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Founder of China's Li Ning returns to lead turnaround after third annual loss

By
Reuters
Published
today Mar 20, 2015
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Chinese sportswear maker Li Ning Co said on Thursday its namesake founder was returning to lead a turnaround drive, as the former industry leader posted a third consecutive year of losses, squeezed by global brands and cheap local rivals.

The former Olympic champion gymnast returns as interim chief executive to replace Kim Jin-goon, an executive of U.S. private equity fund and Li Ning backer TPG Capital, who stepped down in November.

Li Ning


The company is also betting that collaborations with tech companies such as fast-growing smartphone maker Xiaomi and a mid-ranged pricing strategy will help boost sales this year and attract younger customers.

News of Li's return helped lift the stock nearly 12 percent to its highest close since September last year.

"It fuelled hope that Li may bring some good changes," said Steven Leung, a Hong Kong-based broker at UOB Kay Hian. "But we remain cautious on its store expansion when the industry is still facing a lot of challenges."

Li Ning, also backed by Singapore sovereign fund GIC , on Thursday it said its net loss nearly doubled to $125 million as it soaked up restructuring costs.

The company has struggled to compete with global powerhouses like Nike Inc and cheaper domestic brands, trimming its store network to just over 5,600 in China last year from over 8,000 a few years ago.

Chief Financial Officer Terence Tsang, however, told an earnings briefing the company aims to achieve mid-to-high single digit growth in same store sales this year, an improvement from the low single-digit growth notched in the second half.

"The year 2015 will mark the beginning of a new development stage...and breakthrough is expected in the next three years," the company said in its earnings statement.

Li Ning posted a net loss of 781.5 million yuan ($125 million) for 2014, versus a 391.5 million yuan loss a year earlier. The loss was in line with analysts' forecast.

Full-year revenue rose 16 percent to 6.73 billion yuan as distributors expanded sales amid signs that China's sportswear makers appear to be growing again after years of overzealous expansion ended in an earnings squeeze.

1 CNY = $0.16/£0.11
$1 = £0.68

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