SBD/March 26, 2013/Finance

Li-Ning Reports Losses; Plans To Scale Back Inventory And Overhaul Image

Chinese sportswear company Li-Ning reported “a deeper-than-expected annual loss, its first in nearly a decade as a listed company, but said its bottom line should improve this year as it scales back inventory and overhauls its image,” according to Chu & Burkitt of the WALL STREET JOURNAL. Exec Chair Li Ning yesterday said, "In the next two to three years, the industry will still see a lot of restructuring, but I think we can say we've survived the most difficult time." Exec Vice Chair Jin-Goon Kim said that the company “may close additional stores in 2013 after having cut 1,821 stores last year to its current 6,434.” The company is “in the midst of a three-year restructuring plan.” Li-Ning said that it “swung to a 2012 loss” of $318.8M, citing “inventory buildup and stiff competition.” Kim said that the company’s inventory levels are “now at healthy levels, and the company is focused on ‘winning (in China) big time before we focus on the overseas market.’” He added that while the company “will need to raise additional funds to improve its cash flow, it has no timeline for doing so.” Li-Ning said that to broaden its appeal to Chinese consumers it would “focus on its core Li Ning brand of apparel and footwear and de-emphasize the Lotto sports fashion brand" (WALL STREET JOURNAL, 3/26).

FORGOTTEN MAN? REUTERS’ Kwok & Jourdan noted analysts have been left “puzzling the logic of splashing out on an expensive NBA superstar with no apparent U.S. retail strategy in place” after Li-Ning lured Heat G Dwyane Wade from Nike last year. Li-Ning is “paying top dollar for an elite athlete just as Nike and other established sportswear brands are scaling back on big-name endorsements because of disappointing returns.” Li-Ning also “raced to open hundreds of stores in the afterglow of the Beijing Olympics in 2008, but has been forced to retreat as sales have slumped.” DiGennaro Communications Account Exec Will DeGirolamo, whose firm reps Li-Ning Brand Initiative Dir Brian Cupps, said that there would be “more news soon on the Wade deal, including the U.S. launch of a new line of sneakers.” DeGirolamo said, "The sneakers will be available for the first time in the U.S. in early April." But Kwok & Jourdan noted not having shoes on the market now “means Li-Ning may be missing out on a golden opportunity,” as the Heat are on a run of 27 straight wins (REUTERS, 3/23).
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