Retail News
- Gome Electrical outlines expansion plans
Date: 29-Jun-2007 Sources: (Shenzhen Daily)
GOME Electrical Appliance Holdings Ltd. has outlined plans to use a recent US$838 million cash infusion to consolidate its position as China's largest electronics retailer in a market that will by some estimates account for a quarter of all global electronics sales by 2010.
The investment moves come at a time of rapid consolidation in China's highly competitive consumer-electronics market.
Gome raised the cash from a share sale and a convertible-bond issue in early May. But it gave little indication of how it intended to use the money.
Gome president Chen Xiao outlined Wednesday the company's plans to invest its cash infusion, including a planned expansion of the Gome store network to 1,000 outlets from the current 930 outlets. Both numbers include about 200 stores Gome hopes to acquire from its parent, Gome Group.
Though the increase isn't large compared with previous expansions, Chen said many existing stores will also be substantially refurbished.
Che said Gome plans to open 100 stand-alone cellphone stores this year and shop for possible acquisitions that could add to its sales of computers and other tech products. As China's largest electronics chain by revenue, Gome estimates it holds more than a 50 percent market share in appliances but less than a 10 percent market share in sales of cellphones. 'This is the area we have huge room to grow,'Chen said.
McKinsey & Co. estimates China's consumer-electronics market will account for a quarter of all global electronics sales by 2010.
Chen reiterated that Gome is interested in a strategic investor but only if Gome retains control. 'No matter what we do, we never give up our holding position in any acquisition deals,'he said.
Gome also plans to use some of the cash injection to speed up its payments to its suppliers, which average 90 to 100 days. Chen said Gome intends to cut this to nearer industry standards of 60 to 75 days. By paying suppliers faster, Gome could get bigger discounts and better margins, said analyst Brenda Lee of Daiwa Securities.
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