GOME Electrical Appliances Holding, China's leading home electronic appliance retailer, said its first-quarter profits increased by about two times, thanks to stronger margins and sales in its expanding store network.

The company earned 513 million yuan in the first three months, compared with 169.2 million yuan in the corresponding period last year. Excluding adjustments related to convertible bonds and currency conversion, its profits increased by 77 percent to 567.9 million yuan.

Sales increased 21 percent to 12.2 billion yuan, and the same store sales rose by 3.17 percent to 9.4 billion yuan. The adjusted gross margin widened to 15.36 percent from 13.28 percent a year earlier. The weighted average sales area stood at approximately 2.7 million sq m while the sales volume per square meter rose 1.02 percent in the first quarter.

GOME, which had 726 stores at the end of last year, plans to open 120 outlets in 2008 and aims to have a market share of more than 20 percent by 2011.

Explaining that the company only added 20 stores in the first quarter, president Chen Xiao said: "Few stores were added in the first quarter, but more new outlets are expected in the second and third quarter."

The company will continue to enhance operation quality of individual stores and expand its telecommunication business. The revenue growth of telecommunication products lagged in the first half, up only by 11.95 percent, and the sales accounted for about 13.89 percent of the total.

The retailer will focus on developing flagship stores and big stores to capture the market's forefront .

Chen said the company's capital expenditure this year stands at 1.8 billion yuan to 2 billion yuan due to buying and upgrading the stores.

He is also confident to maintain the same store sales growth of 3 to 5 percent for the year as a whole.

GOME booked exchange losses of 60.7 million yuan in the first quarter due to the appreciation of yuan and weakening US dollar.

Chen said the company has converted $200 million into yuan in the first quarter, so as to minimize to the company's exposure to yuan appreciation. The exchange losses in the second quarter will depend on the exchange rate. "The losses should not exceed 100 million yuan," he said.

(HK Edition 05/28/2008 page3)