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  • Dec 18, 2014
  • Updated: 8:11pm
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Gome pushing online sales as interim profit soars

Mainland electrical appliance retailer wants to lift internet share to 20 per cent as profit soars

PUBLISHED : Monday, 25 August, 2014, 12:39pm
UPDATED : Tuesday, 26 August, 2014, 12:10am

Gome Electrical Appliances Holding expects online sales to grow to 20 per cent of its total business by the end of the year as it announced first-half profit that surged 115 per cent to 693 million yuan (HK$871 million).

Online transactions account for 10 per cent of the mainland retailer's sales, which reached 29.12 billion yuan in the first six months, up 7.41 per cent from the same period last year.

Same-store sales grew 7.25 per cent.

Consolidated gross profit margin rose 0.49 percentage point to 18.83 per cent, helped by lower costs from operating stores in supermarkets and department stores and increased online retailing.

A dividend of 2.1 HK cents per share was declared.

"At the start of the year, we said we aimed for 5 per cent same-store sales growth, and we achieved that. We are full of confidence for the second half of the year," Gome president Wang Junzhou said.

The company has been diversifying its product mix from electrical appliances to include baby products, cosmetics and health care products and pouring investment into its online platform.

Besides launching a website through which orders can be placed for delivery in 178 cities, Gome has designed a mobile software application and installed Wi-fi at all its 1,605 stores to provide an integrated online-to-offline shopping experience.

On August 13, Caixin Media reported leaked emails from the company's executives showed the firm was intent on overtaking rivals Suning and JD.com

Wang wrote to employees that he wanted Gome to beat Suning "in an all-round way".

"What our rivals did in five years, we should aim for in one, and what they did in three years, we should aim for in six months," Wang wrote.

E-commerce head Mou Guixian said in an email that Gome must beat JD's prices at all costs.

"All departments must ensure prices lower than JD's, or the directors can pack up and leave," the email said.

A Jefferies report this month said many investors were interested in the progress of Gome's integration and "its latest strategy of close coordination with supermarkets and suppliers".

Gome has tie-ups with supermarket chains across the mainland, including Wumart, Lianhua and MoPark, a strategy Wang said it would be expanding in the second half with various leading supermarkets and department stores.

"Most believe that compared with Suning, Gome bears more investment value, but it is too early to judge whether it will win out over JD.com in the long term," Jefferies said.

Shares of Gome rose 3.03 per cent yesterday to close at HK$1.36.

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