Radio Shack 2003 Annual Report Download - page 24

RADIOSHACK 2003 Annual Report
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Sales in the computer department, which includes desktop,
laptop, handheld computers and related accessories, in
addition to digital cameras and home networking products,
decreased slightly in dollars and decreased as a percent-
age of total sales to 9.8% in 2003 compared to 10.0% in
2002.These decreases were primarily the result of a
planned decrease in sales of desktop CPUs and monitors,
substantially offset by increased sales of digital cameras,
camcorders and related accessories, as well as home net-
working products and computer accessories.We expect
that sales in the computer department will increase in 2004,
compared to 2003.
Sales in the power and technical department increased
slightly in dollars and remained at 13.6% of total sales for
both 2003 and 2002.This sales increase was primarily due
to increased sales of general and special purpose batteries
and power inverters, but was partially offset by decreased
sales of bulk and packaged wire, as well as decreases for
technical parts and tools.We anticipate that sales will
increase in this department in 2004, compared to 2003.
Sales in the personal electronics, toys and personal audio
department increased slightly in dollars and remained
at 12.6% of total sales for both 2003 and 2002.The increase
in this department was due primarily to micro radio-
controlled cars and related accessories not available in the
first nine months of 2002 and, to a lesser extent, sales of
wellness products sold under our LifeWise™ brand. Also,
increased sales of personal audio products had a positive
impact for 2003, resulting from increases in national security
threats and the conflict in Iraq.These increases were sub-
stantially offset by decreased sales of personal electronics,
excluding wellness products, and educational toys.We
believe sales in this department will be approximately the
same for 2004, compared to 2003.
Gross Profit
Gross profit for 2003 was $2,315.7 million or 49.8% of net
sales and operating revenues,compared with $2,238.3 million
or 48.9% of net sales and operating revenues in 2002, result-
ing in a 3.5% increase in gross profit and a 90 basis point
increase in our gross profit percentage.These increases over
the prior year were primarily due to the following:
We experienced over $40.0 million in benefit from our
supply chain vendor and strategic pricing initiatives. In
connection with these initiatives, we utilized on line reverse
auctions, realized more favorable terms from vendors,
and retail support operations to underperform, compared
to the 2004 sales performance of the Company as a whole.
Sales in the wireless communication department, which
is made up of wireless handsets (including related services),
accessories, and wireless services such as prepaid airtime
and bill payments, increased 14.3% in dollars and increased
as a percentage of total sales to 34.9% in 2003 compared
to 31.0% in 2002.This sales increase was due primarily to an
increase in the average selling price of our wireless hand-
sets, resulting from our continued emphasis on national
carrier service and product offerings with desirable product
features and content, such as color screens and cameras.
In addition, sales increases in both wireless services and
accessories contributed to this increase.We believe our
plans featuring new technologies, sales promotions, and
carrier compensation models will result in wireless sales
increases for 2004.
Sales in the wired communication department, which
includes residential telephones, answering machines and
other related telephony products, decreased 9.5% in
dollars and decreased as a percentage of total sales to 7.4%
in 2003, compared to 8.3% in 2002.These decreases were
primarily the result of a decline in 2003 sales of the
“Telezapper,” a call screening product, although they were
partially offset by sales increases of cordless phones.We
anticipate that sales in this department will be down for
2004, compared to 2003, as customers continue to migrate
to more advanced technologies.
Sales in the radio communication department decreased
4.8% in dollars and decreased slightly as a percentage of
total sales to 2.5% in 2003, compared to 2.6% in 2002.
The decrease in this department was primarily the result of
a decrease in Family Radio Service (“FRS”), two-way radio
sales, scanner sales and communication accessories, partially
offset by a sales increase in GPS devices.We believe sales
in this department will be approximately the same for
2004, compared to 2003.
Sales in the home entertainment department, which
consists of all home audio and video end-products and
accessories, including DTH hardware and installation,
decreased 13.7% in dollars and decreased as a percentage
of total sales to 15.9% in 2003 compared to 18.7% in 2002.
These decreases were primarily attributable to a decline in
sales of satellite dishes and their related installation serv-
ices, as well as a decrease in home entertainment accessory
sales.The sales decrease was partially offset by increased
sales of DVD players and televisions.We anticipate that
sales in the home entertainment department will be down
for 2004, compared to 2003.