Gome Electric issues profit warning

Electrical appliance retailer Gome Retail has issued a profit warning despite a strong year, the result of impairments and financial costs.

During the 12 months to the end of December the group launched its “Home Living” strategy, a blueprint aimed at helping it evolve into a one-stop provider, going beyond the traditional home-appliance retailer.

Based on a preliminary review of the latest management accounts, the group’s total gross merchandise volume (GMV) both online and offline is expected to grow by more than 20 per cent year on year. Sales from the comparable stores of the group are expected to increase by more than 2 per cent with the consolidated gross profit margin expected to exceed 18 per cent.

With the e-commerce business entering the online/offline integration stage, its direct sales revenue decreased by about 7 per cent. However, the GMV from the e-commerce business is expected to more than double.

With more than 200 million members in its loyalty program, the group is speeding up expansion of its services while expanding into China’s fourth- and fifth-tier cities.

Despite the strong trading, Gome impaired the goodwill for some of its under-performing business units and long-term assets related to the e-commerce business. That, together with rising financial costs related to the increased debts, is likely to produce a loss attributable to the owners of the company during the year of between RMB300 million (US$47.2 million) and RMB500 million, compared to a net profit 12 months earlier.

The financial data also covers Artway Development and its subsidiaries from April 1, following its acquisition on March 31.