Saturday, May 5, 2007

Don't People Get Tired Of Doubting "Lampert U" Grads?

Another blowout quarter for RadioShack (RSH) and it's Lampert University grad CEO Julian Day. Much has been written that past few weeks about The Shack in anticipation of its result and the sentiment was for of the end of the ride for shares. I will not point out those who wrote these articles but suffice it to say, wrong again folks. Results:

  • Income from operations, $8.4 million ($0.06share) last year to $42.5 million ($0.31/share) this year, significantly ahead of analyst forecasts, as gross margins improved.
  • Revenue was down 14.5% to $992 million.
  • Excluding items, EPS were $0.29; analysts were looking for $0.14/share on revenue of $1.04 billion.
  • Gross margin was 52%, up from 48.3%.
  • Cash flow was $37 million, vs. $310 cash use last year.
  • Shares up 65% this year
  • Retail locations as of March 31 were 5,205, down from 6,835 on Dec. 31 2006.
CEO Julian Day said "We took the opportunity earlier this year to warn that same store sales numbers for the first quarter were likely to be challenging, given the highly promotional nature of our business in the first quarter last year. And so it proved. Nonetheless, against this background we were able to produce financial results which reflected steady improvement in our operating economics,"

RadioShack launched a cost-cutting restructuring in February including closing stores and merchandise adjustments; the company said reductions in selling and administrative costs and staff cuts will result in savings of $30 million a year.

CFO Jim Gooch: "While we recognize and we are focused on our top-line sales challenges, particularly in the wireless business, we will continue to bring a disciplined approach to the management of our business, with the goals of improving profitability, strengthening our balance sheet and driving cash flow."

I could replace the above results and statements with anything Eddie Lampert at Sears Holdings (SHLD) has said or wrote since taking over Sears and Kmart. It should be noted that the "Lampert Way" is working in Canada also as Sears Canada, a 70% owned subsidiary of Sears holdings just reported a fantastic quarter sporting an $11.8 million dollar quarterly profit vs a $17.2 million loss last year.

Sadly though it appears people still just do not get it. They will be focused on "same store sales" and revenues, not an annoying little thing I call profits. Yet, quarter after quarter Day and Lampert continue to deliver for shareholders as share prices continue to climb. While I own shares of Sears and have enjoyed the ride there, I missed the boat on RadioShack. I am hoping for 1 bad quarter, then let the doubters cream the shares and I will sneak in at a bargain price.

Take a look at year charts for both RadioShack and Sears Holdings:

Let the doubters say what they want. A picture is worth a thousand words (dollars in these cases).

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