Pedestrians pass by a Li Ning sportswear store in Wuhan, capital of Central China's Hubei Province. The company is one of China's leading sportswear brands. Photo: CFP

China's leading sportswear retailer Li Ning Co finally turned a profit in 2015 after struggling for three consecutive years.

On January 6, the company released a positive profit alert, saying that it is expected to report an approximate break-even in terms of profit and loss attributable to the equity holders for the year ended on December 31, 2015.

The stock price of the Hong Kong-listed company jumped 6.97 percent on that day to HK$4.45 ($0.57) per share, it's highest in nearly nine months.

The well-known company's losses narrowed and its sales rose in the first six months of 2015 as it tried to regain its place in the domestic sportswear market.

Li Ning, the Olympic gymnast who created the company, said his namesake company was back on the right track.

"There is a steady revenue growth and operational efficiency has improved in the first half of 2015, helping to reduce losses significantly and lay the foundations for achieving full-year profitability," Li was quoted as saying by the Financial Times in August 2015.

Back in the black

As of October 2015, Li Ning's product orders had grown for eight straight quarters, according to a statement the company sent to the Global Times on Tuesday.

With the recovery of the sportswear market and the restructuring of the company, Li Ning has started to get control over its stores' performance.

Over the last few years, the company has committed itself to improving direct retail store operating efficiency, enhancing long-term relationships with channel partners and expanding its e-commerce business, said Zhang Qing, CEO of Beijing-based sports consulting firm Key-Solution. 

"The company has been devoted to improving its products to prop up sales," Zhang told the Global Times on Monday.

The company has also put a lot of effort into diversifying and innovating its sales channels by combining its off-line stores with online business platforms.

The estimated results for 2015 did not take into account of the net gain from the company's 125 million yuan ($19 million) sale of its 10 percent interest in Double Happiness Co, a leading domestic sports equipment manufacturer, the company said.

Hard times

Li Ning Co had its share of difficulties over the last few years. Three straight years of losses took a toll on the company's stock price.

Even after its recent jump, Ling Ning's shares are only traded for around one-seventh of their peak value in 2010, according to the National Business Daily (NBD). The company's market value now stands at around HK$8.4 billion yuan, the report said.

"As a leading sportswear retailer in China, the company expanded aggressively after 2008, but was affected by the sluggish sportswear industry, resulting in higher costs and more store closures," said Zhu Qinghua, an industry analyst with Shenzhen-based CIC Industry Research Center.

Due to its fuzzy position in the market, the brand lost its older, value-conscious consumers and failed to capture trendy youngsters, Zhu told the Global Times on Tuesday.

A white-collar worker in Beijing surnamed Lin told the Global Times on Tuesday that he liked Li Ning's stock 10 years ago, but he would not buy it now because the brand is likely to lag behind the market.

The company's management has also undergone significant changes over the last four years.

In 2012, when its revenues started to fall, former CEO Zhang Zhiyong left the company after more than 20 years of service.

After Jin Zhenjun, the chief arranged by TPG Capital, left in November 2014, Li Ning took the role as interim CEO.

Experts say it seems that only Li Ning can save Li Ning Co. The "gymnast prince," who won more than 100 gold medals, is determined to take his company back to profitability.

Looming challenges

Li Ning Co has found itself squeezed in recent years between famous global brands and rising local rivals.

Domestic companies such as ANTA Sports Products Ltd, 361 Degrees International and Peak Sport Products Co are performing well in second- and third-tier cities by catering to the needs of middle and low-end consumers.

Even with the downturn in the domestic sportswear market, ANTA's annual net profit rose from 1.5 billion yuan in 2010 to 1.7 billion yuan in 2014, according to a report in the NBD.

"I prefer to buy ANTA's footwear. It is quite good and cheaper than Li Ning's," Huang Hanlin, a 20-something consumer in Guiyang, capital of Southwest China's Guizhou Province, told the Global Times on Tuesday.

To battle against its domestic and global competitors, Li Ning has to stay competitive in first-tier cities while trying to serve the second- and third-tier cities through its e-commerce business, said Zhang, the CEO of Key-Solution.

As running and biking has become more popular among the Chinese middle class in recent years, more and more people are buying sportswear, Zhang said.

Turning point

After three years of painful restructuring that involved closing stores, streamlining operations and clearing inventory, the sportswear industry has reached a turning point and is now poised for a rapid growth, experts agreed.

The industry has a lot of room to expand, giving it strong prospects for the future, said Zhu, the analyst from the CIC Industry Research Center.

"Technology will become a primary factor in sportswear," he said. "A sportswear company's research and development capability will be critical to its success."

By applying the competitive spirit of athletics to develop its business, Li Ning will make use of the Internet to change its role from a traditional sportswear retailer to a supplier of a "sports experience" that makes customers believe that "anything is possible," the company said, referring to its slogan.

Li Ning in July 2015 announced the launch of a "smart" line of athletic shoes created in cooperation with domestic smartphone maker Xiaomi Technology, marking the company's first venture into the wearable technology area.

The firm will focus on exploring smart sportswear products as it attempts to target a young generation of consumers, Zhu said.