Hong Kong closures signal Gome retreat
Appliance seller's decision to close stores in the city comes after battling losses and may mark temporary halt to its overseas expansion
Gome Electrical Appliances' decision to close its Hong Kong operations signals a temporary halt to its overseas expansion plans, which have been losing momentum since its founder Wong Kwong-yu was jailed four years ago.
Analysts said Gome's Hong Kong business has been making losses for the past decade due to a "smaller business scale" and "lack of local resources" compared to domestic players like Fortress and Broadway.
More importantly, the company's long-term plan to shift its focus to the online market and lower-tier mainland cities has further marginalised the position of Hong Kong in its corporate strategy.
Gome Hong Kong announced on Sunday that its six shops in the city would be shut by March 16 and it would focus on wholesaling in the future.
The six shops are privately held by Wong and his family, and are not part of the assets of the listed company. The company's stock price yesterday fell 8 per cent before closing at 94 HK cents, down 5.05 per cent.
"Actually, I think this is not a bad decision by Gome," said Charlie Chen, head of China consumer research of BNP Paribas. "The Hong Kong market has become 'chicken ribs' for Gome, which is of little value for the company."
In October 2003, Gome invested around HK$50 million to open a 25,000 sq ft shop in a prime location in Mong Kok. Wong, then Gome's chairman, vowed to grab as much as 30 per cent of the city's market share within two years by offering customers cheap goods in supersized shops. Prior to that, the businessman had successfully opened hundreds of big shops across the border, taking a good lead ahead of rivals including Suning Appliance.
