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Gome’s Shares Slump in Hong Kong After Ex-Chairman Comments

Chen Xiao, then chairman and president of Gome Electrical Appliances Holdings Ltd., seen here at the company's headquarters in Hong Kong, on May 10, 2010. Photographer: Jerome Favre/Bloomberg
Chen Xiao, then chairman and president of Gome Electrical Appliances Holdings Ltd., seen here at the company's headquarters in Hong Kong, on May 10, 2010. Photographer: Jerome Favre/Bloomberg

May 11 (Bloomberg) -- Gome Electrical Appliances Holding Ltd. fell the most in almost two months in Hong Kong after a newspaper reported its former chairman as saying the company’s targets are unachievable and the stock has no prospects.

Gome said it will take “appropriate steps” after the 21st Century Business Herald reported Chen Xiao as saying the company is overcharging suppliers and its plan for new store openings is impossible to reach. Chen said he intends to sell his shares and many institutional investors have pulled out, the newspaper said.

Shares of China’s second-biggest electronics retailer dropped 3.2 percent as the report revived disagreements between Chen and Gome’s billionaire founder Huang Guangyu. Chen quit in March after losing a battle with Huang, who fought from a prison cell to reassert his influence over the company after being jailed on bribery and insider trading charges.

“Investors will initially have some concern over the company because the harsh remarks are reportedly from a former executive,” Charlie Chen, an analyst with BNP Paribas Securities Asia in Hong Kong, said in a telephone interview.

Gome’s shares fell 9 cents to HK$2.72 at the 4 p.m. trading close in Hong Kong, the biggest drop since March 17. The benchmark Hang Seng Index fell 0.2 percent.

‘Would Not Tolerate’

“The company would not tolerate Mr. Chen’s behavior as expressed in the article and any other false or misleading news reporting about the company,” Zhang Dazhong, Gome’s current chairman, said in a statement to the Hong Kong stock exchange today. Gome “would take appropriate steps to protect the company’s interests,” the statement said, without specifying what it might do.

Gome “does not agree” with Chen’s views, which don’t represent the position of the company, it said in the exchange statement. Chen didn’t answer calls to his mobile phone or respond to an e-mail listed on his microblog.

The electronics retailer posted the fastest profit growth in four years in 2010, as net income rose 39 percent to 1.96 billion yuan ($299 million). The company said in March it will concentrate on opening stores in key regions, particularly megastores and flagship outlets, and speed up expansion in so-called second-tier markets.

Same-store sales, which show how stores are faring without taking into account the impact of newly opened outlets, rose 22 percent last year, according to the company. Gome closed 39 underperforming stores, opened 139 new stores and remodeled existing stores in the period, it said in March.

Gome’s shares have risen 16 percent in the past year, trailing the 28 percent gain by rival Suning Appliance Co., which trades in Shenzhen.

Chen owns a 1.2 percent stake in Gome, according to data compiled by Bloomberg. Huang, also known as Wong Kwong Yu, holds 31 percent and privately owns the Gome brand and about 400 stores. He is currently serving 14 years in prison for bribery, insider trading and illegally buying foreign currency.

To contact Bloomberg News staff for this story: Michael Wei in Beijing at

To contact the editor responsible for this story: Frank Longid at

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