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) 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) and Wal-Mart (WMT.N), 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.
It has said it would focus more on raising profitability along its network. The 120 new stores planned for this year would represent a marked deceleration from the 170 outlets opened in 2007.
For a full earnings statement, please click here
In 2007, China's retail sales jumped 17 percent to $1.3 trillion as increasingly well-heeled Chinese stock up on modern consumer goods. The country's consumer electronics market is expected to hit $100 billion this year.
GOME, which aims to spearhead consolidation in its fragmented sector, agreed in December to lend 3.6 billion yuan to a third party to buy Dazhong Electrical Appliances, China's No.4 appliance retail chain.
In February, a subsidiary of the firm paid 541 million yuan for a controlling stake in Sanlian Commerce Co (600898.SS), a retailer in eastern China's Shandong Province.
Shares in GOME ended up 2.5 percent on Thursday before the earnings announcement. The stock gained nearly 30 percent during the fourth quarter, easily outperforming the Hang Seng Index's .HSI roughly 2.5 percent climb. ($1=6.986 Yuan) (Reporting by Joseph Chaney; Editing by Anne Marie Roantree and Edmund Klamann)
