Li Ning Co will concentrate on the Chinese mainland market for its future development, the company told the Global Times Wednesday, following the closure of its only store in Hong Kong.
The store in Tsim Sha Tsui, a busy shopping area in Hong Kong, was closed early September, a spokesperson of Li Ning Co, who declined to give her name, confirmed to the Global Times Wednesday.
"The operations in Hong Kong and overseas markets can be carried on only if the risks they bring are controllable. The company will instead focus on the business in the mainland according to its development strategy," she said.
The Hong Kong store was closed due to its failure to generate expected profits, noted Zhang Qing, CEO of Beijing Key-solution Sports Consulting Co, adding that "it is not the first store that has been closed by Li Ning for such reason."
In the first half of 2012, the firm closed 1,200 stores worldwide in order to invest in more profitable stores, according to the interim report of the company released on August 22.
Li Ning overestimated the potential of the sportswear market following high growth of the industry in the past decade, and rapidly expanded its businesses, Zhang told the Global Times Wednesday, "resulting in many low-performance stores and high costs."
By the end of 2011, the company's inventory amounted to 1.13 billion ($178 million), an increase of 40.57 percent from 2010, while its net profit dropped 65.2 percent year-on-year to 386 million yuan in the same period, according to its financial report for 2011.
It is a wise decision to close underperforming stores and concentrate on the business in the Chinese mainland as it is difficult for Li Ning to gain ground in overseas markets that are mostly seized by top global brands like adidas and Nike and popular local brands, a sportswear researcher surnamed Lu from Chongqing Sailsports Consulting Co told the Global Times Wednesday.
The company lags behind adidas and Nike in the domestic sportswear market as well, due to its ineffective brand promotion and lack of product innovation, said Lu.
Li Ning has also been losing customers to domestic brands like Anta due to its failure to position its brands clearly, according to Zhang.
Anta gained a net profit of 1.73 billion yuan by the end of 2011, much more than Li Ning did.
Zhang noted that the whole sports goods market in China is squeezed by casual wear brands and outdoor sports brands.