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Lining Brand Positioning Ambiguous Stock Prospects Worrying

2011/1/12 11:24:00 97

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It seems that the status of an international sports superstar does not seem to be enough to succeed in business.

Sportswear companies were once the darling of China's consumer sector, and now their aura is fading.

In December of last year, the same name company, founded by Lining, a gymnast champion, announced that the number of orders in the second quarter of 2011 was surprisingly low, resulting in a decline of 15% in Hongkong's share price and a loss of HK $3 billion (US $386 million 100 thousand) in market value.

The number of sales orders announced by Li Ning Co's China trend group is also not satisfactory. The price of the two shares fell by 44% last year.

The shares of the two companies were the worst performing companies in the industry, and the shares of other companies in the same industry began to weaken in the second half of last year.

The industry's share price has dropped by about 17%.

Lining

Trend group's growth in orders in the second quarter of 2011 was 0% and 3%, much lower than the 22% quarter and 15% in the second quarter of 2010, which exacerbated concerns about the slowdown in the rapid growth of China's sports apparel industry.

Although their competitors' growth in orders for the second quarter of 2011 was relatively healthy, more than 20%, worries about the future of the industry may continue to put pressure on stocks in the industry this year.

Selling last year

Sportswear

The phenomenon of stocks shows that some companies that used to trade highly valued will inevitably be reassessed.

According to GoldmanSachs, for example, the price earnings ratio of Lining's stock is 13 times that of its full year profit in 2011, and its average price earnings ratio is 23 times since its initial public offering in June 2004.

DeutscheBank will be the year of adjustment in 2011 because the pace of traditional expansion driven by new stores has begun to slow down, according to Deutsche Bank.

Goldman Sachs estimates that in the past few years, the growth rate of sportswear shops has been slowing down. In 2007, the average growth rate of sports clothing increased by 80% over the same period last year, while in 2010 it dropped to 18%, as the sales growth rate of the same store lagged behind that of other retail areas.

But in 2011, it will also be a year of differentiation for sportswear companies.

Lining's capture of overseas markets last year must have attracted a lot of attention, but Goldman Sachs believes that this is a step wrong.

Goldman Sachs said that Lining's brand positioning is between the global high-end brands and the domestic mass market brands. This lack of clear value orientation and the status of cards in the middle are risky.

By contrast, smaller brands are doing well. They continue to focus on the Chinese mass market and make full use of the urbanization process to make profits.

Credit Suisse (CreditSuisse) believes that

Peak

Sporting goods limited and Anta Sports Products Limited will continue to maintain strong growth in the next two years. 74% of the former's revenue comes from the mass market. The latter is the leader in China's sportswear brand in terms of footwear and clothing sales.