Li Ning reports losses for H1

By Zhao Qian Source:Global Times Published: 2013-8-13 0:03:04

Leading Chinese sportswear group Li Ning Co reported Monday a loss of 184 million yuan ($30.05 million) in the first half, a result analysts said still optimistically indicated the sector had passed its most difficult period despite short-term losses.

Its sales revenue reached 2.9 billion yuan in the first half, down 24.6 percent year-on-year, the sportswear firm reported.

The company ascribed the poor business performance to its reforms for business ­operation including reducing ­releases of new products to digest inventories.

Other major sportswear brands also reported declines in net profit for the first half.

ANTA Sports Products reported a 19 percent net profits decline and Peak Sport ­Products Co also predicted that its ­first-half profits would see an ­obvious decline due to ­digestion of ­inventories and sluggish ­economy, which would impact demand for new products.

Despite the profit declines, "these major sportswear brands actually have already passed over their most difficult time," Ma Gang, a sportswear industry insider, told the Global Times Monday.

Inventories for the ­major sportswear companies are reduced to a reasonable ­level, and the whole ­sector has ­experienced a deep ­restructuring as smaller companies went bankrupt and bigger players ended blind and fast expansion, Ma noted.

During the past two decades, the Chinese sportswear sector has experienced a period of quick expansion but met a bottleneck when more and more homogeneous products come to the market.

Li Ning Co has taken "differential strategies" to survive in the difficult period confronting the sportswear industry, Li Ning, founder and executive chairman of the group, said in its first-half report.

To improve its management system, the sportswear firm has employed a new batch of senior managers, including a new CFO, in the first half, Li Ning said in the report.

The company announced that it has closed around 400 outlets with low efficiency nationwide and opened several new shops with high efficiency in the first half.

ANTA also decided to close more stores domestically this year, but planned to expand its business overseas including Southeast Asia and Middle East, a move analysts said aimed to fasten its process of internationalization.

"Although it will still take some time for sportswear companies to overcome current challenges, they have already made some obvious improvement," Zhang Qing, CEO of Key-solution Co, a sports strategy and consultation company, told the Global Times Monday.

The key measure for those firms to survive serious competition is to make adjustments to their supply chain and improvements to their merchandising model, Zhang noted.

Chinese sportswear companies used to have very long supply chains involving many distributors, which were extremely unwieldy, Zhang said, noting that "firms like Li Ning and ANTA have already taken measures to resolve this issue."

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