China's Sports Brand Is Facing The Tide Of Elimination

July 24th, Lu You Sports brand Signing star and NBA player Steve Nash attends Lu's activities in Quanzhou, Fujian.

In the wake of rising prices for sportswear, analysts said that in order to cope with the sequelae caused by heavy borrowing and over expansion, he was planning to win a price war between Chinese sports shoes and sportswear manufacturers by the east wind of the 2008 Beijing Olympic Games.

Ken Lee, an analyst at UOB KayHian, said in a research report released last week that as of the end of 2010, China's five largest sportswear manufacturers listed in Hongkong had 7000 or more retail outlets in the mainland.

Ken Lee said that the scene of this opening up can be traced back to the initial public offering fever in recent years in Hongkong. With this upsurge, the 360 degree International Limited and Peak Sport Products Co Limited listed in Hong Kong in June 2009 and September 2009 respectively, raising 231 million US dollars and 224 million US dollars respectively to promote their ambitious expansion plan.

Ken Lee said, but then there are all Athletic Wear Manufacturer's retail competition.

Ken Lee visited the six cities in the mainland of China in June this year. He found that their products often depreciate from 50% to 90%.

Coincidentally, Credit Suisse analysts said in a research report released earlier this month that they expect some Chinese sportswear manufacturers to integrate for survival needs, and that the industry may break out in the second half of this year.

The recent profit warning of two Chinese sportswear manufacturers is a realistic portrayal of their immediate predicament.

　　 Lining Li Ning Co. issued an early warning on July 7th, saying its profit in the first half of the year will probably fall by 56%. A day later, China Dongxiang Group, the maker of sportswear brand Kappa (Kappa), issued an alert saying that the first half profit of the first half year profit fell by 75%, probably due to a decline in sales and a provision of 220 million yuan ($34 million 100 thousand) reserve to buy back the backlog stocks to the distributors.

Before the above earnings warning was issued, Ken Lee has downgraded its sports apparel industry from the previous "market share" to "reduction". He is particularly vigilant about Lining's retail strategy. This strategy includes the increase in retail stores from about 8000 to 10 thousand in three years.

In some cases, retailers intend to open new stores in neighborhoods where four stores have been opened.

Ken Lee says more stores are useless.

Citigroup said in a Li Ning Co research report that the newly opened factory outlets pushed up the operating expenses of Li Ning Co, but it hardly helped increase overall sales.

Citigroup said that Li Ning Co is firmly pushing forward the expansion strategy of factory outlets, which may be used to deal with backlog stocks.

Nevertheless, Ken Lee believes that the trend of sales decline is basically irreversible. He predicts that Li Ning Co will start losing money in the first half of next year. A key indicator that must be noted is the sales figures that will be released in August and the data on wholesale demand in 2012 this autumn.

Last week, Morgan Stanley (Morgan Stanley), with Li Ning Co and China's trend, continued to buy over season inventory grounds, and saw the market of sports apparel industry down.

Nevertheless, some Chinese sports brands still hold optimistic expectations for the future. XTEP International Holdings Limited, which is listed in Hongkong, said it plans to add 500 retail stores this year, mainly in the two or three line city center.