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Gome Reports 501 Million Yuan Loss Industry Price Battles

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Aug. 31 (Bloomberg) -- Gome Electrical Appliances Holding Ltd., China’s second-largest electronics retailer, swung to a first-half loss amid a slowing economy and price battles.

The company posted a loss of 501 million yuan ($79 million) for the six months ended June from a 1.25 billion yuan profit a year ago, according to a statement to the Hong Kong stock exchange today. Sales fell 22 percent to 23.1 billion yuan.

Gome and bigger rival Suning Appliance Co. face more heated price competition after online retailer 360buy Jingdong Mall announced plans to cut prices. Consumers have also curbed spending as China’s economic growth has slowed to its weakest pace since 2009.

Sales declined on a comparable store basis in August and July although losses narrowed during those months, President Wang Jun Zhou said in a conference call after the earnings announcement. The company forecasts improvements in its e-commerce business, has adequate capital and no plans to raise funds for now.

“We closed down some non-performing stores in first-tier cities and we leveraged our market share to forge stronger relationship with suppliers,” he said, adding that the company shared resources between its online and brick and mortar stores to curb costs.

Gome said it will continue developing its e-commerce business, which reported a loss in the first half. Suning posted a 29 percent drop in first-half net income to 1.75 billion yuan.

The companies may benefit from 26.5 billion yuan of subsidies China plans to allocate to promote the use of energy-saving household appliances and products. The subsidies will replace a consumption-incentive program that ended Dec. 31, according to a May statement posted on the government’s website.

Gome closed up 1.5 percent at 67 Hong Kong cents. The benchmark Hang Seng Index dropped 0.4 percent.

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

To contact the editor responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net

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