After a review of the first 11 months, Li Ning Co. said it expects to show a substantial loss for the year. The loss is expected to be primarily attributable to one-time costs related to the implementation of its transformation plan, including the Channel Revival Plan.
The Chinese company noted said its board had fully approved managements “Channel Revival Plan that calls for aggressive inventory clearance and other moves to enhance sales channel profitability. Seeing the success of the pilot scheme initiated in July, the board has endorsed the Channel Revival Plan with a budget of RMB 1.4 to 1.8 billion, ($224 million to $288 million).
“The wholesale business practice that had allowed Li Ning to quickly capture market share in the Chinese sportswear industry through aggressive network expansion was no longer able to respond quickly to the dramatic slowdown and saturation of the industry in the past few years, said Jin-Goon Kim, executive vice chairman of Li Ning. Over-expansion has caused channel partners inventory to build up and their store productivity and profitability to decline.
The plan covers inventory clearance, inventory buy-back, sales network rationalization and customized programs to restructure the accounts receivables from individual participants. Channel policies are also being revamped to focus on stronger partners.
Li Ning is the third largest sports apparel and footwear brand in the world after Nike and Adidas and the first Chinese sports brand to enter the U.S. In October, Li-Ning signed an endorsement deal with the Miami Heats Dwyane Wade that includes the creation of the Wade brand, designed to mimic Nikes Jordan brand. Its other NBA endorsers include such as Philadelphia 76ers forward Evan Turner and Toronto Raptors guard Jose Calderon.
