Li Ning switches market focus after more losses

Deficit of 391m yuan prompts company to targetmid-tier sector and exit non-sportswear goods

PUBLISHED : Tuesday, 25 March, 2014, 1:32am
UPDATED : Tuesday, 25 March, 2014, 1:32am

Mainland sportswear brand Li Ning plans to focus on the mid-tier market and exit non-sportswear categories after reporting a loss of 391.54 million yuan (HK$491.6 million) last year, 80 per cent less than the 1.98 billion yuan it lost in 2012.

Revenue fell 12. 8 per cent to 5.82 billion yuan, partly due to a shrinking outlet network. The number of stores fell to 5,915 from 8,255 in 2011.

Like many industry rivals, Li Ning, founded by the Olympic champion gymnast Li Ning, expanded overzealously before the 2008 Beijing Olympics.

Suffering from high excess inventory, it has had to offer discounts of as much as 70 per cent on its products.

The company said its goal was to steer focus away from casual wear, a crowded and competitive segment, and back to its core in sportswear while elevating its brand to a more premium position.

"There's not a lot of players [in the middle]," executive vice-chairman Kim Jin-goon said. "Our belief is that local brands do not have the innovation or the brand power … the international brands have a high cost structure, they don't have a more nimble operational platform. The numbers back us on this.

"The Li Ning brand is the only brand that is able to have a local cost structure with a value proposition that's able to step up with a premium."

Li Ning sells three sports shoe lines, ranging from 299 yuan to 399 yuan and 999 yuan.

Last year, the company reduced operating expenses by 611 million yuan, investing most of that back into the brand through sponsorship of the China Basketball Association and US National Basketball Association star Dwayne Wade.

However, an HSBC report published earlier this month noted "heavy spending in advertising and promotion, particularly for basketball, has been made but we think it is difficult to monetise as at least two other peers (Anta and Peak Sports) are also focused on the sport and the group cannot tap Dwyane Wade's primary market in the US yet".

Kim, who was tasked with turning around Li Ning's fortunes in July 2012, was also named interim chief executive. "I'm not permanent. We made it more formalised because [it's taking] a little longer," he said.

Li Ning shares yesterday fell 5.87 per cent to close at HK$5.61, in a market that rose 1.91 per cent.