Suning shares plunge, posts loss in Q3

Shares of Suning Commerce Group Co plummeted by the daily limit of 10 percent on Thursday trading, after the Shenzhen-listed home appliance retailer posted a quarterly loss for the first time in six years.

Suning lost 108 million yuan ($17.7 million) in the third quarter of 2013, down 118 percent from the same period a year earlier. Its third-quarter revenue also fell by 2.5 percent year-on-year to 24.6 billion yuan, the company said in its latest financial report released late Wednesday.

Suning attributed the profit slump to several factors including the end of nationwide subsidy programs on home appliance purchases, sluggish consumption of IT products, and the adoption of a unified price strategy, said the financial report.

"Fewer customers bought home appliances after subsidy programs for energy-efficient home appliances and home appliance replacement expired, which reflected in the drop of Suning's third-quarter revenue," Lu Zhenwang, founder of Shanghai Wanqing Commerce Consulting, told the Global Times Thursday.

However, Suning's main competitor GOME Electrical Appliances Holding said in a statement on October 15 that its profitability is expected to increase significantly in the first three quarters of this year, mainly due to strong growth in the sales revenue from its physical stores.

"Suning and Gome cannot be compared due to their different business models. Suning has spent heavily in the e-commerce sector, while Gome still sticks to traditional sales channels," Song Yang, a senior analyst at IT consultancy Analysys International, told the Global Times on Thursday.

Suning ranked No.3 in China's B2C market in the third quarter by taking a 4.7 percent share, lagging behind tmall.com with a 49.2 percent share and jd.com with an 18.3 percent share, according to data from IT consultancy Analysys International.

"Tmall.com and jd.com serve as e-commerce platforms," Song said, noting that Suning's transformation represents the future of retailing - an integration of online and offline businesses.

Suning started unifying the prices of products on its online store and offline physical outlets on June 8.

Such a move dragged down its gross profit margin to 15.21 percent in the third quarter, down 3.48 percentage points from a year earlier, according to the company, and has also brought on some criticism from its rivals.

"Some home appliance manufacturers have complained to us about Suning's same-price strategy, as they have been forced to raise their products' retail prices not only on suning.com but also on other e-commerce platforms," Yan Xiaobing, vice president of jd.com, told news portal sina.com.cn on October 22.

"The same-price strategy will still weigh down Suning's profitability in the following quarters," Lu said, "But unifying online and offline prices is a trend and in the long run will benefit the company in terms of attracting customers."

For the entire year of 2013, Suning expects a year-on-year net profit drop of between 70 and 90 percent from last year's 2.68 billion yuan.