Gome, Suning buying sites to hold locations
The mainland's two biggest consumer electronics retailers are spending billions of yuan to buy store properties to make sure they can continue operations in prime locations amid rising rents.
Gome Electrical Appliances Holding, the mainland's biggest electronics retailer with 654 stores, has purchased 20 recently to limit the impact of rising rents, according to president Chen Xiao. Each store cost 'between tens of million yuan and 100 million yuan', Mr Chen said.
Gome, controlled by the mainland's richest man Wong Kwong-yu, will continue to buy store properties when opportunities arise, according to Mr Chen.
Suning Appliance, Gome's closest rival, is raising at least 2.4 billion yuan through a share placement to fund the opening of 250 new stores and the purchase of store properties, including its flagship store in Shanghai's Pudong district, according to president Sun Weimin.
Shares of Shenzhen-listed Suning, which were suspended from trading last Monday, jumped 10 per cent on Tuesday on news that it had obtained regulatory approval to raise funds through a private share placement.
The retailer needed to buy, for the first time, store properties because some landlords refused to rent out the desired locations, Mr Sun said. He did not indicate how many stores would be purchased.
Mr Sun said the exact fundraising needs had yet to be determined.
The property housing the Shanghai store, which will open soon, will cost Suning 582 million yuan. Suning is also opening more stores to promote its brand. The company added 71 stores in the first half of this year, bringing its total to 413 outlets with 1.63 million square metres.
Mr Sun has said his company aimed to operate a chain of 1,500 stores within three years.
The new stores helped to drive a 61 per cent increase in sales in the first half to 19 billion yuan, helping to push net profit for the period up 110 per cent to 578 million yuan. Gome is focusing on boosting same-store sales, according to the management.
Gome's underlying first-half profit surged 178 per cent as it benefited from the acquisition of a rival chain, China Paradise Electronics Retail, last year for HK$5.27 billion.
Sales rose 73.8 per cent to 21.15 billion yuan. Same-store sales grew 0.59 per cent in the six months to June, compared with a drop of 1.24 per cent posted in the first half of last year.
Excluding a valuation loss of 411 million yuan on the company's convertible bonds, profit was 806 million yuan, compared with 290 million yuan a year earlier. Net income rose 14.5 per cent to 395 million yuan.
Suning is tapping the market to fund its store expansion plans
The amount Shenzhen-listed Suning is seeking to raise in a share placement 2.4b