Li Ning Co Ltd., China’s biggest sporting goods maker, said it expects revenue to decline 5 percent in the first half of 2011 from a year ago as it moves to revamp distribution channels.
In a filing with the Hong Kong bourse, the company also indicated that its gross profit margin was expected to decline by 100 basis points in the half due to a new wholesale discount policy and increases in raw material costs.
Profit margin attributable to shareholders is expected to decline to 6-7 percent of sales in the first half from 12.9 percent a year ago. The overall expense ratio is expected to increase by 7 percentage points in the first half from 32 percent a year earlier, Li Ning said in its statement.
Profit margin attributable to shareholders for the full year 2011 is expected to decline by about 1-2 percentage points compared with the first half, the company added.
Same-store sales growth maintained a low-single-digit pace from January to June, with the total number of Li Ning brand stores at the end of June at 8,163 doors.
That decline comes in contrast to 2010, in which Li-Ning, founded by the legendary Olympic gymnast of the same name, reported a 31 percent increase in sales to nearly $1.5 billion.
But Li Ning’s shares have been under pressure since last winter, when the company announced weaker-than-expected order data. In March, Li Ning said income growth in China has not quite translated into a sustainable increase in purchasing power for sporting goods.
In May, it made headlines when after three of its top executives – Chief Operating Officer Guo Jian Xin, Chief Marketing Officer Fang Shih Wei and Lin Li, head of the e-commerce department – abruptly resigned from the company.
Li Ning last year formed a U.S. headquarters in Portlands Pearl District in order to pursue growth in the U.S. The comapny signed NBA players Evan Turner, Shaquille ONeal and Baron Davis to endorsement deals.
First-half results are expected to be announced in August.
