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RadioShack Corp. (RSH) plans to spread its Southeast Asia footprint with its largest franchise expansion to date, becoming the latest company to turn its sights abroad for growth as U.S. operations struggle.
The consumer-electronics retailer said Thursday it reached a pact with Malaysian retail group Berjaya Retail Berhad to extend RadioShack franchise locations to 10 countries in Southeast Asia. It expects the group to open at least 1,000 sites within the first 10 years and widen RadioShack's presence to 39 countries.
Such an expansion would significantly increase RadioShack's international footprint. It currently has about 515 international stores, split between its company-operated Mexico locations and franchise stores in a couple dozen other countries.
By comparison, it operates 4,476 U.S. stores.
Berjaya Retail Berhad also operates the 7-Eleven and Singer brands that have a combined network of 2,000 stores in the region. It is owned by the major shareholder of Berjaya Corp. (3395.KU).
RadioShack has said in the past that international expansion represents a key strategic opportunity, as growth rates and the room to implement operating improvements are greater outside the U.S. than in it.
Martin B. Amschler, RadioShack's vice president of franchise, said in a release Thursday that the company is continuing to "explore and cultivate relationships with qualified candidates to introduce" more RadioShack franchises in other regions of the world.
Other U.S. companies with atrophying U.S. business have turned to Asia and other emerging markets for growth. Fast-food company Yum! Brands Inc. (YUM), for example, derives the largest chunk of its revenue now from China, where its Pizza Hut and KFC chains continue to return rapid sales and profit growth.
RadioShack's results, which rely heavily on its U.S. performance, have weakened recently as its transformation from a chain of all-purpose tech stores to a retailer primarily of mobile devices has backfired. Though the transition helped the company at first, the narrower focus has weighed on RadioShack's bottom line in recent quarters because of increasing competition from online and discount stores and detrimental moves by smartphone carriers.
In the latest quarter, profit slumped 79% because of changes in how Sprint Nextel Corp. (S) deals with customers, which stunted RadioShack phone activations. The company warned that discounting and the relatively low margins it earns from smartphones would crop up as hindrances again.
RadioShack shares were up 4 cents at $6.52 in recent trading Thursday afternoon. The stock has slumped 53% in the last year.
-By Joan E. Solsman, Dow Jones Newswires; 212-416-2291; email@example.com