Gome Shares Fall on China Slowdown Concerns: Hong Kong Mover

Gome Electrical Appliances Holding Ltd. (493), China’s second-biggest electronics retailer, fell to the lowest level in almost three years in Hong Kong trading amid slowing economic growth and concern that the end of government subsidies will affect earnings.

Gome in a statement after the close of trading said it expects a “significant decline” in profit for the three months ended March 31 because of lower sales and a loss related to its e-commerce business.

The stock dropped 5.4 percent to HK$1.40, at the close of Hong Kong trading. The benchmark Hang Seng index rose 1.7 percent.

The Beijing-based company last month reported that 2011 profit fell 6 percent, missing analysts’ estimates as higher costs weighed on the electronics retailer. Bank of America Merrill Lynch in a note dated April 30 recommended that investors sell Gome 2014 convertibles.

“Gome is suffering with the fading of various government subsidies to encourage consumers to buy home appliances following the last financial crisis,” the analysts wrote in the research note.

A government program that gave shoppers as much as 400 yuan to subsidize purchases of new home appliances helped drive industry sales the past two years. The incentives, part of China’s moves to boost domestic consumption, ended Dec. 31.

Gome competitor Suning Appliance Co. reported a 15 percent drop in first-quarter net income last week. China, the world’s second-largest economy, pared the nation’s economic growth target to 7.5 percent from an 8 percent goal in place since 2005.

To contact the reporter on this story: Anjali Cordeiro in Hong Kong at acordeiro2@bloomberg.net

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

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