Chinese Home Appliance Retailer Gome Refutes Rumored Bankruptcy Liquidation

In response to bankruptcy rumors circulating in the market recently, Gome, a Chinese home appliance enterprise, issued a statement on the evening of December 1 saying that the company and other subsidiaries of Gome Holding Group had not received any legal documents or inquiries related to bankruptcy.

According to Gome’s 2022 interim report, its total liabilities reached 58.568 billion yuan ($8.3 billion), of which 22.902 billion yuan were bank loans and other loans to be repaid within one year. At present, the company’s cash and cash equivalents are only 2.409 billion yuan, and the cash flow from operating activities in the same period is only 55.35 million yuan, showing a plummet compared with its cash flow of 2.14 billion yuan in 2021.

In terms of financial performance, Gome has failed to reverse the situation since its net profit turned into a loss in 2017. Gome’s retail net profit lost 450 million yuan in 2017, 4.887 billion yuan in 2018, 2.59 billion yuan in 2019, 6.994 billion yuan in 2020, 4.402 billion yuan in 2021 and 2.966 billion yuan in 2022 respectively, with accumulated losses exceeding 22 billion yuan in five and a half years.

SEE ALSO: Electronics Firm GOME Delays Employee Wages, Seeks New Financing

Previously, Gome was caught up in rumors of wage payment delays. It was reported that Huang Xiuhong, Chairman of Gome, said at a general meeting that the company will only provide social security to employees before the end of December of this year, and will not pay any more wages. After the meeting, the company issued a letter of commitment, which required employees to make mental preparation to help the company tide over difficulties together. In addition, on November 18, the company announced that it terminated the acquisition of two property deals.

Before its employees missed wages, consumers were unable to pick up goods after paying in Gome stores. Since the second half of 2022, Gome stores in various provinces and cities across China have been closed on a large scale, and some stores are in arrears with rent and utilities.

Huang Guangyu, the founder of Gome, and his current controlled entities have greatly reduced holdings in the company this year. Among them, the shareholding ratio of Huang and his wife Du Jian dropped sharply from 59.94% on January 24, 2022 to 39.19% as recently disclosed, with a cumulative reduction of 6.235 billion shares.

Huang’s measures, in addition to continuously reducing shares and cashing out, also include the sale of real estate assets. According to Caixin, the former richest man in China is seeking to sell Guangzhou Gome Smart City.