Sportswear maker Li Ning expects sales declines

12 Jul '11

4 min read

Li Ning Company Limited will be holding a discussion with investors and analysts on the operational highlights and estimated results of the Group for the six months ended 30 June 2011, as well as its outlook for the full year as set out in this announcement. This discussion is an update to the disclosure of information consistently made by the Group since January this year.

The Group has always adhered to its core strategy and mission – to focus on branding and product innovation and compete on differentiation. Through its focus on the very essence of sports, the Group aims to inspire people's desire and power to make breakthroughs.

In recent years the sporting goods industry in China has experienced changes that are marked by the consumers' consistently escalating requirements and maturing awareness towards branding and sports functionality.

At the same time, rising costs have inflicted far-reaching impacts on the overall structure of the industry and have had a profound influence on different segments of the value chain. On the other hand, competition within the industry is intensifying and the overall competitive landscape is presently shifting. It was against this macro environment that the Group proactively introduced key reform measures in 2010, including the brand revitalisation and distribution channel reforms, to better align the growth objectives of the Group with the industry's development trend.

The Group is currently in the early stages of this reform process. Consistent with its constant communications with investors since January this year, the management has envisaged that in the near term future, the Group's operating performance and financial indicators will both be affected. More importantly, throughout the reform process, the management has been analysing and reviewing the situation on an ongoing basis in order to adjust and improve its execution plan. At the same time, the Group has actively enhanced its communications with its investors and the capital market, so as to facilitate investors' timely and effective understanding of the Group's progress and development.

The LI-NING Brand Products Trade Fair for the fourth quarter of 2011 concluded in June 2011. Based on tagged retail prices, the confirmed order value for this Trade Fair rose by more than 5% compared with the corresponding period last year. The average retail prices for apparel and footwear products registered increases of over 10%, while order volumes declined at a high-single-digit rate. Due to the new wholesale discount policy for 2011, order value based on sell-in prices declined by about 1% from the corresponding period last year.

Looking at the results of the LI-NING Brand Trade Fairs for the full year 2011 , order value for new products grew by approximately 1% based on tagged retail prices, and declined more than 5% from the year 2010 based on sell-in prices.

As of 30 June 2011, the Group hascompleted integration of 256 single-store, low-efficiency sub-distributors, which is in line with the Group's implementation plan. The Group envisages that by the end of 2011, it will complete integration of 400 single-store sub-distributors. As of the end of June 2011 , the number of LI-NING brand factory outlets reached 191.

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