Struggling Gome hopes the worst is now behind it
With its founder still in jail, and beset by rivals and the challenge of the internet, retailer Gome is hoping that the worst is now in the past
Is the worst over for Gome Electrical Appliances? That is the question many are asking after the Beijing-based appliance retailer weathered a series of setbacks over the past month.
Two weeks ago Gome said in a filing to the Hong Kong Stock Exchange that it may record a loss for 2012, because of declining sales, increasing rental expenses, and losses in its e-commerce business.
Around the same time it was reported to be planning to close all the shops it is managing in Hong Kong as a prelude to withdrawing from the retailing business in the city. And earlier this month it reportedly cut hundreds of employees in its online department, though management described the move as a "human resource adjustment" rather than large-scale layoffs.
To make things worse, the "home appliances to rural areas" scheme, a nationwide government policy to subsidise the purchases of televisions, washing machines, and fridges in rural communities, came to an end in January, casting a shadow over the already weak appliance market in the country.
A year ago the market cooled down quickly after the government halted another policy offering subsidies to encourage consumers to dump old electrical appliances and buy new ones.
But despite all this negative news, Gome's management told investors after issuing a profit warning on January 29 that "the worst is now behind us." A key indicator that things were on the mend, it said, was a sales recovery through the new year period.
