David Barnes SVP & Chief Financial Officer

Transcription

1 David Barnes SVP & Chief Financial Officer

2 My Background 6 Years at Coors CFO of U.S.Business Treasurer and Financial Planning 6 years at YUM Brands / PepsiCo CFO and VP, Development in China VP Planning for International Restaurants Other experience Strategy Roles at Motorola, Asea Brown Boveri Consultant at Bain and Company

3 My Key Priorities at RadioShack Some Highlights Financial reporting and rigor in our internal controls Clarity and consistency in investor communications Capital structure Financial resource allocation

4 Q Income Statement Summary Sales $1.12 bil. +3% GM% 50.4% (-18 bps) SG&A $451 mil. +9% EPS $0.34 (-17%)

5 Income Statement Guidance FY05 EPS $1.80 to $1.90 Higher total sales Lower GM% Higher operating expenses

6 Free Cash Flow (in millions) E Net Income/ D&A / Other Non Cash Working Capital 209 (136) Cap Ex (190) (229) ( ) Dividends (41) (40) (40) TOTAL* * 2004 total impacted by rounding and 2006 totals reflect range of most likely cases not range of worst to best cases.

7 RadioShack Corporation Sales Composition and GM% Relative to Overall Technical 4% Personal Electronics 14% Modern Home 15% Services 4% Power 6% Other 2% Wireless 34% Accessories 21% Platform Wireless Accessories Power Services Modern Home Technical Personal Elec GM% low high high in-line low high low Based on 2004 sales

8 Wireless: Drivers of Shortfall Core store post-paid sales Tough anniversaries versus 2004 created by: Lapping improved unit economics Lapping improved upgrade offering Incentive bonuses from providers Camera phones Churn to our providers Unfavorable mix of prepaid versus postpaid handsets Early adopters not buying at RadioShack Average selling price pressure

9 Wireless: What s Right Kiosk channel sales Units up in our core stores Residual revenue stream Inventory position Long term trends Data usage Subscriber growth Product technology cycle (e.g. MP3, video)

10 Wireless: What are the Remedies Test sensitivity of prepaid cannibalization High-end handset program in select stores Fashion angle of wireless Clearer POP and customer messaging Higher-end rate plan growth Product technology cycle Next new store format iteration coming this summer

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12 David Johnson SVP & Chief Accounting Officer

13 Areas of Focus to Deliver Financial Results Improve customer experience in core stores Rationalize and improve infrastructure Leverage infrastructure and competencies to develop new revenue streams Attract, retain, develop and reward great people

14 Improve Customer Experience People Assortment Environment

15 Store Standard Operating Procedures Improving Execution and Compliance Codified in 2004 in 26 store test Identified 13 SOPs with biggest impact to results New level of focus with measurement and accountability figured in Examples include: Receiving shipments, pricing, floor replenishment, optimized labor scheduling, opening and closing procedures Benefits include time (cost) savings and higher sales Experimental group sales and sales per labor hour up versus control group Rollout to entire store base completed by fall 2005 Entire store base fully compliant suggests $200 million annualized sales opportunity

16 Improve Customer Experience People Assortment Environment

17 Non-Wireless Drivers: Accessories Shorter term Home entertainment, wireless weakness igo, imaging, computer, and digital music categories selling well Longer term Continued growth in shorter term successful categories above Meaningful contributions from networking, surveillance, and storage

18 Non-Wireless Drivers: Power Shorter term General purpose battery GM% recovery Longer term Continuing general purpose battery strength through ongoing successful 2004 promotion Specialty battery growth, driven in part by cameras, security

19 Non-Wireless Drivers: Modern Home Shorter term High growth in home networking Respectable results in home video (e.g. DVD home and portable) Weakness in phones, home audio Longer term Cinego portable home theater projection unit possible home video catalyst Flat panel products Continued strength in networking

20 Non-Wireless Drivers: Personal Electronics Shorter term Contributions from digital imaging, satellite radio, MP3 (ipod and other) Rationalization of gifts and other lowproductivity SKUs Longer term Sustainable growth in digital imaging

21 Rationalizing SKUs To Drive Productivity & Enhance Competitive Position Working areas of opportunity regarding rate of sale Examples: 2004: audio/video, cassette recorders, portable CD players, clocks, radios 2005 anticipated: gifts, disc jockey/public address, karaoke Rationalization techniques have included: Reducing breadth; increasing depth Fewer stores Dot-com Eliminating SKUs

22 Improve Customer Experience People Assortment Environment

23 New Format Strategy Strategy Roll out concept to defend shareholder value Must build, defend and protect brand Financial Reality ROI of new format trails overall store base ROI New format ROI several hundred basis points above corporate WACC Maintenance cap ex on stores insufficient in previous years; catching up

24 About the New Format in % - 90% remodeling existing stores Remainder to be new and relocated stores Intend to touch: Great locations we ll want for long time Stores that are not deep into lease agreements Unlikely to touch Best performing stores which will be remodeled with 2006 prototype Very low square footage stores

25 Areas of Focus to Deliver Financial Results Improve customer experience in core stores Rationalize and improve infrastructure Leverage infrastructure and competencies to develop new revenue streams Attract, retain, develop and reward great people

26 Sam s Club Kiosks At least $150 mil sales opportunity in 2005 Accretive to earnings 1Q06 or earlier Carriers: Sprint, Cingular, T-Mobile $10 mil to $15 mil in cap ex this year Model same as core store wireless Inventory risk Sales & earnings all RadioShack s Residual generating Sam s receives rent

27 Sprint Branded Kiosks Organic Expansion 200 by YE 2005; 500 by YE 2007 Financial implications Shared Profitable immediately for RadioShack Cannibalization <10%

28 New Square Footage Growth Opportunity Productivity Comparisons* Metric RSH Store Sam s Kiosk Sprint Kiosk Annual revenue $4.8 bill $150 mil $100 mil # of units 5, Revenue per unit $835K $275K $500K Sq. feet per unit 2, Revenue per $342 $3,050 $5,000 square foot * = Approximate full year calculations

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