Li Ning sees profits plunge

Profit plunged 84.9 per cent at Chinese sportswear group Li Ning in the six months to June 30.

Li Ning said net profit slid to just 44.3 million yuan (US$7 million) on revenue down 9.5 per cent to 3.88 billion yuan (US$610.8 million).

Founder and chairman Li Ning blamed the decline on general industry slowdown and intensified competition.

Li ning closed 1200 inefficient stores during the first of this year. As at 30 June, the total number of Li-Ning brand conventional stores, flagship stores, factory outlets and discount stores totalled 7303, representing a net decrease of 952 stores as compared to December 31.

In early July, the group announced changes to its management team and the appointment of a new board member. The group will be led by Li Ning, as founder and executive chairman, and Jin-Goon Kim, executive vice chairman.

To address the problem, Li Ning says it will enhance overall management strength and operational capabilities, and embark on both short term and longer term strategies to achieve growth. 

“The group decided to focus its resources on the core Li-Ning brand and the Chinese market, centred on the essence of sports, to give full play to the brand value. Despite the pressures, the group continued to press ahead with its reforms during the first half,” said Ning.

In the second half of 2012, the group will step up its construction of factory outlets for its subsidiaries in order to improve their inventory clearance capabilities. The group will also press ahead with construction of sixth-generation stores.

A new go-forward plan, involving a “Three Stage Transformation Blueprint” with the main goal of improving the company’s core strength and achieving long-term profitability.

“In the long-run, the consumer goods industry, which the group operates in, will still benefit from the transformation of China’s economy from being investment-driven to consumption-driven,” said Li Ning.

He added that while transformation within the industry and the competitive environment is inevitable, the ongoing management reforms and adjustment in strategies which the group is currently undertaking will equip the group with a higher capability to adapt to the long-term development of China’s sporting goods industry and build the company’s competitive edge for the future.


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