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GOME Electrical Appliances Holding Limited announces the Group’s unaudited consolidated results for the six months ended 30 June 2014

  • Core Financial Indicators Exceed Industry Average for Six Consecutive Quarters
  • E-commerce Business Enters Period of Rapid Growth
  • Acceleration of Omni-Channel Strategy;
  • Company to Build Another GOME by 2017

Results summary:

GOME achieved excellent results in core financial indicators for six consecutive quarters:

1. Sales revenue up for six consecutive quarters y-o-y, 2014 1H up 7.4% y-o-y to RMB29.12 billion
2. E-commerce business enters period of rapid growth, gross merchandise volume(GMV) up 53.7% y-o-y
3. Same store sales growth (SSSG) reached 7.3%, tier-two market recorded SSSG of 11.3%
4. Sales revenue per sq.m sustains an upward trend for six consecutive quarters to RMB 4,074 in 2014 Q2
5. Consolidated gross profit margin in 2014 1H up 0.5 percentage points y-o-y to 18.8%
6. Net profit margin amounted to 2.4% in 2014 1H, up 1.2 percentage points

Omni-channel strategy created value for shareholders with earnings per share amounted to RMB 4.1 fen and dividend payout ratio maintained at 40%.

Hong Kong, 2014-8-26 — /EPR Retail News/ — GOME Electrical Appliances Holding Limited (HKSE: 493, “GOME” or “The Company”, together with its subsidiaries, “The Group”) today announced the Group’s unaudited consolidated results for the six months ended 30 June 2014 (“the Reporting Period”).

Conclusion of effective integration of GOME Omni-Channel resources;
Core financial indicators exceed industry average for six consecutive quarters

In the first half of 2014, the Group strictly followed the strategic target of “Open Omni-Channel Retailer”, meeting the strategic demand of “Offline+Online+Mobile Terminals” businesses. It expanded into surrounding areas with core cities as the center, to provide cross-regional and cross-channel services to consumers. As at the end of the reporting period, riding on the open supply chain advantages that include low-cost and highly-efficient procurement, logistics and IT, the Group recorded sales revenue of RMB 29.12 billion, up 7.4% year-on-year. The Group’s consolidated gross profit margin rose from 18.3% to 18.8% compared with the same period last year. Total operating expenses ratio fell by approximately 0.8 percent point year-on-year to 16.3%. Profit attributable to the owners of the parent company accounted for RMB 690 million, up 115.2% year-on-year. Net profit for the second quarter of 2014 amounted to approximately RMB 430 million. Net profit margin for 2014 first half year was recorded at 2.4%, up 1.2 percentage points year-on-year. Thus core financial indicators that include sales, consolidated gross profit margin, operating expenses ratio, same store sales growth, sales per square meter, average single-store sales all outperformed industry average for six consecutive quarters.

The Group achieved satisfactory results with earnings per share of RMB 4.1 fen for the first half of 2014, up 115.8% y-o-y. To share the Group’s operational achievements with its shareholders, the Company recommended to declare an interim dividend in accordance with the dividend payout ratio of 40%.

During the reporting period, the Group opened 55 stores and achieved y-o-y growth of 7.3% in same stores sales. Of this, 34 stores were in tier-two markets where y-o-y growth in same stores sales reached 11.3%. Further, the Group actively promoted strategic cooperation with department stores, supermarkets and local chains and added a total of 79 jointly operated stores, which led to a 60% q-o-q increase in sales of this segment in the second quarter.

In terms of supply chain, the Group’s Enterprise Resources Planning System (“ERP”) continued to build a cross-sharing platform with advantages in cost, efficiency and service.

Differentiated products accounted for 1.2% of total sales in 2009, with the proportion rising significantly to 32% in the first half of 2014. With higher operational efficiency, the Group recorded cash and cash equivalents of RMB 13.07 billion, and operating cash flow of RMB 3.28 billion.

During the reporting period, the Group’s online channels continued to improve on the e-commerce front in terms of reputation and customer satisfaction. This was achieved through the full integration with the procurement, logistics and information supply chain value platform. In the first half of 2014, the Group recorded a 53.7% increase year-on-year in GMV, in which a 64.8% increase was recorded in the second quarter. Unique Visitor(“UV”) rose by 43.8% year-on-year, with gross profit margin of E-commerce business at 7.3%. Further, the Group vigorously expanded its mobile APP and Big Data businesses, with the proportion of mobile terminal GMV increased to 10% of the total amount of the online platform. Focusing on the virtual operator market, the Group is tapping its advantages in the existing retail network to diversify its business, and to prepare strategic channels for mobile terminals, to develop new profit growth points.

Acceleration of “Omni-Channel Retailer” Strategy; Company to Build Another GOME by 2017

To further enhance the advantages of “Omni-Channel Retailer”, the Group proposed four drivers of momentum comprising structural upgrade, infrastructure upgrade, as well as online and offline acceleration. These serve to encourage creativity and innovation in every business unit of GOME.

  • Structural Upgrade: GOME will strengthen regional management capacity, optimize internal management and improve efficiency by implementing a flat organizational structure and setting up IT management processes. The Group will implement staff incentive schemes to enhance staff motivation and to accelerate market share expansion in tier-two markets.
  • Infrastructure Upgrade: (1) Procurement Platform: GOME will create a new procurement platform which optimizes the product structure, and ensure the proportion of differentiated products reaches 50% by 2017. (2) IT System: GOME will upgrade the IT system which supports the omni-channel supply chain platform, and work to achieve synergy with vendors’ supply chains. (3) Logistics Service: Relying on GOME’s 428 warehouses covering 398 cities (non-listed GOME Group included), the Group will strive to achieve “3 Deliveries/Day, Precise Delivery, Installation with Delivery” for online and offline ordering in 200 cities by 2014. It aims to achieve “3 Deliveries/Day” in 400 cities by 2016, which will further enhance customer satisfaction.
  • Offline Development Acceleration: (1) Tier-One Market: To accelerate the installation of new smart retail terminals across 1,605 stores. With full Wi-Fi coverage, together with offline and online SKU available on the mobile App, this reinforces the personalized experience and hence improves same-store sales. (2) Tier-Two Market: To accelerate network expansion in tier-two and tier-three cities by opening satellite stores surrounding flagship stores. To further increase market share, the Group focused on middle and western China with high population density, and raised its market share in the regions of Shanghai and Nanjing. The Group will also extend its logistics services with 500km radius of central logistics warehouse to stimulate cross-regional sales. (3) Channel Integration: While expanding sales by leveraging the channel integration with department stores and supermarkets chains, GOME will continue strategic cooperation with Wumart, MoPark and Lianhua etc. It will also step up the strategic alliances with leading supermarkets and department stores located in Beijing, Shanghai, Guangdong, Hebei, Henan, Liaoning and Shandong.
  • Online Development Acceleration: GOME will accelerate the Omni-Channel integration of, 1,605 offline stores (non-listed stores included), supermarkets and department stores chains in the future. It will utilize the Mobile APP and Big Data, and develop the GOME financial and MVNO businesses. By leveragingthe advantages including adequate inventory levels, competitive pricing, page experience upgrades and timely delivery, the Group will be able to enhance both customer experience and satisfaction, expand its market share and shape into an omni-channel products and service platform with the core competitiveness in direct home appliances retailing.

Mr. Wang Junzhou concluded, “While the global economic recovery is slowing down, China’s national economic development is transforming from “speed” to “quality”, and is gradually stabilizing. Due to the impact of the internet on home appliances industry, the competition in the home appliances industry is becoming more intense. Looking forward into the future, the Group will continue to operate under the “Omni-Channel Retailer” strategy, with a comprehensively focus on customer needs. GOME will pursue the optimization and development of a store network, stepping up the development of e-commerce businesses and mobile terminal businesses. It will also reinforce the integration of multi-channels, develop an open supply chain platform, and improve sales growth and profitability by strengthening after-sale services. This will let us achieve our goal of “Building another GOME” by 2017, creating greater value for shareholders and consumers.”


About GOME Electrical Appliances Holding Limited
GOME Electrical Appliances Holding Limited was listed on The Hong Kong Stock Exchange in July 2004 (HKSE: 00493). The GOME Group was founded in China in 1987 and is engaged in the retail business of electrical appliances and consumer electronics in China. It is the leading retail chain of electrical
appliances and consumer electronics and the leading retail chain enterprise in China.

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