Gome shares tumble after news it would take stake in Huishang Bank
Retailer says investment part of 'omni-channel' strategy to better compete with online sellers
Shares of Gome Electrical Appliances Holding fell 6.56 per cent yesterday after the retailer said it planned to buy a 5.7 per cent stake in Hefei-based Huishang Bank.
Pending approval from regulators, Gome would subscribe to 632.5 million new H shares of the bank for HK$2.4 billion, it said in a filing with the stock exchange on Tuesday.
Gome said it was part of its "open omni-channel retailer" strategy and would allow it to become a rounded and efficient retail chain.
"It will help elevate our financial services payment, enabling us to see gender, age, location and conduct detailed analysis for deep customer relationship management," chief financial officer Fang Wei said yesterday.
"No matter if it is Alibaba or JD, can they really achieve a true omni-channel strategy? In this competition, whoever can be first in omni-channel is who will be No1 [overall]. We believe that the future customer is undoubtedly an omni-channel customer.
"I can order online but sometimes I want to take my partner or kid out to shop. I may want to experience the service. I can choose different methods to shop."
Gome, which started out as a bricks-and-mortar electronics chain, embarked on its omni-channel retailer plan last year and has been working on overhauling its capacity in procurement, logistics and information technology to meet online consumer demand.
However, investors seemed to baulk at the deal, sending Gome's share price down from HK$1.22 to HK$1.14 at yesterday's close.
"We think it is irrelevant to the core business and it doesn't need an equity investment so that's most likely why the market perceives it so negatively," one analyst said.
Gome plans to buy Huishang shares at HK$3.80 each, a 12.4 per cent premium to the stock's close on Tuesday.
The transaction is viewed as a move to challenge Alibaba's dominance in online shopping and its in-house payment system Alipay. The e-commerce titan said sales for Singles' Day on Tuesday soared to US$9.3 billion, up 60.3 per cent year on year.
"We think such a working partnership could be achievable without committing an equity investment," Barclays said in a note yesterday.
Gome will report third-quarter results later this month.