Sportswear maker Li Ning plans to open more so-called 'factory outlets' to clear mounting inventory after reporting a nearly 50 per cent plunge in net profit for this year's first six months to June. The company's share price rose slightly to HK$9.03 yesterday, up 0.33 per cent, as the interim result it released yesterday turned out to be in line with market expectations. Chief executive Zhang Zhiyong said the company would open 56 new discount outlets to clear out-of-season stock, in addition to its existing 191 outlets by the end of this year. Sales through factory shops and other inventory clearance channels amounted to 11 per cent of total sales in the first seven months this year and would climb to 15 per cent by the middle of next year, he said. The bulk of Li Ning's sales are from conventional stores. 'To clear inventory in factory outlets will be a permanent part of our business strategy in future as well as a brand new business model,' Zhang said. Merchandise offered in such outlets is usually half the price of new stock. Li Ning earmarked 300 million yuan (HK$366 million) this year to buy back distributors' stock and plans to spend up to 300 million yuan doing so next year. Li Ning posted a net profit of 294 million yuan for the six months this year to June, down 49.5 per cent year on year. Revenue dropped 4.8 per cent to 4.3 billion yuan. Basic earnings per share also plunged 49.7 per cent to 27.94 cents. The homegrown manufacturer of sports shoes, apparel and equipment has been undergoing reform to improve shop efficiency and restore its brand since last year. It issued a profit warning last month, saying order volumes at the fourth-quarter trade fair this year recorded a high single-digit fall following a continuous decline in the previous three quarters. Li Ning's share price has fallen 65 per cent during the past year. Zhang said the profit decline in the first half of the year was mainly due to a drop in revenue, increases in advertising expenses and a dramatic rise in rents and labour costs. He expected the gross profit margin would still be under pressure in the second half despite falling prices of raw materials since July. Looking forward, the company will focus more on high-end products, such as sports shoes priced at 400 yuan or higher. As of the end of July, Li Ning operated 8,163 shops across the country. The total number is expected to reach 8,300 by the end of this year, and climb to 8,650 and 9,000 in the year 2012 and 2013.