition on all fronts. Last year, RadioShack switched from selling Verizon Wireless service to selling Cingular instead.
Julian Day, chairman and CEO of RadioShack, acknowledged that the company needs to improve in the wireless portion of the business, but expressed confidence in the approach being taken with Cingular that, he predicted, would lead to "a relatively slow but steady ramp-up."
While wireless has been off, RadioShack has found success in selling other items such as MP3 players and accessories.
Discussion Questions: RadioShack has shown success in reducing costs but what must it do to grow top line results? Do you see areas where it could continue to reduce costs through supply chain or other efficiencies that would not result in revenue reductions?