Gome announced profit warning yesterday after market closed. Key takeawaysare as below.
It recorded 2%+ SSSg for 2017 vs 3% as we estimate.
Its total GMV （online + offline） grew over 20% vs our forecast of 26%growth.
Its total revenue declined 7% to RMB71bn mainly due to online directsales contraction. While the GMV from online marketplace grew by+100%. This is 12% lower than DBe/market consensus.
It expects consolidated GPM will improve to +18% from 16% in 2016, thisis better than our forecast of 17%.
It expects to record a net loss of RMB300-500m in 2017, mainlyattributed to impairment of goodwill and long-term assets related tosome under-performing stores and ecommerce business respectively.
Excluding the one-off impairment （RMB400-500m DBe）， it might recorda net profit of up to RMB100m, which is still lower than DB/market ofRMB314m/RMB323m.
This profit warning implied 4Q saw revenue declined 35% to RMB14bn. This is42% lower than our forecast. This also implied a net loss of at least RMB120m（excluding unexpected impairment loss） vs our RMB94m NP forecast in 4Q17.
We believe this is mainly due to higher than expected opex and stagnant onlinedirect sales in 4Q.
The company will release its full set results on 27 Mar 2018. We believe the keyfocus will 1） online B2C strategy ; 2） opex control; 3） its progress of new "home+living" new retail strategy including socialnomics and online/offline integration.4） ytd SSSg. 5） optimization of its B&S.