Gome Profit Climbs as China’s Growth Drives Electronics Demand

Gome Electrical Appliances Holdings Ltd. (493) profit jumped 13 percent in the third quarter as consumers in the world’s fastest-growing major economy spurred demand at China’s second-largest electronics retailer.

Net income climbed to 538.8 million yuan ($84 million) in the three months ended Sept. 30, from 477.6 million yuan a year earlier. Sales rose 14 percent to 14.2 billion yuan. Third- quarter figures were derived from earnings the Beijing-based retailer reported today to Hong Kong’s stock exchange.

Gome is adding stores to narrow the gap with larger rival Suning Appliance Co. (002024) in an electronics and appliances market forecast to surge 70 percent to 2.14 trillion yuan by 2015 from 2010, according to London-based researcher Euromonitor International. Gome also increased selling and distribution costs 31 percent in the nine months ended Sept. 30 to tap rising demand for home appliances and electronics.

China’s economy, the world’s second biggest, will expand 8.5 percent next year, the Organization for Economic Cooperation and Development estimated in a report yesterday.

The retailer rose 0.5 percent to HK$2.01 at the close. The stock has climbed 29 percent since Oct. 3, when it said it would put a property venture with its jailed founder on hold.

Gome said today it has terminated the plan to form a property joint venture with Beijing Eagle Real Estate Holdings Ltd. and Beijing GOME Electrical Appliances Co., because of “the recent volatility and uncertainty in the macroeconomic environment.”

The retailer said Sept. 27 it planned a real-estate venture with billionaire founder and controlling shareholder Huang Guangyu, also known as Wong Kwong Yu. Huang is serving a 14-year prison sentence for bribery and insider trading and owns about a third of the company with his wife Lisa Du Juan, according to data compiled by Bloomberg.

To contact the reporter on this story: Vinicy Chan in Hong Kong at vchan91@bloomberg.net

To contact the editor responsible for this story: Frank Longid in Hong Kong at flongid@bloomberg.net

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