Gome’s net profit growth in the second quarter

On Friday, Gome Electrical (00493.HK) issued a pre-profit announcement for the first half of the year. In the second quarter, the company expects the net profit to grow by over 100% from the previous month. In the first half of this year, it will turn profitable and profitability has improved significantly.

According to the announcement, Gome's sales revenue in the first half of 2013 increased compared to the same period of last year. At the same time, after the company's associate e-commerce with related parties was completed in 2012, related parties will bear 40% of losses in e-commerce. Gome expects its net profit in the second quarter of 2013 to grow by more than 100% compared to the first quarter of 2013. In the first quarter of this year, operating income was about 12.34 billion yuan and net profit was 76.33 million yuan. Based on this calculation, the second quarter net profit will reach at least 153 million yuan. In the first half of last year, GOME’s sales revenue was 23.13 billion yuan, a loss of 501 million yuan, and a loss of nearly 600 million yuan in the entire year.

However, some analysts believe that the slowdown in the economic growth in the Mainland, the domestic market demand for home appliances growth is weak, the country's US stores and online stores will inevitably be affected. According to statistics, Gome's same-store sales increased by nearly 17% in the first quarter, but the overall gross profit margin fell to approximately 17.6%, reflecting the continued suppression of gross margins under the price competition. Gome had expected earlier that the overall sales area this year will be reduced by 50,000 square meters compared with last year, and 10 to 20 new stores will be concentrated in secondary cities during the year.

Wang Junzhou, president of Gome, stated that the group has fully implemented the strategy of “combining online and offline multi-channel retailers” and is full of confidence in the future. Although the expansion of e-commerce business is the focus of Gome's work in recent years, sales of e-commerce business in the first quarter of this year increased by 51.3% year-on-year to 714 million yuan. However, due to the fact that the business is still in the stage of exploring the profit model and the competition is fierce, it has been Being at a loss dragged the group’s recovery.

Some analysts believe that the size of Gome's e-commerce business is still small compared to those of rivals Jingdong Mall and Suning. However, Gome is still full of confidence in e-commerce, and the chief financial officer said last month that the e-commerce business could achieve a single-month break-even before the end of the year.

Some sources pointed out that the Development and Reform Commission and other relevant departments are discussing new subsidy policies for home appliances, including the new energy efficiency standards for air-conditioners, televisions, air-energy water heaters, range hoods and washing machines. It is expected to be formally implemented on October 1, or Appliance industry brings a new wave of sales.

In addition, Gome and Sharp China recently signed an annual strategic development framework agreement, the two sides determined 2013 to 2015 sales target of about 28 billion yuan, of which, the United States in 2013 purchase of Sharp LCD TVs up to 700,000 units.

Stimulated by the pre-profit announcement, Gome closed up 11.27% last Friday to 0.79 Hong Kong dollars.