Electronics Firm GOME Delays Employee Wages, Seeks New Financing
Huang Xiuhong, the chairman of Beijing-based electronics retailer GOME Holdings, said recently that until the end of December, the company will only provide social security to its employees, and it will not pay wages. In the medium and long term, Huang admitted that the payment of wages will be uncertain.
In addition, GOME is requiring its employees to sign a commitment letter this week regarding the delayed payment of wages. Some employees have claimed that this was a disguised way of forcing them to resign.
According to a report by Yicai, a GOME insider said that the company only suggested that wages might be delayed in the next six months, not that wages would not be paid. GOME is negotiating with Xiamen C&D, a state-owned enterprise in Xiamen, Fujian Province, to raise 10 billion yuan ($1.37 billion).
The GOME source also said that under the weak economic environment and continuing pandemic disruptions, most private enterprises in China, especially physical retail enterprises, are under great pressure regarding cash flow. GOME’s operations, including its brand, network, and team sales ability, have no problem, and the biggest issue comes from liquidity funds.
Founded by Huang Guangyu in 1987, GOME has developed into a comprehensive products and services provider integrating retail, the internet, finance, R&D, real estate, investment and other business sectors. GOME Retail, a subsidiary of GOME, was listed on the Hong Kong Stock Exchange in July 2004.
In the first half of this year, GOME Retail’s revenue was 12.109 billion yuan, down 53.46% year-on-year. The net loss to the parent company was 2.966 billion yuan, increased by 50.24% year-on-year. In 2021, GOME achieved revenue of 46.484 billion yuan, a year-on-year increase of 5.36%, while the net loss was 4.402 billion yuan, decreased by 37.06% year-on-year.
On October 21, GOME Retail issued a profit warning announcement, saying that due to this year’s pandemic disruptions, its sales revenue in the first three quarters of the year will decline by about 55% to 60% year-on-year. According to a supplementary announcement issued on October 28, the company expects that its operating loss will increase by 35% to 65% in 2022 compared with the same period of last year.
Since the beginning of this year, Huang Guangyu and his wife, the major shareholders of GOME Retail, have reduced their holdings many times. After the last reduction on December 22 last year, they held 20.584 billion shares of GOME Retail. Up to now, according to data from the HKEx, they hold 15.286 billion shares.
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In fact, Huang Guangyu was sentenced to 14 years in prison in 2008 for the crimes of illegal business operations, insider trading and bribery. At the same time, he was fined 600 million yuan and confiscated 200 million yuan of personal property. On June 24, 2020, the court granted Huang’s parole, and the probation period of parole was to February 16, 2021. Huang Xiuhong, the current chairman of GOME, is Huang Guangyu’s sister.
Before this bout of delayed wages, GOME’s management changes and continuous layoffs have attracted the attention of all parties. On the eve of China’s National Day this year, Wang Wei, the former CEO of GOME, resigned. Xiang Hailong, CEO of GOME Online, was only in office during August. Ding Wei, the executive vice president of an e-commerce platform of GOME, was also dismissed in July this year. In its official response, GOME described the above situation as a “temporary and emergency adjustment.”
