Shares in GOME slide after similarly named firm shuts up shop

HONG KONG Mon Jan 21, 2013 2:03am EST

HONG KONG Jan 21 (Reuters) - Shares in GOME Electrical Appliances Holding Ltd tumbled on Monday after a similarly named but privately held company said it was shutting up shop in Hong Kong, fanning worries about consumer demand and the health of electronics retailing industry.

GOME Home Appliances (H.K.Ltd, privately owned by billionaire Huang Guangyu, who is also a major shareholder in the listed company, said it would close its six retail stores and focus on its wholesale trade.

It is not part of GOME Electrical, China's No.2 home appliance retail chain operator, which operates more than 1,000 stores in China and is backed by private equity firm Bain Capital and bigger rival Suning Appliance.

GOME's stock fell as much as 8 percent to HK$0.91, its lowest level since Dec. 27. The shares were down 4 percent at HK$0.95 as of 0610 GMT, underperforming a flat overall market .

While analysts said the similar names may have initially played some part in the stock's decline, the news also fed into already existing worries.

The announcement comes less than a week after German retailer Metro decided to scrap its consumer electronics venture in China, once trumpeted as an engine of future growth, after meeting unexpectedly strong competition.

"Despite the clarification, it still triggered concern about the overall operating environment in the mainland that is facing challenges," said Steve Chow, analyst at Kingsway Group Research.

Smaller rival Huiyin Household Appliances (Holdings) Co Ltd was down nearly 10 percent in Hong Kong although shares of rival Suning in Shenzhen fared better, declining just 0.7 percent.

A spokesman for the listed GOME declined to comment on the announcement.

In November, the listed GOME swung to a loss in the third quarter from a profit a year earlier due to sluggish demand, rising costs and a loss at its e-commerce business. (Reporting by Donny Kwok; Editing by Edwina Gibbs)