Li Ning Co., Ltd. issued a profit warning on the Hong Kong Stock Exchange yesterday morning, saying that the company will have a substantial loss this year, and said that the company's management is currently seeking a major transformation of the company.
Li Ning Co., Ltd. issued a profit warning on the Hong Kong Stock Exchange yesterday morning, saying that the company will have a substantial loss this year, and said that the company's management is currently seeking a major transformation of the company. The announcement pointed out that based on the preliminary review of the company's unaudited consolidated management accounts for the 11 months ended November 30, 2012, the company will experience a substantial loss for the year ending December 31, 2012. Yesterday, Li Ning stocks fell 3.89% to close at HK$4.7.
Li Ning also pointed out in the announcement that in the past two years, the Group’s sales channel problems have gradually emerged, and the company will implement a large-scale one-time channel revival plan to replace old inventory with a new product portfolio to solve the problem of sales channels including excess inventory, and help Sales channels to strengthen the financial status and cash flow, the estimated cost is about 14 to 18 billion yuan.
The Board of Directors believes that the Group has previously gained market share through wholesale operations. However, in recent years, this model is no longer suitable for the development of the industry. The Board of Directors also noted that over-expansion has led to an increase in dealer inventories, which has adversely affected the profitability of retail stores.
Li Ning is currently advancing a three-year reform plan to win more shares in the sportswear market in the mainland and increase profitability. The company announced in July this year that founder Li Ning took over as CEO and invited an executive from TPG Group, a US private equity investment company, to join the company to lead the company’s transformation.
Li Ning told the media that “the management believes that reducing obsolete inventory, improving product freshness, optimizing product procurement, and rationalizing sales channels are the best ways to restore the Group’s sales channels.â€
When the company announced its first-half results in August, it had expected the 2012 annual results to lose money. The company’s net profit for the first half of the year was only RMB 44 million, a sharp decrease of 85% year-on-year. The 2011 net profit was 386 million yuan.
Li Ning also pointed out in the announcement that in the past two years, the Group’s sales channel problems have gradually emerged, and the company will implement a large-scale one-time channel revival plan to replace old inventory with a new product portfolio to solve the problem of sales channels including excess inventory, and help Sales channels to strengthen the financial status and cash flow, the estimated cost is about 14 to 18 billion yuan.
The Board of Directors believes that the Group has previously gained market share through wholesale operations. However, in recent years, this model is no longer suitable for the development of the industry. The Board of Directors also noted that over-expansion has led to an increase in dealer inventories, which has adversely affected the profitability of retail stores.
Li Ning is currently advancing a three-year reform plan to win more shares in the sportswear market in the mainland and increase profitability. The company announced in July this year that founder Li Ning took over as CEO and invited an executive from TPG Group, a US private equity investment company, to join the company to lead the company’s transformation.
Li Ning told the media that “the management believes that reducing obsolete inventory, improving product freshness, optimizing product procurement, and rationalizing sales channels are the best ways to restore the Group’s sales channels.â€
When the company announced its first-half results in August, it had expected the 2012 annual results to lose money. The company’s net profit for the first half of the year was only RMB 44 million, a sharp decrease of 85% year-on-year. The 2011 net profit was 386 million yuan.
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