China Economic Review
Charting China’s changing economic terrain · Since 1990
Gome nose-dives
August 23, 2009
Gome Electrical Appliances, whose billionaire founder is being detained for alleged share manipulation, said first-half profit fell 50%. Probable cause was the avoidance of big ticket items by cautious Chinese consumers.Gome said in a statement to Hong Kong’s stock exchange that net income in the six months to June fell to RMB580 million ($85 million) from RMB1.15 billion a year earlier. That is lower than the estimates of several analysts but the market seems to have got used to the fact that analysts generally getting it wrong.
Gome, China’s second-biggest electronics retailer by market value, in June announced plans to raise $431 million to help finance new stores, revamp existing outlets and pay debt. The company resumed trading in Hong Kong June 23 following a seven-month suspension after its largest shareholder, Huang Guangyu, was detained for “economic crimes”. It is said he no longer has anything to do with the company.
Ashley Cheung, an analyst at BOCI Research Ltd. in Hong Kong, said before the earnings announcement, “First-half sales slowed comparatively because the lack of funding to improve operations. Gome’s earnings will improve quarter by quarter as they revamp their stores with the new capital injected.”
The retailer, with 859 stores at the end of 2008, will focus on revamping existing outlets this year to boost profitability.
Bloomberg reports it will be in competition with Suning Appliance to tap rising demand for home appliances and electronics products in China.