Reuters: Global Markets: GOME shares hit 3-1/2 year low as e-commerce worries weigh

Reuters: Global Markets Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

GOME shares hit 3-1/2 year low as e-commerce worries weigh May 28th 2012, 02:58 A pedestrian walks in front of a company logo on the top of a GOME electric appliance shop in Beijing August 30, 2010. Credit: Reuters/Jason Lee HONG KONG | Sun May 27, 2012 10:58pm EDT HONG KONG (Reuters) - Shares of Chinese home appliance distributor GOME Electrical Appliances Holding Ltd (0493.HK) plunged to a 3-1/2 year low on Monday after a sharp drop in first-quarter profit triggered worries over future earnings, especially given its push into the competitive e-commerce market. GOME's stock, which has dropped more than 30 percent so far this year, fell as much as 9.9 percent to its lowest level since November 2008. The stock was down 6 percent at HK$1.24 at 0221 GMT, lagging a flat benchmark index .HSI. "GOME's top-line weakness in 1Q 12 has been worse than expected," Bank of America Merrill Lynch wrote in a research note. "Despite the recent share price weakness, we remain cautious given the potential for consensus downgrades, low earnings visibility and the heavy competition in the online business." It said GOME's online business was a key concern due to the company's push to ramp up online sales from the second quarter, despite fierce competition. The bank cut its 2012 and 2013 estimates by 17 and 14 percent, respectively, and lowered its stock price target by 13 percent to HK$1.40. On Friday, the Chinese home appliance retail chain operator reported an 88 percent fall in first-quarter profit to 67.4 million yuan as sales dived on the expiry of a government subsidy program at the end of last year. SUBSIDIES WILL AID MAKERS MORE China recently announced a fresh 26.5 billion yuan ($4.2 billion) in subsidies for mainly eco-friendly products to boost domestic spending. The scheme comes after warnings by analysts about weaker growth in white goods sales. Due to the weak macro environment, operational pressure and challenges in the e-commerce sector, GOME recorded a 34.4 percent decline in same-store sales for the first quarter, much lower than a 7 percent decline for its rival Suning (002024.SZ)., China International Capital Corp said. "Sales growth will gradually recover for 2H, but intrinsic problems still exist. New government subsidies will have a positive impact, but their influence will not be big," the Chinese brokerage wrote in a research note. It said manufacturers, rather than distributors, would be the main beneficiaries of the new subsidies. The Chinese brokerage, which cut its 2012 earnings forecast for GOME by 60 percent, expects margins to be squeezed due to a weak sales performance and increased expenses, while a lack of new store openings would put pressure on the company. ($1 = 6.3439 Chinese yuan) (Reporting by Donny Kwok; Editing by Richard Pullin) Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions