Li Ning posts first loss since 2004

Chinese sportswear company Li Ning posted a loss of nearly 2 billion yuan in 2012 – its first loss since listing in 2004.

The Beijing-based company, founded by Olympic gymnast Li Ning, blamed the net loss on lower sales and high restructuring costs.

“China’s sporting goods industry is experiencing the worst industry down cycle that the sector has seen. Years of over-expansion caused the building up of inventory for channel partners, adversely affecting store productivity and profitability,” it says.

Li Ning warned the market in December that it would post a big loss as a result of its plan to reduce inventories by buying product back from distributors. The company said it spent 1.8 billion yuan on supporting channel inventory reduction.

According to executive vice chairman Jin-Goon Kim, Li Ning may close more stores this year from its remaining 6434, after closing 1821 last year.

The company expects market and industry conditions to continue to be difficult and financial performance is expected to remain challenging at least in the first half of this year.

“However, with the recent adoption of initiatives on channel efficiency and faster replenishment, the company should start to generate healthier cash flow and build a foundation for more sustainable growth,” said Kim.

You have 7 articles remaining. Unlock 15 free articles a month, it’s free.