Gome Retail’s loss soars tenfold After Restructuring

Gome Retail’s loss tenfold last year to RMB4.887 billion (US$728 million), compared with RMB450 million in the previous year.

The loss – projected early last month in a profit warning – was largely due to massive write downs as the once brick-and-mortar based retailer continued its transformation into a New-Retail-era business, with its focus moving online. On a day-to-day trading basis, the company has almost broken even.

During the reporting period, GMV (gross merchandise volume) from its ME Shop increased by 368 per cent, while GMV from new businesses such as home solution and integration of kitchen cabinets with electrical appliances increased by 116 per cent and from smart products by 89 per cent. Services GMV rose by 51 per cent.

“The booming new business indicates that the group’s strategic transformation is progressing well,” the company said in an earnings statement.

Overall sales revenue fell 10 per cent to RMB64.356 billion, and consolidated gross profit margin of 16.8 per cent was down on the 18.26 per cent of 2017.

“Looking forward, Gome will continue to focus on major large-scale integrated flagship store projects in the first- and second-tier cities in an effort to provide one-stop comprehensive household solution, from home appliance to decoration, construction and household services,” the Hong Kong-listed company said.

The group expects to open 16 large-scale integrated flagship stores and 200 home-decoration materials and home furnishing shops this year.

“Gome will step up the output of its supply-chain service in the third- to sixth-tier cities to achieve swift development of store coverage in county-level cities, with an emphasis on franchising. It is expected that 500 franchise “new retail stores” and 200 self-operating county-level stores will be opened this year.”