Li Ning reshapes "labor pain": å°´å°¬ consumer groups and channel positioning

Since July, the Hong Kong stock market has been suppressed by international short-sighted forces and the Hang Seng Index has closed the Yinxian for three consecutive weeks. The H-share apparel and footwear segment represented by Li Ning has not been spared. In particular, environmental protection organizations recently pointed out that 14 garment brands such as Li Ning failed to effectively solve the emission pollution problem of its suppliers, which caused the stock price of listed companies to weaken significantly.

As a representative of the H-share apparel and footwear listed companies, Li Ning has recently received market attention. On July 7th, Li Ning Company released the first half of 2011 operating conditions, performance forecast and annual outlook announcement on the Hong Kong Stock Exchange. It is expected that the net profit margin in the first half of this year will fall from 12.9% in the same period of last year to 6% -7. %. And it is expected that the cost of raw materials will continue to increase substantially in the second half of the year. The gross profit margin in the second half of the year will decline year-on-year, and the profit attributable to shareholders will decline by about 1 to 2 percentage points from the first half of the year. Li Ning Company stated that the main reason for the decrease in net profit margin is that the company is currently accelerating the speed of inventory clean-up at the retail side and continuously integrating its distribution stores.

Affected by the negative results, Li Ning's share price fell by 15.77% on July 7th, hitting a new low in 27 months. In the following three days, Li Ning's stock price fell from 13.7 Hong Kong dollars to 10.20 Hong Kong dollars, to 1.056 billion in the total share capital, Li Ning's market value evaporated nearly 3.7 billion Hong Kong dollar in three days.

Affected by Li Ning and China Mobile (driving profit warning, the domestic sports brand stocks listed in Hong Kong on July 10 all dived. As of the close of the day, ANTA Sports and Xtep International shares fell by more than 8%, and Peak Sports shares fell by 5.89%.

Poor brand conversion difficulties

In the announcement, Li Ning repeatedly stressed that the decline in performance was due to the increase in raw material costs and labor costs. In fact, under the general environment where the entire textile and apparel industry is facing slowing orders and increased competition, Li Ning’s positioning is vague. The gap between international brands such as Nike and Adidas continues to increase, and the price of products is also “green and yellow”, making the company in the market. In the larger operating pressure.

In fact, since the launch of the restructuring strategy of rebranding on June 30, 2010, Li Ning's transformation has taken a toll and has faced a situation of internal and diplomatic difficulties.

In terms of internal operations, the first is the company's integration of stores, channel adjustments did not bring expected benefits, inventory digestion did not reach the set target, and the company’s order volume fell for two consecutive quarters. Li Ning disclosed in its announcement that as of June 30, 2011, it had completed the integration of 256 inefficient single store distributors. It is expected that by the end of 2011, the integration of 400 single store distributors will be completed. In terms of retail sales data, Li Ning's store growth in the first half of the year remained at a low level, with a total of 8163 stores, and inventory levels increased.

At the just-concluded fourth-quarter new product ordering meeting of Li Ning Company, the order amount was calculated at the retail price, which was more than 5% over the same period of last year. The order amount calculated from the point of view of wholesale shipping decreased by approximately 1% from the same period of last year. According to the Li Ning brand's full-year ordering data for 2011, the annual new product order amount calculated by retail pricing increased by approximately 1%, while the annual order amount calculated based on the perspective of wholesale shipments declined by more than 5% from 2010.

In addition to the lack of optimistic business data, Li Ning COO (Chief Operating Officer) Guo Jianxin, CMO (Chief Marketing Officer) Fang Shiwei, and Director of e-Commerce Lin Yi left the company in succession at the end of May. This has also triggered market concerns about personnel fluctuations.

In external competition, the industry does not buy Li Ning's brand positioning. In the high-end market, Nike and Adidas have gradually increased their investment in the Chinese market and have a greater appeal for young consumers. On the mass market, there are also Jinjiang companies, such as Anta, Xtep and Peak, which cover the second and third tier cities in a more competitive price range. The average price of Li Ning's sports footwear is about 35% higher than that of Anta. Li Ning's "sandwich layer" The problem is getting more and more prominent.

Under the background of a 20% increase in the market over the same period, Li Ning did not perform well, which caused the capital market to lose confidence in it.

As early as December 20, 2010, Li Ning's stock price fell 23% on that day, and the market value evaporated nearly 4.5 billion Hong Kong dollars. Among them, JP Morgan Chase reduced its holdings of 12.883 million shares at a price of HK$18.24 per share. At the same time, Li Ning’s target share price fell by 23%. At the end of May 2011, the departure of executives also caused Li Ning's share price to fall by 8%. Currently, the market value of Li Ning is approximately HK$10.8 billion, which is close to Xtep and less than one-third of the market value of Anta Sports.

Domestic institutions and international investment banks have also lowered their ratings on Li Ning. JP Morgan downgraded Li Ning from “neutral” to “reduce” and cut its target price by 49% to 8 Hong Kong dollars. On July 8, CLSA downgraded Li Ning from "underperforming the market" to "sell" and lowered its target price from HK$13.3 to HK$9.8. On July 15, Guotai Junan issued a research report. It is expected that Li Ning's net profit in the first half of 2011 will fall by 52% year-on-year, and its target price will be reduced from 12.09 Hong Kong dollars to 10.75 Hong Kong dollars, corresponding to 2.5 times 2011 forecasted book-to-book ratio.

Guotai Junan International Peng Gangxiang believes that the recent profit warnings of Li Ning and China are far worse than expected, and brought about the adjustment of the entire sports goods stocks. The biggest concern at the moment comes from the inventory at the retail end, which will inevitably affect the sales of domestic peers in the second half of the year and 2012.