Li Ning's performance is bad, questioned: everything is possible

The previous mainland sporting goods leader Li Ning Sports Goods Co., Ltd. (hereinafter referred to as "Li Ning") has yet to come out of the shadows. On June 12, Li Ning issued an early warning of performance. The annual unit orders showed a high unit number decline, and it is expected that the profit for the first half of the year and the whole year will fall sharply.

On June 11, Li Ning released the news of sponsoring the China Basketball Professional League (CBA) and shortening the time of the Le Tour concession so that the major investment banks and analysts lost their confidence.

On June 13, a number of investment banks and analysts, including JP Morgan Chase, Merrill Lynch, China International Capital, and Shenyin Wanguo, downgraded Li Ning’s rating to “reduce” or “underperform the market”.

From the market point of view, on June 12, Li Ning was funded by the fund, and the stock price once fell to a new low of 6 and a half years. It fell by 8% a day and closed at 5.25 yuan. The market value evaporated 400 million yuan in a single day. On June 13th, its share price continued to fall, with a drop of 3.05%.

Poor performance <br> <br> Currently, Li Ning in 2012 full-year orders will have been completed. However, there was a high double-digit decline in the order amount for the fourth quarter just concluded. Among them, there was a low double-digit decline in the amount of orders for footwear products, and the average retail price and order quantity had a low single digit and a low double-digit decline, respectively. In terms of clothing, the order amount showed a decline of more than 20%. Its average retail price and order quantity showed a low single digit and a drop of more than 20%.

Li Ning said in the announcement that it expects that the pre-tax profit and net profit will decline significantly in the first half of this year and the whole year.

In fact, since the beginning of last year, Li Ning's performance has experienced a sharp decline. According to Li Ning’s 2011 annual report, from a profit perspective, Li Ning’s net profit dropped by 65.2% to 386 million yuan last year; revenue decreased by 5.8% to 8.929 billion yuan, and its profit decline ranked at Anta, 361 degrees, Xtep and Peake. The end of the big native sports brand.

From the perspective of inventory and cycle, Li Ning’s inventory amount also reached 1.133 billion yuan, a year-on-year increase of 40.57%; inventory turnover days also rose from 52 days of the previous year to 73 days.

It is worth noting that with the intensification of brand competition, Li Ning's domestic sports brand championship is also at stake. The 2011 annual report of three other local sporting goods, Xtep International (3.2, -0.10, -3.03%, Real-time Quotes), 361 Degrees, and Peak Sport, showed that these three companies achieved revenue of 5.54 billion yuan, 5.568 billion yuan, and 4.65 billion yuan respectively. Yuan, an increase of 24.28%, 14.84% and 9.4% respectively over the same period of last year. The number of retail stores of the three companies was more significant than that of Li Ning and Anta in the first camp. Xtep, 361 degrees, and Peak retail stores increased by 565, 602, and 582 respectively over the previous year. Li Ninghe Anta added 340 and 229 respectively.

Questioning

Under the pressure of declining performance, Li Ning had to shrink the front and refocus the dominant "sports" brand to cope with the industry downturn that has not yet ended.

On June 11, the Li Ning Group signed a cooperation memorandum for becoming a CBA equipment sponsor. The agreement covers five seasons from 2012-2013 to 2016-2017. Li Ning did not disclose the specific amount of the sponsorship, but media sources said that the total amount of equipment sponsorship contract between Li Ning and the CBA is as high as 2 billion yuan, which is an average of 400 million yuan per season. In contrast, the price of the sponsorship agreement signed by Anta and CBA was much lower, and the alleged sponsorship fee for three years was only RMB 60 million.

On the same day, Li Ning also stated that it had shortened the Lotto franchise period for fashion sports brands by 10 years by signing a supplementary agreement. In 2008, Li Ning signed an agreement with the Italian sports brand LottoSport to obtain the brand's 20-year exclusive franchise in China. The shortening of the Le Tour concession period can reduce Li Ning's royalty fee of 934 million yuan in the past 20 years to 210 million yuan in 10 years.

However, as the price of signing the latest agreement, Li Ning needs to pay Lotto Sport an extra 45 million yuan.

For Li Ning’s series of actions, Li Hongliang, former Li Ning’s sports marketing manager and director of the Eastern District’s retail market, is currently dissatisfied with Li Hongliang, the current seven-women men’s brand director. He commented on Weibo’s comments: “Seven years ago, the Polaris plan was just born and 10 million. Every year, it is too expensive; today, two billion in five years is not too expensive.” He said, “At the current scale of 8 billion, the total investment in the market is expected to be 8% or 650 million, and 400 million will have to sign the CBA. So I doubt the authenticity of numbers."

In addition, Li Hongliang also issued a meaningful sigh. “In the past seven years, the main project has gone from basketball to running to badminton. The CMO has changed for four. The Marketing staff has left a quarter and is now returning... I hope that everything will be available, I hope there is money for promotion. I hope there is good product!"

These moves did not win the recognition of investment banks and institutions. CICC believes that despite spending heavily on sponsorship to increase brand sentiment in the short term, sponsorship will require huge investment and marketing expenses, which will further increase the pressure on its operating turnover. Guotai Junan also believes that sponsoring CBA is not worth the money. China Motor Co., Ltd. lowered Li Ning's rating to "Reduce" and its target price fell to 4.5 yuan.

"It's hard to say that Li Ning has already made a bad run. At present, Li Ning is also actively adjusting its strategy, but personally feel that it has a greater promotion in the brand, but the energy spent on the product is limited." Meng said in an interview with reporters that whether it can bottom out in the future depends on whether it can launch more competitive products in the later period.