Li Ning's transformation plan was developed to strengthen the Group's financial performance and to position Li Ning for long-term profitable and sustainable growth. Since the announcement of its transformation plan in July this year, the Group has reported good progress on a number of initiatives, including investing in branding and product development, building better supply chain and retail operations for the Group, downsizing its cost structure, as well as successfully recruiting a number of new talents to the Group in the past few months.
Mr. Li Ning, Executive Chairman of the Group, commented, "Despite the current challenges faced by the industry as a whole, we have an ambitious revival plan to definitively address channel issues. The results of the pilot scheme for the Channel Revival Plan have been highly encouraging. We expect the combined actions to strengthen the long term productivity and profitability of our sales channels, which will in turn support the profitable growth of our company."
As a result of focused diagnosis and field testing, the management of Li Ning concluded that reducing old inventory, improving product freshness and optimizing merchandising, coupled with network rationalization, is the best path to recovery for the sales channels. To achieve this, the Group has been working closely with several top channel partners and has successfully rolled out a number of pilot tests of the Group's key initiatives, which will now be scaled up to aggressively address inventory issues and support its channel partners to strengthen their operational capabilities and profitability.
Mr. Jin-Goon Kim, Executive Vice Chairman of the Group, commented, "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. Over-expansion has caused channel partners' inventory to build up and their store productivity and profitability to decline. The management of Li Ning Company believes that it is necessary to put in place a comprehensive transformation blueprint, including a one-time channel revival plan at a scale large enough to fix the problems that had built up in the channels over the last few years."
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