Lining'S Net Profit Margin Slipped In 2012

The number of orders made by Li Ning Co, a well-known sporting goods company, has dropped to a double-digit figure in the fourth quarter. The orders for clothing and footwear products are double-digit declines compared with the same period last year.

The order amount dropped by 20% over the same period last year.

In view of the outcome of the order meeting, Lining expects 2012 performance to be dragged down, sales revenue will grow negative and net profits will drop sharply.

According to the Hongkong Wen Wei Po, the total volume of orders for the fourth quarter of the year Lining recorded a high double-digit decline. The order size and order quantity of shoes products all recorded double-digit declines year by year, and the average retail price decreased as the number of units decreased. In terms of clothing products, the order amount and order volume fell by more than 20% year-on-year, while the average retail price decreased.

Li Ning Co said the competition for sports products in 2012 was more intense, and the intensity of discount sales increased further, while the pressure of retail end inventory was still grim.

Although the company started to reform at the retail end earlier, it was still subject to market environment and the results of the reform still need time to emerge.

Li Ning Co said that in order to deal with the harsh environment of the industry, avoid new inventory pressure on the retail side, actively communicate with distributors and control the order arrangement, the order amount in the fourth quarter of 2012 was further reduced compared with the same period last year.

Lining's 2012 earnings outlook is more pessimistic, net profit or double slide.

According to the Li Ning Co announcement, according to the results of the order meeting, the company's management expects that the sales revenue of the group in 2012 will be negative compared with that in 2011.

Cost is affected by the amount and duration of CBA sponsorship contract. The fourth quarter of 2012 to the third quarter of 2017, the group's brand marketing and promotion costs will increase substantially.

In terms of profits, together with the impairment of intangible assets of Lotto (Le Tu) concession business and the interest on convertible bond interest, the company expects that the pre tax profit and shareholders' profit in the first half of 2012 and the full year of 2012 will decline considerably compared with the same period in 2011.

In 2011, Li Ning Co net profit was only 386 million yuan, less than five major sports.

The bottom second PEAK sports net profit of 780 million yuan, half of the bottom five local sporting goods business.

This pessimistic anticipation of this year's performance is even more worrying for investors.

Lining said in a low profile that the sponsorship of China's professional men's basketball media has cost up to 2 billion.

Lining's recent announcement that the sponsorship of the professional men's basketball league matches and the fourth quarter's orders will not be as satisfactory as expected, are particularly low-key.

Earlier, Jiefang Daily reported.

The total amount of equipment sponsorship contract between the company and CBA is as high as 2 billion yuan, and the average annual investment of 400 million yuan has increased a lot of times compared with that of CBA's last equipment contract.

The Li Ning Co's announcement in the announcement is particularly dull: "in June 11, 2012, the Group signed a memorandum of understanding on the equipment sponsor of the Chinese men's basketball professional league (CBA), covering 2012-2013 to 2016-2017 years and 5 seasons".

For the amount of 2 billion yuan sponsorship, Lining refused to comment.

But the amount should not be underestimated, because Lining admits that it is affected by the amount and duration of CBA contract sponsorship, and the cost of brand marketing and promotion will increase substantially in the next five years.

Data show that Li Ning Co's investment in advertising and marketing expenditure in 2010 and 2011 reached 1 billion 290 million yuan and 1 billion 430 million yuan respectively.

In the face of increasingly severe industry environment and the pressure of de stocking, the sponsorship contract seems to make its performance cloudy.