Home Appliance Retailer GOME Expects Full-Year Loss
GOME Electrical Appliances, backed by private equity firm Bain Capital, expects it made a loss last year because of a slowdown in China's economy and an unprofitable e-commerce business, the company said on Monday.
GOME, China's second-largest home appliance retailer behind Suning Appliance, posted a net loss for the first nine months of 2012 and its shares halved in value last year.
In a statement, the company attributed the full-year loss forecast to falling revenue, rising rental costs and the losses in the e-commerce business, in which it has invested heavily.
It also blamed the fortunes of the wider Chinese economy, namely "consumption overdrafts as well as poor consumer sentiments and confidence as a result of China's macro economic growth slowdown and economic stimulus policies termination".
GOME is expected to announce the 2012 results before the end of March.
The continued losses will come as no surprise to financial analysts, who are expecting an annual net loss of 433.6 million yuan ($70 million), according to the consensus forecast of 18 analysts on Thomson Reuters I/B/E/S. In 2011, GOME posted a 6.2 percent fall in net profit to 1.84 billion yuan.
GOME executives said last year they expected the e-commerce business to break even within a year, although some analysts are skeptical.
"Due to the intensive price war and high promotional expenses ... we don't think the one-year goal for GOME is achievable," Elyse Wang, an analyst at Haitong International Research, said in a report last week.
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GOME stock is up 3.3 percent this month, although it has lagged the Hang Seng Index's 4.5 percent rise and has fallen by nearly a fifth from a high reached on January 7.