Chen Xiao, chairman and president of Gome Electrical Appliances Holding Ltd, speaks at the company's 2009 annual results announcement in Hong Kong Wednesday. The company, whose billionaire founder Huang Guangyu faces bribery charges, posted a 35 percent gain in 2009 profit after closing unprofitable stores and revamping outlets. Edmond Tang / China Daily

Despite joint liability, maximum fine would be easily absorbed by the company

Hong Kong-listed Gome Electrical Appliances, which reported its earnings Wednesday, said the outcome of the trial of company founder Huang Guangyu will have little impact on the firm, China's second-biggest home electronics retailer by market value.

"After consulting with legal professionals, we believe the outcome will not affect the company in any senses, no matter what it turns out to be," said Chen Xiao, chairman and president of Gome.

Huang Guangyu, founder and former head of Gome, was charged with "illegal business dealings", "insider trading", and "bribery by organization" in Beijing two months ago after 15 months in police custody.

The mainland's Securities Regulatory Commission confirmed that Huang was indicted for illegal gains by manipulating the share price of two mainland-listed companies, but did not elaborate in detail.

The count "bribery by organization" linked the fate of the former chairman and Gome the company. If Huang is found guilty on this charge, Gome will also face punishment.

Analysts said earlier that since Gome's liability in the prosecution is 4.56 million yuan, even if Gome is eventually punished with a fine, its operations and financial condition will barely be affected, given that Gome Wednesday reported year-on-year growth of 34 percent in net profits for 2009 to 1.4 billion yuan.

Chen said the company used to focus only on aggressive territorial expansion. While opening large-scale stores in premium locations to accommodate large inflows of customers, the company is now also striving to improve operating efficiency by remodeling stores.

"By closing 189 underperforming stores and opening only 56 new ones last year, the company's revenue slid by 7 percent, but same store sales achieved a profit increase of 2.8 percent from a year earlier," said Chen.

Gome predicted a net opening of 80 stores in 2010. "We may further close down 20 existing stores and open about 100 new ones in the mainland this year, specifically to allocate resources to the second- and third-tier markets," said Wang Junzhou, Gome's executive vice-president.

The company is also expected to take advantage of the State's policies to boost domestic consumption, like the "home appliances going to the countryside" and "home appliance replacement" policies.

Regarding Hong Kong, Chen said it is a love-hate market to the investors, which provides tons of opportunities but in the most competitive environment.

"It could not be easy for any home electronic retailers to do business in Hong Kong, where I believe competition is more fierce even when compared to the mainland market," said Chen.

For example, China's biggest electronics retailer by market value, Suning Appliance Co said last month it aims to win market share of more than 25 percent in Hong Kong in the next three years, helped by opening up 30 outlets.

Suning has announced its intention to buy Citicall Retail Management Ltd, one of Hong Kong's local home appliance retailers, to gain 22 stores in Hong Kong and a platform for overseas expansion. Chen said Gome was also in close contact with Citicall in the past, but failed to initiate any cooperation.

(HK Edition 04/08/2010 page2)