Competition Between Domestic And Foreign Competitors In The Channel, Lining

Sales are expected to fall by 5%.

Local movement

Encounter investment banks sing empty

Li Ning Co announced on the 7 day its operation and performance forecast in the first half of the year showed that the company's net profit margin will fall to 6% to 7% at the end of June, down from 12.9% in the same period last year.

Lining said in a notice that the main reason for the decline in net profit margin is that the company is currently accelerating the clearance of inventory at the retail end and continuing to integrate distribution stores.

"The company decided to reclaim some of the dealer's inventory this year, because the futures orders are flat compared with last year, and the spot supplement is relatively small. It is estimated that the overall sales revenue in the first half of this year will be reduced by about 5% compared with the same period last year."

In addition, the increase in store rentals and raw materials also reduced Lining's gross margin by 1%.

In fact, since last year, Lining's revenue began to decline.

According to the financial report, Li Ning Co's revenue in 2010 was 9 billion 479 million yuan, an increase of 13% over the same period last year.

This is less than Lining's average annual growth of more than 30% over the past 10 years, which is also lower than that of Anta and PEAK.

Major investment banks have joined the camp of singing Lining.

CLSA said Li Ning Co is in the middle of its ebb tide, and investors need to wait for Lining to reform the sales channel.

UBS said that in front of Lining is the urgent need to solve the problem of stock accumulation, the decline of the market share of the two or three tier cities and the lack of confidence of distributors.

Goldman Sachs also said that Lining had two major risks to brand risk and sales channels.

Drag on share prices

Selling sentiment in the two tier market was detonated. Within three days, Lining's share price fell from HK $13.7 to HK $10.20, and its share price fell to a low of two years. In the three days, Lining's market value evaporated nearly HK $3 billion 700 million.

Lining, whose international brand name is Kappa and China's 03818.HK, issued a profit warning. Yesterday, the share prices of domestic sports brands listed in Hong Kong plunged.

At the close, Anta sports (02020.HK), XTEP international 01968.HK shares fell more than 8%, PEAK sports 01968.HK shares fell 5.89%.

"All are dragged down by profit warning by Lining and China."

A sports Brand Company executive said.

For Lining's earnings warning, peers gave different views.

"Obviously we have problems in our own business, and we have to shift the responsibility to other factors such as rents. We have to face the pressure of rents and rising costs."

PEAK CEO Xu Zhihua told reporters that all this can only be digested inside the enterprise.

Facing internal and external attacks

What led to the continuous decline of Lining's performance? Li Ning Co issued an early warning of earnings while giving the answer, "this is the inevitable process of the group's active pformation."

On the one hand, Lining emphasized the internationalization of brand remolding, and on the other hand, he integrated the sales channels. This series of actions brought Lining short-term performance decline and personnel earthquake.

What is even more disheartening is that despite the fact that Lining, who is in line with Nike and Adidas, does not regard other domestic sports brands as an eye, it has to face the awkward fact that at present, the market value of Lining's Hong Kong stock is HK $10 billion 767 million, which is not only comparable to that of XTEP's international, PEAK sports and other second-class sports brands, but also to 1/3 of Anta's sports market value of HK $31 billion 126 million.

Li Ning Co is in an awkward interlayer.

The international market has been basically separated from Nike and Adidas, and the back of the domestic market is also unstable.

Insiders pointed out that Anta, XTEP and PEAK, which started in two or three tier cities, were squeezing into the first tier cities on a large scale.