Retail News
- Gome expects faster net profit growth
Date: 7-Mar-2007 Sources: (Shenzhen Daily)
GOME Electrical Appliances Holding, China's largest electronics retailer, expects that its net profit growth will outpace sales growth in 2007, its chairman said yesterday.
Gome, which has grown aggressively in the country's booming retail market in recent years, will slow down its expansion pace to focus on profitability, Huang Guangyu told reporters on the sidelines of a retail forum in Shanghai.
'This year, we'll mainly focus on business capacity in various stores. We're going to open good stores, but fewer stores,'Huang said.
Gome and its parent group owned a total of 830 stores at the end of 2006 after its acquisition of rival China Paradise last year and aims to open some 100 outlets this year, Huang said.
Meanwhile, Gome will close more than 20 less profitable stores, aiming to complete the restructuring of the China Paradise merger in the first half of 2007, Huang added.
Gome's net profit rose 46 percent to 560 million yuan (US$73 million) in the first nine months of 2006, while sales rose 42 percent. The company is scheduled to release 2006 results in mid-April.
Gome's increased focus on earnings comes as its largest competitor, Suning Appliance Co., steps up expansion and after U.S. home appliances chain Best Buy set up shop in Shanghai late last year.
Suning plans to increase its network by between 180 and 200 stores a year through 2010, while Best Buy expects to open 23 stores under its Chinese partner's Five Star brand and two to three Best Buy locations in China in the next 12 to 18 months.
Best Buy aims to eventually replace Gome as the top retailer in China's highly fragmented home electronics market, hoping that its strategy, under which its salespeople work on a non-commission basis, will attract domestic consumers.
'It's not possible to say yet whether (Best Buy's) model is what suits China best. Consumers decide if you can be successful or not, and it's a long process,'Huang said.
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