Li Ning to open 56 factory outlets
August 29, 2011 Category Retail, Weekly
Sportswear maker Li Ning plans to open 56 so-called “factory outlets” to clear mounting inventory after reporting a 49.5% plunge in net profit for this year’s first half to CNY294 million. Sales through factory shops and other inventory clearance channels amounted to 11% of total sales in the first seven months this year and would climb to 15% by the middle of next year, Chief Executive Zhang Zhiyong said. Merchandise offered in such outlets is usually half the price of new stock. Li Ning earmarked CNY300 million this year to buy back distributors’ stock and plans to spend up to CNY300 million doing so next year. Revenue dropped 4.8% to CNY4.3 billion. Li Ning’s share price has fallen 65% during the past year. Zhang said the profit decline in the first half of the year was mainly due to a drop in revenue, increases in advertising expenses and a dramatic rise in rents and labor costs. He expected the gross profit margin would still be under pressure in the second half despite falling prices of raw materials since July. The company plans to focus more on high-end products, such as sports shoes priced at CNY400 or higher. As of the end of July, Li Ning operated 8,163 shops across the country. The total number is expected to reach 8,300 by the end of this year, and climb to 8,650 and 9,000 in the years 2012 and 2013, the South China Morning Post reports.
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