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Gome H1 profit declines 49.6%

By Yu Tianyu and Ding Qingfen (China Daily)
Updated: 2009-08-22 08:29

The interim business performance, however, improved by sales per square meter, a key index to show the quality of electronics retailers, compared with the last quarter of 2008.

Both corporate executives and industrial experts said the prospects of the company will continue to improve further, as it shifts it focus from store expansion to increasing profits by optimizing sales network, better products and service quality and tapping the second- and third-tier cities.

Gome said sales revenue reached 20.5 billion yuan ($)in the first half, compared with 24.9 billion yuan in the same period in 2008. Net profit for the period stood at 580 million yuan compared with 1.15 billion yuan a year back.

During the first half of 2009, the company closed 100-odd stores nationwide, and opened 30 new stores.

Suning, Gome's archrival and the second largest player, in late July said its net profit may go up by 14.7 percent to 1.26 billion yuan on a 6.2 percent rise in sales to 26.692 billion yuan.

Gome's interim business was still lower than the estimate of 733.3 million yuan by three analysts in a Bloomberg survey.

Chen Xiao, chairman of Gome, said the worst period has passed, as the drop in same-store sales has eased to 8.28 percent during the second quarter of this year from a high of 36 percent in the last quarter of 2008. Sales per square meter climbed to 3,183 and 3,658 yuan in the first two quarters, from 3,100 yuan in the last quarter of 2008.

After seven-month trading suspension, Gome in late June announced plans to raise $431 million to finance new stores, revamp existing outlets and repay debt.

"First-half sales slowed due to lack of funding," said Ashley Cheung, analyst, BOCI Research Ltd, according to Bloomberg.

"Gome's earnings will improve quarter by quarter as they revamp their stores with the new capital," Cheung said.

"The company is committed to raising sales and profits per store, by revamping stores, and improving services. We are also exploring the second- and third-tier cities," said Chen.

Gome fell 2.6 percent yesterday to HK$2.24 in Hong Kong stock exchange, before the interim financial report was announced.