Pre-tax profits (with inventory and capital consumption adjustments) declined at a 9.2% annual rate in Q2 and are down 7% since last year, the worst since 2001.

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If they are, that may put pressure on next year's profits as the company works off inventory by cutting prices.

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More inventory means higher financing costs, which mean worse profits.

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More inventory means higher financing costs, which means lower profits.

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But a RadioShack spokeswoman says the company is sticking to its plan to close or relocate some stores, and to replace cleared out inventory with higher-margin goods aimed at increasing profits per square foot.

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The company was able to book record accounting profits in FY 2007 (the year ended March 31, 2008), but during the year days inventory increased to 48 days.

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Even those are arguably good signs for future profits, as manufacturers and retailers tuck in extra earnings for at least a while before adding employees and inventory to their overhead.

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