Li Ning pins hopes on changes after 184m yuan loss

Mainland's top sportswear brand says worst over as it adopts a retail-oriented business model and rebuilds its management team

PUBLISHED : Monday, 12 August, 2013, 9:06am
UPDATED : Tuesday, 13 August, 2013, 4:10am

Li Ning, the mainland's leading sportswear brand, posted a loss of 184.24 million yuan (HK$233 million) for the first half of the year, but the management is optimistic things would improve, saying the worst is behind the company.

The brand is undergoing a shift from a wholesale business model to a more retail-oriented one.

We think that taking a bold and differentiated strategy is the winning plan
Li Ning, Chairman, Li Ning

The mainland's sportswear industry has been plagued by overexpansion while battling competition from casual wear and adjusting to meet the rising level of consumer tastes.

"The market is currently choked with undifferentiated local brand products," the company's founder, former Olympic gymnastics champion Li Ning, said at a results briefing yesterday. "We think that taking a bold and differentiated strategy is the winning plan."

That included an increased focus on innovation in product design. For example, the Li Ning Bow, Arc and super light basketball shoes, which utilise new lightweight technology, were some of the most popular models for the company.

"The super light basketball shoes leverage our success in 10th-generation running shoes. The sell-through of that is higher than for any other shoe we've made," executive vice-chairman Kim Jin-goon said.

Li Ning has been working with channel partners to reduce inventory turnover periods to less than seven months from more than nine months. It said most of its channel partners experienced improved productivity and cash flow during the first half.

"There were some hiccups along the road, but we believe we are on the path to a very exciting transformation," Kim said.

"We are pleased to announce we have completed the recruiting and building of our management team, not only at the top level but the levels below … we believe this is going to be the core for executing our transformation programme."

The company hired Terence Tsang Wah-fung as chief financial officer in April and Monica Sun Zhengzheng to oversee human resources last month.

Li Ning announced a decrease in revenue of 24.6 per cent to 2.9 billion yuan. It attributed this dip to a short-term focus on moving less merchandise to retailers, clearing inventory and shrinking the store network.

Over the past year, Li Ning closed about 18 per cent of its store network or about 400 outlets that were underperforming, including its only Hong Kong shop.

Most of the stores that were closed were operated by subdistributors, Kim said.

Although the firm would evaluate each store on its performance, he said, it did not expect to close many more and would also open new profitable locations.