CHINA: Li Ning warns of losses under turnaround plan
Chinese sportswear firm Li Ning Co has warned that it expects to post a "substantial" loss during the current financial year as it accelerates efforts to turn around the company.
Elaborating on a multi-year turnaround plan launched in July to try to improve the struggling firm's performance and growth, Li Ning says its focus will be on reducing inventory of existing products, getting newer products into stores and improving its sales network.
But it says it will spend up to CNY1.8bn (US$289m) carrying out the plans.
Pilots of the so-called 'Channel Revival Plan,' have so far been "highly encouraging," the company said.
"The wholesale business practice that had allowed Li Ning to quickly capture market share in the Chinese sportswear industry through aggressive network expansion was no longer able to respond quickly to the dramatic slowdown and saturation of the industry in the past few years," explains executive vice chairman Mr Jin-Goon Kim.
"Over-expansion has caused channel partners' inventory to build up and their store productivity and profitability to decline.
"Our management team will work closely with key channel partners to finalise and execute each of their revival programmes over the next few months."
He added: "We believe Li Ning's initiatives will be critical to leading the group and its channel partners to not only weather through the inventory build-up issues faced by the industry, but to create a new model that will result in profitable long-term growth for the business overall."
Li Ning's first-half profit tumbled 84.9% to CNY44.3m (US$7m) as it closed almost 1,000 stores. Sales fell 9.5% to CNY3.8bn.
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