CORRECTED-UPDATE 1-China's GOME Q4 disappoints, plans expansion

(Corrects number of stores in 2nd paragraph to 726 from 526)

(Adds details)

HONG KONG, April 17 (Reuters) - Top Chinese electronics chain GOME Electrical Appliances Holding Ltd (0493.HK: Quote, Profile, Research, Stock Buzz) lagged forecasts with a 45 percent rise in quarterly earnings despite strong sales and improved margins, but said on Thursday it planned to expand its store network by almost one-quarter this year.

GOME, which operates 726 outlets across Asia's second-largest retail market, hopes to set up 120 more and to buy more telecommunications retail chains like the 23 CellStar outlets -- which sell cellphones -- that it bought in 2007.

The company, which has increased market share by buying out smaller rivals, aims to control one-fifth of the Chinese market for electrical appliances and electronics by 2011, it said in a statement on Thursday.

In 2007, the firm took a large writedown to reflect the changing value of batches of convertible bonds issued, which wiped about 753 million yuan ($108 million) off its annual earnings. It did not offer a quarterly breakdown for the writedown.

Beijing-based GOME, which competes with smaller Suning Appliance Co 002024.SZ and U.S. giants Best Buy Co (BBY.N: Quote, Profile, Research, Stock Buzz) and Wal-Mart (WMT.N: Quote, Profile, Research, Stock Buzz), posted a net profit of 376.8 million yuan ($53.94 million) for the October-December period, up from 259 million yuan a year ago, according to Reuters calculations from full-year and nine-month results.

The result lagged an average forecast of 430.8 million yuan from 10 analysts polled by Reuters Estimates.

Gross margins inched 1.04 percentage points higher to 15.64 percent in 2007, the company said.