Li Ning plans network growth to 10,000 stores

Li Ning plans to expand its sales network to 10,000 outlets by 2013, as the mainland's top sportswear maker remains upbeat about industry prospects despite the end of the Olympic Games.

'We are not worried about the possibility of a slowdown as there is still a lot of room for us to expand in second and third-tier cities,' chief executive Zhang Zhiyong said.

The company, founded by the legendary gymnast of the same name, had a total of 6,393 outlets at the end of June. Most of its stores are owned by distributors.

The company reported first-half net profit jumped 68.3 per cent to 333.73 million yuan (HK$381.59 million) on Wednesday.

The expansion plan eases some analysts' concerns that there could be limited potential for the sportswear company to open more stores given that it has already been on a fast-growth trajectory.

'The expansion plan demonstrates the company's confidence in the market but its effectiveness remains to be seen,' said Guotai Junan Securities (Hong Kong) analyst Tiffany Feng.

Mr Zhang said Li Ning also aimed to double same-store sales growth, a key industry measure of competitiveness, by 2013 as it seeks sustainable development to balance expansion and store efficiency.

In the first half of the year, the company had 26 per cent growth in same-store sales. During the Olympics, that figure surged to 43 per cent on average while in the six Olympics sites it soared 51 per cent.

Li Ning is capitalising on the increasing popularity of its core brand value following the star appearance of its chairman at the Games opening ceremony and the rising affluence of the middle class on the mainland.

It is estimated every mainland citizen has only 0.5 pair of sports shoes, compared with 1.3 pairs per head in Hong Kong and 2.6 pairs per head in the United States.

The Beijing-based company also has global ambitions.

Mr Zhang said the company planned to increase contributions from overseas sales to 20 per cent of total revenue by 2018 from 1.1 per cent in the first half.

Its target is to become one of the top five global sportswear brands within a decade, although its focus for the next five years would remain on the mainland.

Shares in Li Ning, which have gained 12.6 per cent since the start of the Games, advanced 3.44 per cent to HK$19.84 yesterday, against a 2.29 per cent drop in the overall market.