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Gome Shares Jump on Improved Profit Forecast: Hong Kong Mover

Jan. 21 (Bloomberg) -- Gome Electrical Appliances Holding Ltd., China’s second-largest home appliance retailer, jumped the most in six months in Hong Kong trading after saying profitability improved on strong sales growth and cost controls.

The stock rose as much as 11.1 percent, heading for the biggest gain since July 2013. It gained 8.7 percent to HK$1.37 as of the midday trading break. The city’s benchmark Hang Seng Index rose 0.57 percent.

Same-store sales grew more than 12 percent last year and gross profit margin is expected to have exceeded 18 percent, the company said in a filing to the Hong Kong stock exchange yesterday.

The retailer, which posted a net loss of 596.6 million yuan ($98.6 million) in 2012, wants to improve gross margin rather than gain market share through discounting, Elyse Wang, a Hong Kong-based analyst at Haitong International Securities Group Ltd. said in a note on Dec. 13. Unlike competitors that are expanding aggressively into e-commerce, Gome wants to improve profitability instead of gaining traffic flow, Wang said. Bigger rival Suning Commerce Group Co. said earlier this month it will start selling wealth management products online from Jan. 15.

To contact the reporter on this story: Jasmine Wang in Hong Kong at jwang513@bloomberg.net

To contact the editor responsible for this story: Hwee Ann Tan at hatan@bloomberg.net

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