Gome sees net loss widen amid slowing growth on mainland
Warning comes as sales revenue suffers significant fall and expenses increase
Gome Electrical Appliances yesterday warned that the company was expected to record a net loss of up to 700 million yuan (HK$867 million) for the nine months to September.
The second-largest home appliances chain on the mainland said it had recorded a net loss of 501 million yuan in the first half. The company forecast the loss would reach 100 million yuan to 200 million yuan in the third quarter, bringing the net loss for the nine months to September to between 600 million yuan and 700 million yuan.
The loss was due to the significant fall in Gome's sales revenue and a loss incurred by its e-commerce business. An increase in staff and rental expenses were also blamed for the result.
Gome said in the announcement that the slowdown in the mainland's economic growth and the end of stimulus policies had led to poor consumer sentiment and confidence.
The electrical appliances industry suffered a setback in the first half of this year as the central government ended a number of schemes to subsidise consumer purchases of home appliances. The fact that the company's e-commerce business was still in the initial investment stage also contributed to the poor result.
"This year has been difficult for both the home appliances industry and Gome as the decline was felt at all levels across the entire industry," chairman Zhang Dazhong said in a press release yesterday.
But Gome said the decline in sales revenue for the third quarter had shown an improvement compared with a year ago. Profitability in the same period was also better than the second quarter.
The company said it would improve its business by expanding store network in second-tier markets, accelerating integration of its e-commerce operations with back-end resources. Gome said it would also improve same-store sales growth in first-tier markets by enhancing product competitiveness.
