Gome maintains steady expansion but profit falls

PUBLISHED : Wednesday, 28 March, 2012, 12:00am
UPDATED : Friday, 08 May, 2015, 9:12am


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Gome Electrical Appliances, the second-largest home appliance retailer on the mainland, plans to maintain its pace of expansion by opening about 260 shops this year after reporting a 6.2 decline in net profit for last year.

Gome yesterday posted earnings of 1.84 billion yuan (HK$2.27 billion), compared with 1.96 billion yuan in the previous year - more than 20 per cent below the average analyst average forecast of 2.4 billion yuan, according to Reuters.

Revenue grew 17.5 per cent to 59.82 billion yuan while sales cost increased 16 per cent.

Chief financial officer Victor Fang said the company would open 250 to 260 shops this year, with half of them in second- and third-tier cities.

At the end of last year, the firm had 1,079 stores across the country, an increase of 253 from the previous year.

Gome shares rose 2.97 per cent yesterday to HK$2.08 ahead of its earnings report, beating a 1.83 per cent gain in the benchmark Hang Seng Index.

The company said a more than 70 per cent jump in capital expenditure had dragged down net profit last year as it invested more in new shops, remodelling existing stores and buying IT equipment.

Store sales improved 3.06 per cent, while the gross profit margin increased by 1 percentage point to 12.63 per cent.

This year, 'the group will adopt an operational strategy which emphasises on both store network expansion and same-store growth', said chairman Zhang Dazhong.

Zhang also said the company would start to 'position e-commerce as the key area of development'.

Gome operates two online shopping platforms - and It said this week it would sell its products on, one of the largest business-to-customer shopping portals in the country.

Rival Suning Appliance, which operates more than 1,700 home appliance shops, has said its revenue for last year was 93.8 billion yuan, about 1.6 times that of Gome.

Its net profit, which stood at 4.8 billion yuan, was nearly triple that of Gome.

Gome did not recommend a final dividend, saying it wants to preserve capital for future funding needs. It paid 2.7 HK cents per share in the first half.