Chinese sports brand Li Ning is expecting a substantial loss for the full year due to costs relating to its transformation plan.

The company in July announced a revamp of its business and now plans a ‘Channel Revival Plan’ to accelerate inventory reduction and enhance profits.

“The plan is part of the company’s transformation plan developed to strengthen financial performance and to position the company for long-term profitable and sustainable growth,” the company said in a statement.

The channel revival plan, which includes a range of initiatives focusing on support for channel partners’ inventory clearance, inventory buy-back, sales network rationalisation and customised programs to restructure the accounts receivables from individual participants, will cost the company 1.4 to 1.8 billion yuan (US$224.7 million to US$288.9 million).

“Despite the current challenges faced by the industry as a whole, we have an ambitious revival plan to definitively address channel issues,” said executive chairman Li Ning.

It says the plan will allow channel partners to bring to market a higher mix of new products that better matches the demographics of their customers, and will also support channel partners in strengthening their financial position and cash flow for growth.

“The management of Li Ning believes it is necessary to put in place a comprehensive transformation blueprint, including a one-time channel revival plan at a scale large enough to fix the problems that had built up in the channels over the last few years,” said executive vice chairman Jin-Goon Kim.

GB