2011 Lining Net Profit Less Than Anta 1/4 Brand Remodeling After 90 Fatal

Li Ning Co Chronicle

May 1990

In 1996, Li Ning Co sponsored the Chinese sports delegation to participate in the Atlanta Olympic Games.

In 1998, Li Ning Co took the lead in building Foshan's first sportswear and shoe design and development center in Foshan, Guangdong.

In 2002, Li Ning Co established a new brand positioning: Lining, everything is possible.

In June 2004, Li Ning Co successfully listed in Hongkong, the first mainland sporting goods company to list in Hongkong.

In January 2005, Li Ning Co signed a contract with NBA to become an official market partner of NBA.

Lining bought the 57.5% stake in "red double joy" in 2007

Lining ignited the main torch at the opening ceremony of the Beijing Olympic Games in August 2008

In 2009, Lining officially won the sponsorship of China national badminton team.

In 2010, Li Ning Co repositioned its brand image as "post-90s Lining" and changed the slogan to "let change happen".

Five Li Ning Co executives leaving in 2011

In early February 2012, Li Ning Co announced layoffs and announced the introduction of TPG as a strategic investor.

In 2012, Li Ning Co plunged into unfavorable predicament, such as the sharp decline in brand performance, the turbulence of executives, the decline in orders, the sharp drop in share prices, the swing of positions, and the attack of peers.

In July 5th, after announcing the resignation of chief executive Zhang Zhiyong, nearly fifty of gymnastic princes, Lining, returned to China.

However, the "Prince" needs to face the overall market downturn and huge inventory pressure.

2012 is the Olympic year. It is also known as the "golden summer season" by the body clothing industry. Whether Lining can extricate himself from the predicament or lose everything has become the focus of attention.

Looking back, in 2010, the ambitious domestic sports brand "one brother" - "Lining", in order to reshape the brand, changed the slogan from "everything possible" to a more globalized MAKE THE CHANGE ("let change happen").

And this change is just like a vicious curse.

Is it possible for Lining to let change happen?

Performance crash

In mid 2011, shares closed down to HK $6, which led to the abandonment of rating agencies, and the order volume decreased by about 14% in the three quarter of 2011.

In July 7, 2011, the share price of Lining, a listed company in Hong Kong, suddenly dropped by 15.77%. (2331.HK)

The next day, the stock fell again by 10.75%.

In the two trading day, the share price of the company dropped from HK $14 to HK $13.3, and the market value of HK $4 billion vanished.

In the next 5 months, Lining's stock price was in a continuous decline, and by the end of 2011, its share price had dropped to a low of HK $6.

So, while investors are suffering from shrinking share prices, they are eager to know what has happened in the first half of 2010 that they have vowed to regain the status of Chinese kings.

In March 29, 2012, the company published the annual report, and finally found the answer.

Data show that the company achieved total revenue of 8 billion 929 million yuan in 2011, down 5.80% from the same period last year. Net profit was 386 million yuan, down 65.19% from the same period last year, and the basic earnings per share were 0.367 yuan. In 2010, its earnings per share were as high as 1.07 yuan.

At the Li Ning Co performance briefing, the company believes that the main reason for the decline in corporate performance and net profit is the increase in the overall discount rate of dealers and retail terminals and the impact of rising production costs.

For the industry, Li Ning Co believes that the competition in China's sporting goods industry is still grim, and still needs to face the pressure of rising costs.

From the first, second and the three quarter of 2011, the Lining brand order meeting held in the group held a decline in the third quarter, which reflects that this year's market environment is still arduous.

Bad performance, which led to the abandonment of rating agencies, Deutsche Bank in its research report predicted that Li Ning Co's earnings per share between 2012 and 2014 were 43% to 63%, and lowered its target price of HK $4.7.

Barclays Bank's report lowered Lining's rating from neutral to reduced, lowering the target price from HK $6.50 to HK $2.70.

However, these bad situations are not the main reasons for the big drop in Li Ning Co performance.

In fact, in the case of a year-on-year increase in the periphery, orders for Li Ning Co in the three quarter of 2011 will be calculated at wholesale prices, and the order volume will drop by about 14% compared to the same period last year, and the order volume will be reduced by 17%.

Personnel changes

After many executives left, Zhang Zhiyong, CEO of the company for 11 years, resigned.

When Li Ning Co is in trouble, someone has to be responsible.

The candidate finally fell to Zhang Zhiyong, chief executive officer who has served Lining for 20 years and has been in charge of the company for 11 years.

In July 5, 2012, Lining, executive director of the founder and board of directors, announced that Zhang Zhiyong resigned as chief executive officer, and Lining would be responsible for external affairs and relations before hiring the new chief executive.

Statistics show that in 1992, Zhang Zhiyong, 24, joined Li Ning Co in the role of a cashier.

12 years later, Zhang Zhiyong, 36, became the Li Ning Co's CEO.

Zhang Zhiyong, a man of financial origin, is modest and modest. Under his guidance, Li Ning Co has developed from hundreds of millions of small companies to nearly 10 billion sales companies.

However, this rapid growth has also covered many problems, including Zhang Zhiyong's shortcomings in employing, managing and making decisions.

In fact, in 2011, behind the departure of Fang Shiwei, chief executive officer of Li Ning Co (CMO), Chief Executive Officer (COO) Guo Jianxin, Lotto (Le Tu) general manager Wu Xianyong, vice president and chief product Officer (CPO) Xu Maochun, he had an indispensable relationship with Zhang Zhiyong.

The above executives are known as "airborne troops" inside the Li Ning Co.

After 2006, all the departments inside the Li Ning Co had rarely been trained by Zhang Zhiyong, and some of them were international companies.

A Li Ning Co insider told reporters that Zhang had been exposed to the problem of employing people after he became big. He was too superstitious about professional managers.

"These powerful people lack the accumulation of Lining culture, or are not familiar with Lining."

The person finally concluded that not only is the problem of losing money, but also the most precious time.

Another character of Zhang Zhiyong is evaluated by Li Ning Co insiders as not strong enough.

He always hoped to balance as much as possible in the face of various contradictions.

In the face of the media interview, Lining admitted that when the past team was executing, some decisions were not so firm, or the choice was not clear, while some reforms were needed. At the same time, some realistic problems should be considered, such as performance, internal balance of various departments, product habits, distributors and so on.

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Fatal location

Customer group age is located in the 90s, when the price increases are improper, lose the advantage of cost performance.

In the eyes of the outside world, Li Ning Co's most failed decision is the brand remolding that began in 2010.

And Zhang Zhiyong never imagined that the reform that touched the soul ended in a fiasco and his fall.

In June 30, 2010, Lining released the pformation strategy of brand remolding, including major decisions such as changing logo and changing audience positioning.

"Now, do you think this new Lining logo is very interesting?" a staff member of the Li Ning Co division of Lining told reporters that the word "human" resembled a cracked "L" old sign. Did it long predict that Lining will lose the left arm? The logo is too abstract, but the explanation is very clear.

Perhaps it is to tell the world that they are still young. The Li Ning Co has positioned the new concept in the two concepts of "cool" and "fashionable".

Li Lichi, a researcher at Zhuo Chuang brand planning agency, said that Li Ning Co ignored one of the most important problems: it had betrayed 60 and 70 after supporting Lining's growth, and abandoned the old core consumer before the new consumer group had yet to be formed.

Even more fatal is to narrow the price perception with Nike.

In April 2010, Li Ning Co announced the first increase in footwear products by 11.1% and 7.6% in clothing products. In June of that same year, Li Ning Co announced that the average selling price of footwear products increased by 7.8%, and clothing products increased by 17.9%.

In September of the same year, Li Ning Co announced that the price of footwear and clothing products increased by more than 7% and 11% respectively.

This price makes the price of Lining's products even surpass those of the international second-class brands such as UMBRO, MIZUNO and KAPPA.

A salesperson of Lining brand told reporters that many consumers thought it would be better to buy a pair of discount shoes from Nike or Adidas.

And those ordinary consumers, simply choose Anta and PEAK.

Li Lichi said that this strategy is even more lethal, which makes the brand's former cost performance advantage gone.

There may be no mistake in the direction of reform, but there are some haste in the process.

Stop and catch up

In 2011, Lining's net profit of HK $380 million was not as good as 1/4 of Anta's 1 billion 700 million net profit.

What compelled the Li Ning Co to make major changes is a very complicated market competition pattern.

In 2010, Adidas, the world's second largest sporting goods manufacturer, said it would open more than 2500 stores in two or three cities in China by 2015.

It covers 1400 cities, including small cities with large population ranging from 50 thousand to 500 thousand.

Such a choice is because the Boston consulting firm's prediction for Adidas's China market shows that it is undeniable to penetrate the three or four line market and expand the market share.

In the first half of 2011, sales in Adidas Greater China increased by 38%, and sales of 552 million euros also set a record in the region.

The two or three line city is exactly the place where Lining's brand has become a fortune.

It is worth noting that since 2003, Adidas and Lining have been fighting for second place in the market share.

At the critical moment, Lining had to worry about the predicament.

If pressure comes only from Nike and Adidas, perhaps the problem is far from serious.

For Lining, the Jinjiang Gang represented by Anta, XTEP and other local sports new brand is more likely to become Lining's elbow.

Data show that in 2011, Lining's net profit of HK $386 million was not as good as 1/4 of Anta's 1 billion 730 million net profit. Not only did it lose the net profit of the domestic brand, but also the net profit of 966 million, 1 billion 133 million yuan and 780 million yuan, such as XTEP, 31st and PEAK, respectively.

Such data let Lining, who had been in hiding for many years, frequently appear in the company's internal meeting. When Lining questioned the team, why?

So fast, why have we been surpassed in just a few years? No one can answer Lining's question.

In the view of Ching Ke consulting, the growth of new brands such as Anta, XTEP and 31st degree has been benefited from the strategy of rural encircling the city.

When Lining tried to compete with international brands on the front line or even internationally, the local brands, which had been fully covered by the township market, had accumulated strength to promote the two or three line cities.

This led Lining finally to fall into an awkward situation.

Post Lining Era

The future candidate of company CEO is the key to ensure the future of Li Ning Co.

When the prince of gymnastics lit the torch of the 2008 Beijing Olympic Games, both Lining himself and Li Ning Co entered a peak state.

However, today's Lining has to play again and try to reinvigorate himself.

After Zhang Zhiyong left office, an important decision made by Lining was to introduce TPG partner Jin Zhenjun of Dezhou Pacific Group to the board of directors as executive vice chairman.

According to reports, Jin Zhenjun led the operation team to airborne Lining two months ago.

In a material sent by Li Ning Co, Jin Zhenjun's first entry to Lining was to clean up the stock.

Data show that in 2011, the average turnover days of the company were 73 days, 21 days higher than the 52 days of last year, and the stock of Li Ning Co was 1 billion 133 million yuan, up 40.57% from 806 million yuan in 2010.

To this end, Jin Zhenjun said that even if this year will reduce the business revenue and earnings will not hesitate.

It is estimated that there will be a virtuous circle in the fourth quarter of this year.

For the company's judgement, a Jilin agent led a sports person to agree. In his view, 2012 as the Olympic year, for the sports brand is "Jin Wang season", and from the data in Changchun, the crisis of Lining brand is not so serious as we imagine.

Even if Jin Zhenjun can temporarily lead Li Ning Co back to orbit, the future choice of the company's CEO is the key to ensuring Li Ning Co's future.

According to Lining's standard, the CEO should be a person who has a sense of sports, knows how to run a brand, understands supply chain management and sports marketing, and has strong operational ability.