Li Ning’s Sales Run UP 32.4% in First Half

“During the first half of 2009, while the impact of the global financial crisis continued, and China's, as well as the world's economies, had been adjusting amid the turmoil. As the series of economic stimulus packages promulgated by the Central Government started to take effect, China's economy showed signs of recovery in the second quarter. Leading economic indicators are pointing to a recovery primarily driven by the government,” said Li Ning, Chairman of the Group.

“Notwithstanding the complex economic environment, we have strived to enhance our underlying strengths, on one hand enhancing our core competitiveness, while on the other hand intensifying development of new businesses and the strengthening of a multi-brand structure. We also have implemented prudent and effective management measures.”

During the six months under review, the Group intensified its sales channel support to facilitate expansion of sales channel coverage and improved its retail management at the retail level. It adjusted its product research and development and design to align better market segments and consumer preferences, with a special focus on the launch of the Group's new business, LI-NING brand badminton products. It continued its efforts in building a flexible and effective supply chain structure to enhance operational efficiency.

The Group's core brand, LI-NING brand saw sales of footwear products grew by 23.9% year on year while apparel products and accessories grew by 25.1% and 23.1% respectively.

Double Happiness and Lotto, new additions to the Group's brand portfolio in the second half of last year, respectively recorded sales revenues of RMB219 million ($32.1 mm) and RMB15.4 million ($2.6 mm), accounting for 5.4% and 0.4% of the Group's total. Total revenue generated by AIGLE, Z-DO and Kason brands aggregated RMB80.5 million ($11.8 mm), representing for a relatively small proportion of the Group's total revenue.

In the area of sports marketing, the Group signed up in March the Russian pole vault athlete Elena Isinbayeva, who is a two-time Olympics gold medalist, three-time winner of International Association of Athletics Federations' World Athlete of the Year.

Recognizing the rapid development of badminton in China and Southeast Asia, the Group rolled out in full its strategy in the badminton sector. It signed in April the China National Badminton Team, the fifth gold medal team under the Li Ning sponsorship umbrella. This team participated in the Sudiman Cup tournament in May in full LI-NING brand badminton gear, which well exceeded the members' professional expectations in aspects of handle grip, racket responsiveness, comfort and protection of the apparels and footwear. The Group also secured during the period its sponsorship of the Singapore National Badminton Team and Singapore Open.

During the six months under review, the Group continuously expanded its sales channel coverage, especially in second- and third-tier cities that have the strongest growth potential. As at 30 June 2009, the Group had 7,550 retail outlets in China (6,809 of which were Li-NING brand stores), representing a net addition of 633 stores as compared to the same period of last year. With respect to the LI-NING brand, the Group had approximately 130 distributors operating a total of 6,464 franchised retail stores nationwide as well as a total of 345 directly-managed retail stores in Beijing, Shanghai and 15 other provinces in China.

On supply chain management, construction of all facilities in Jingmen Industrial City progressed on schedule. The output plan for this Centre over the next three years has been completed and is now being implemented.

Going forward, as part of the package of initiatives to kick off its new five-year plan, the Group will continue its preparatory work for revamping the LI-NING brand to better integrate product designs with consumption experience targeting different customer segments to enhance the core competencies of the brand; improve store performance through effective measures and ongoing expansion of the retail network to strengthen market position; establish a flexible and effective supply chain system to better support business growth and pursue development of strategic new businesses to create more growth drivers.

Li Ning said, “The success in hosting the Beijing Olympics has strengthened the Central Government's determination in grooming the country into a sports superpower, a policy direction that virtually guarantees the development of sports brands. Challenges breed opportunities. The adverse macroeconomic situation poses great challenge to those in the retail industry, including us. In light of the pressure surrounding China's and the world's economies, and the uncertain macroeconomic environment, we have adopted cautious strategies and are proactively assessing its business risks and formulating appropriate remedial measures to be prepared for contingencies and to ensure sustainable growth in order to create better value for shareholders and investors.”