Electrical-appliance giant to open 80 new outlets on rising consumer power

GOME Electrical Appliances Holding Ltd - one of the largest privately-owned, electrical-appliance retailers on the mainland - is determined to stake out its claim as an industry leader, with plans to open 80 new stores this year while strengthening its online shopping platform to prop up sales.

The focus will be on third- and fourth-tier mainland cities, where consumer spending power is on the rise.

Victor Fang Wei, chief financial officer of GOME, said in Hong Kong on Friday the company has already opened 20 new stores in the first quarter of this year, including 14 in third- and fourth-tier cities.

By the end of 2014, the company had a total of 1,132 outlets in operation.

According to Fang, GOME's current market share in third- and fourth-tier cities is about 3 percent, compared with 17 percent it has in first- and second-tier cities, where the potential for future growth remains huge.

The company aims to open 80 to 100 new stores annually - most of them in third- and fourth-tier cities. At the same time, GOME will maintain high-speed growth in its e-commerce businesses.

In the first quarter of this year, the retailer's online shopping platform Gome.com.cn posted 107-percent growth in gross merchandise volume (GMV) to 2.2 billion yuan ($350 million), compared with a year ago.

The company expects its GMV to continue growing at a pace of above 100 percent in the next three years, Fang said.

He projected that, for 2015, the total GMV of Gome.com.cn will reach 15 billion yuan, half of which will be from product sales. Fang said in the past few years, GOME has set up warehouses in smaller mainland cities to help the group develop e-commerce in the rural areas, amid a high smartphone penetration rate.

In the first three months of this year, GOME recorded revenue of 14.5 billion yuan - up 8.28 percent from the same period a year ago. Net profit came to 293 million yuan - an increase of 9.33 percent, compared with 268 million yuan for the corresponding period last year.

GOME's gross profit margin stood at 18.2 percent in the first quarter - the same as that of the first quarter in 2014.

In a research report on Friday, international financial services group Credit Suisse said GOME's net profit in the first quarter beat market expectations. Its same-store sales growth during the period was 4.2 percent, which is higher than its full-year growth of 3 percent.

For the past two years, GOME's same-store sales growth was about 6.2 percent, which is much higher than 0.8-percent same-store sales growth of its competitor Suning Appliance Co Ltd, according to the report.

Credit Suisse has raised GOME's share price target to HK$2.7 from HK$1.35, and maintained its "outperform" investment rating.

GOME's share price picked up 1.4 percent to close at HK$2.18 in Hong Kong on Friday.

sophiehe@chinadailyhk.com

Mainland electrical-appliance retailer GOME has set up warehouses in smaller mainland cities to help the group develop e-commerce in the rural areas, amid a high smartphone penetration rate. Asia News Photo

(HK Edition 05/23/2015 page6)