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RadioShack Eyes Asian Expansion

Zacks Equity Research

In a bid to tap the growing Asian market, RadioShack Corp. (RSH) recently entered into an agreement with Asian retailer Cybermart to open small retail outlets in China, Taiwan, Hong Kong and Macau. The first store is expected to come up in Shanghai next month.

Both RadioShack and Cybermart have a respective 49% and 51% stake in the project and have also invested $2.94 million and $3.06 million. They also have plans to open at least 1,000 stores in the growing Southeast Asian markets with a further capital infusion of $34 million for the venture in the next three years.

Earlier, RadioShack announced a franchising deal with Malaysian conglomerate Berjaya to open 1,000 stores over the next 10 years in several South-East Asian countries including Vietnam, Malaysia and Thailand. Such expansion plans in the Asian markets will help the company to improve its top-line growth going forward.

Stiff competition from Best Buy Co., Inc. (BBY) and Wal-Mart Stores, Inc. (WMT) along with a sequential decline in revenue, earnings and gross margin remain major headwinds for the company in the forthcoming quarters. Moreover, a shift toward online purchasing and lower demand for computers and cameras, which generate comparatively higher profit margins than smartphones and tablets, will hurt profitability going forward. We, thus maintain our long-term Underperform recommendation for RadioShack.

Currently, Radioshack has a Zacks #3 Rank, implying a short-term Hold rating on the stock.

Headquartered in Fort Worth, Texas, RadioShack Corp. is one of the leading consumer electronics specialty retailers in the U.S., offering innovative products and services from leading brands.

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