Li
Ning Company said it expects 2012 profits to undergo a “rather substantial
decline” over a year earlier, due to rising marketing costs and a one-off
impairment loss due to intangible assets of licensing brand Lotto as well as
sharp revenue declines.
In
a filing to the Hong Kong bourse last week, Li Ning said trade fairs for 2012
had been completed and new product trade fair orders for the full year would
show a high single digit percentage fall on last year. For the fourth-quarter,
trade fair results showed total orders by value would fall by the high teens in
percentage terms year-on-year. This included a fall of over 20 percent for
apparel products and low-teens in footwear.
“Competition
within the sporting goods industry has intensified, discount promoting efforts
have further increased and the pressure of inventory clearance at the retail
level remains strong,” the company said.
Li
Ning said it also faced a “substantial” increase in brand marketing
and promotion expenses after it just signed a five-year agreement to be the
equipment sponsor for the Chinese Basketball Association through to 2016/2017.
Earnings
would also be hurt by a previously announced impairment loss of intangible
assets on the Lotto brand licensing business, and other factors, such as
interest payable in relation to convertible bonds.
“During
this year and next year, the group will strive to clear out inventory at the
retail level, streamline the retail store network, control the pace of new store
openings, close down inefficient stores and improve retail efficiency,” Li
Ning said in the statement.
