Expecting RadioShack's Margins and Earnings to Fall, Reiterate Underweight

4/29 - "Excluding a $2.9mn tax credit, adjusted 1Q08 EPS was $0.28 vs. our $0.30 estimate. 1Q was the last quarter RSH will profit from (headquarter) cuts in 2007. We continue to believe 2007 margin expansion was a one-off, and margins and earnings will fall in 2008. We expect EPS to fall to $1.45 in 2008 when RSH anniversaries the cost reductions of 2007."

"Gross profit dollars decreased $32mn or 7% in Q1 on an adjusted basis vs. the reported GAAP decline of $46mn. The decrease was mostly due to aggressive pricing in an increasingly competitive environment and a continued mix shift toward lower margin products. As a result, operating margins decreased for the first time in six quarters. We expect continued margin deterioration throughout 2008."

"We estimate wireless sales were down mid-single digits excluding GPS. AT&T postpaid wireless sales were up, driven by ...