Profit falls 88pc as Gome's sales slide
Gome Electrical Appliances, the mainland's second-largest home appliance retailer, saw profits slump nearly 90 per cent in the first three months of this year because of sliding sales and losses from its e-commerce business. Analysts expect its weak performance to continue this year in a cooling appliance market.
The company said in a filing yesterday that sales revenue for the three months to March dropped 28.6 per cent compared to the same quarter in 2011, to 9.76 billion yuan (HK$12 billion).
Attributed profit plunged 88 per cent to 67 million yuan, down from 552 million yuan for the same period last year.
Felix Kwok, an analyst at Core Pacific-Yamaichi International, said: 'The results are in line with our expectations. The appliance market on the mainland has lost growth momentum this year.' Gome's shares rose 2.3 per cent to HK$1.32 before the release of the quarterly results yesterday. The shares have fallen 33 per cent since the beginning of the year, while the benchmark Hang Seng Index has remained flat.
The Beijing-based company issued a profit warning on April 30.
The home appliance market on the mainland has slowed as property sales shrink under tight credit control and after the government's subsidy scheme for appliance buyers expired in some key cities in January.
Kwok said: 'Home appliance retailers have been trying hard to boost sales in the second quarter by doing more advertising and cutting product prices. But this may further hurt profit margins.'
Gome, which operates more than 1,000 shops, said in the filing that its gross profit margin rose 1.34 percentage points to 19.95 per cent.
The Ministry of Finance said on Thursday that the central government would earmark 22.5 billion yuan this year to boost domestic spending on energy-saving appliances including television sets, air conditioners, refrigerators, washers and water heaters.
Industry operators said the government would offer subsidies equivalent to 10 per cent of the retail price to consumers who purchased certain types of energy-saving appliances.