Li Ning, still restructuring, records a loss for the first half of 2013

By

Olivier Guyot

Published
Aug 22, 2013

When its last annual results came out, Li Ning’s management announced it expected the first half of 2013, ending June 30, to be difficult. The Chinese sports brand giant wasn’t surprised, then, to see its revenues drop nearly 25% during that period compared with the first six months of 2012.

Revenue amounted to 355 million euros (2,906 milliards de yuans). The group finished 2012 with losses, and its operating results are still in the red. For the first half of the year, operating losses neared 5 million euros compared with a profit of 22 million a year earlier. The net loss reached 20 million euros compared with a net profit of 8 million last year.

Despite all this, management tries to be reassuring in its communications. “I’m pleased to say that we believe the worst is behind us," stated Jin-Goon Kim, executive vice president of the group. He continued: “Although the Group's financial results have not yet fully reflected the benefits from the investments we've made, we are pleased with the achievements of our Channel Revival Plan, as a majority of our distributors are seeing improved cash flow and productivity.”

Since 2012, the Chinese sports brand giant has questioned its prior distribution model and redefined its strategy, both in terms of store format and merchandising. The group pointed out that it has closed approximately 400 underperforming stores, while opening high-performing store formats. As of June 30, the group had 6,024 stores in total. The group emphasized the role of its distributors above all. Li Ning noted that 90% of its distributors had enrolled in its Channel Revival Plan, permitting a 30% decrease in inventory value.

At the same time, the group said it had launched a new retail management program for its key stores and its top seven distributors. This program, based on faster introduction of new products in response to market opportunities and better restocking procedures, has brought significant growth in retail performance to participating stores.

The group further announced an investment in marketing for its core sports: basketball, running and badminton. Although Li Ning has signed a contract with American basketball star Dwayne Wade, it has also been involved since the beginning of 2013 in developing the appeal of the Chinese Basketball Association (CBA) championship, currently selling Chinese team jerseys. As for badminton, the brand is the official sponsor of the international federation for the period 2013/2016.

Even so, these much-needed steps won’t enable the group to cross the line into profitability in 2013. The group expects losses approaching those seen in 2012, on the order of nearly 200 million euros.