CHINA: Li Ning turnaround gathers “favourable” FY results
- FY loss of CNY359.4m (US$) versus CNY1.96bn
- Revenues down 12.8% to CNY5.83bn
- Gross margin improves to 44.5% from 37.7%
Improved margins and lower expenses helped Li Ning narrow its full-year loss
Li Ning has said the first phase of its transformation plan has achieved "favourable" results after the Chinese sportswear company narrowed its full-year loss, helped by lower costs and improved margins.
The group attributed the year-on-year decline in revenue to the resizing of its retail network, sell-in reductions and inventory clearance.
During the year to 31 December, Li Ning exited unprofitable markets, products and channels, but also focused on the five-fastest growing core sports sectors - basketball, running, badminton, training and sports life - and invested in building its core operating platform, including increasing the number of direct stores.
Gross margin improvement was driven by the performance of its Li Ning and Double Happiness brands. Distribution and administrative expenses fell 32% to CNY2.91bn.
In addition, Jin-Goon Kim, executive vice chairman and director, has been appointed as interim CEO of the company.
Commenting on the group's transformation, Kim said: "In the past year we were head-on continuing to fix the business and at the same time starting to build our new business. The first phase of the Transformation Plan, the Channel Revival Plan, is nearly complete with encouraging core trends."
Direct sales accounted for around one third of Li Ning brand's revenues, its new products as a proportion of total inventory recovered to 2011 levels, and retail sales of new products rose by a mid-single digit year-on-year in the second half of 2013.
"We've already started re-expanding again, investing boldly but smartly according to our transformation plan and we firmly believe these efforts will capture the significant growth potential for Li Ning company," Kim added.
The company expects market uncertainties to potentially pose challenges to its transformation, but will continue to implement the plan, optimise its sales network, strengthen profitability through innovation and enhance retail management.
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