RadioShack Corp.'s troubles deepened Friday, as the electronics retailer announced it would close up to 10 percent of its 7,000 stores following a report of weak fourth-quarter earnings.
At an investment conference at RadioShack's Fort Worth, Texas, headquarters, where the news was released, president and chief executive David Edmondson vowed to reverse the company's fortunes with an 18-month turnaround plan to slash costs and replace slow-moving goods with hot sellers.
"What we now realize is that we must move in a more bold, aggressive manner and with a greater degree of urgency and speed," he told investors and analysts at the annual event.
But investors dumped the stock Friday. The share price dropped by $1.67 to $19.08, an 8 percent plunge.
Wall Street analysts sounded dire warnings about RadioShack's future.
"RadioShack's results, and more importantly the guidance for next year on cash flow, point to a company in a virtual state of collapse," wrote Gary Balter, an analyst with Credit Suisse Group, in a report Friday.
For the quarter, RadioShack's net income fell 62 percent to $49.5 million, or 36 cents per share, from $130.9 million, or 81 cents per share, in the year-earlier period. Sales rose 4.9 percent to $1.67 billion.
For the full year, net income fell to $265.3 million, or $1.78 per share, down from $337.2 million, or $2.08 per share, in 2004. Sales rose 5 percent to $5.08 billion.
One culprit behind the fall in fourth-quarter profits was a $62 million inventory write-down. RadioShack also attributed the decline to sluggish sales of profitable items such as wireless-related products.
"The most profitable categories of the business saw a sales decline in the fourth quarter," Edmondson said. "We saw very significant low-margin category growth, but frankly the dollars were simply not large enough in terms of gross profit dollars to offset the other things that were happening in the business."
RadioShack plans to close 400 to 700 stores at a cost of as much as $90 million.
Top executives will be meeting with regional managers in the coming weeks to decide which stores to close, said executive vice president and chief operating officer Claire Babrowski.
In addition, RadioShack said it would also close two distribution centers, one in Mississippi and one in South Carolina.
The disappointing financial results capped a week in which RadioShack's board of directors said it would hire an independent counsel to investigate Edmondson's portrayal of his academic credentials.
On Wednesday, Edmondson admitted that his resume contained "erroneous information" after a report by The Fort Worth Star-Telegram questioned whether he had received a college degree.
Edmondson has maintained that he received a theology degree from an unaccredited California institution called Pacific Coast Baptist Bible College, which later relocated to Oklahoma and renamed itself Heartland Baptist Bible College.
Edmondson apologized in a statement Wednesday evening and again during the session Friday.
Also, Edmondson is awaiting trial in April on a driving while intoxicated charge.
Some analysts said firing Edmondson over the misstatements on his resume may be excessive, and could hurt RadioShack's turnaround efforts.
"You've got to let the punishment fit the crime," said John Challenger, chief executive of Challenger, Gray & Christmas Inc., a Chicago-based outplacement firm. "In the overall scheme of things, this is probably like a misdemeanor."