Lining Spent Nearly 2 Billion Yuan On The Total Cost Of Reform.

< p > as the last listed company in the sporting goods industry to announce its 2012 performance, Lining's (02331, HK)'s "late" financial report has attracted market attention.

As the only enterprise in the industry to announce the implementation of the overall reform last year, the data in the earnings report directly touched the nerves of the market.

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< p > in the 2012 performance report released yesterday (March 26th) at 11 a.m., Lining Group Executive Chairman Lining and group executive vice president Jin Zhenjun conducted a performance briefing with Hongkong investors, and then rushed back to Hongkong at 12:30 to hold a conference call for media.

At the conference, Lining bluntly pointed out the problems faced by the industry and the company, and Jin Zhenjun also revealed for the first time that since last year, the change in Lining has cost nearly 2 billion yuan.

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< p > Lining's performance report said that in 2012, the income of Lining group was 6 billion 739 million yuan, a decrease of 24.5% compared with the same period last year.

Gross margin was 2 billion 550 million, a year-on-year decrease of 36.9%.

Net profit loss was 1 billion 979 million yuan.

For the reasons for net profit losses, the company explained that "part of the reason lies in the reduction of wholesale sales, provision for accounts receivable and inventories, implementation of change plans and related costs of channel rehabilitation plans and other restructuring costs."

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< p > Jin Zhenjun said, "the main problem of Lining's change lies in the channels and inventory problems. In the second quarter of this year, Lining's inventory problem will return to normal."

Lining inventory nearly 900 million yuan in 2012, a decrease of 200 million yuan over 2011.

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< p > < strong > change payment 2 billion yuan cost < /strong > < /p >

< p > in this conference call, Lining himself admitted that "in the short term, the fierce competition in China's sports industry will continue. The wholesale mode of operation in the past has been faced with a series of challenges in the new economic environment. Similar problems like excessive expansion, excessive channel inventory, rising growth and homogenization of products have become a very serious problem in competition."

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< p > for high inventory problems, Lining said that homogenization is the biggest problem facing the industry. "Discount marketing is the poison that we have to take. Lining hopes to find breakthroughs in the next round of competition through personalization and differentiation."

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< p > 2011, Lining's inventory backlog to 1 billion 100 million yuan, which also limited the development of Lining.

To this end, Lining launched a series of reforms last year.

Looking back in 2012, Li Ning Co signed an investment agreement with Holdings Company TPG and Singapore Government Investment Company GS in January. Strategic investors' participation and strong support enabled the company to take the initiative in implementing the new development strategy.

In addition, in July, the group announced a comprehensive change plan, including focusing on the Chinese market, brand and core flagship business, and strengthening management and advisory teams, focusing on the pformation from wholesale business to retail operation.

From August to October, CBA basketball started, and the company began to cooperate with Wade through the CBA platform basketball.

At the end of 2012, the company approved the comprehensive channel revival plan.

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< p > but the market has always been skeptical of this change. As the first enterprise to reform in the industry, the market can not see the precedent. As the first financial report since the reform began, the market hopes to see the progress of reform.

Obviously, reform is not a good cure at once.

The financial report shows that in order to support reducing channel inventory and improving the financial situation and cash flow to dealers, it is partly the reason that Lining's income decreased by 2 billion 190 million yuan last year.

In addition, the related costs and inventory provision related to the change plan, including the channel revival plan, led to a decrease of 399 million 700 thousand yuan in gross margin and a decrease in gross margin to 37.8%. Meanwhile, the provision for accounts receivable increased administrative expenses by 933 million 200 thousand yuan.

But Jin Zhenjun pointed out that "above a lot of expenses or one-time expenditure."

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< p > the specific performance of the reform in the channel is that in 2012, Lining closed stores with low store efficiency and opened more potential stores.

By the end of 2012, the number of shops in Lining regular stores, flagship stores, factory stores and discount stores was 6434, a net decrease of 1821 compared with December 31, 2011.

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< p > < strong > inventory returned to normal during the year < /strong > < /p >.

< p > for the first time, we exposed the cost of change. Jin Zhenjun said, "this 2 billion yuan is our one-time adjustment, including some provision for receivables and payments."

He stressed, "we have cleaned up all the risks in the accounts at the end of 2012, so that we can start from 2013."

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< p > Jin Zhenjun also revealed that at the end of last year, the implementation of the channel revival plan was 14~18 billion budget at that time. "It spent more than 200 million yuan last year, and some of the resellers in the resurgence plan have already reached agreement and started to start, almost several billion, which has already made an arrangement for about half of 14~18 billion."

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< p > "we hope to support the channel back to normal through this revival plan. Some provisions and a series of processing done by the end of last year should be able to fully cover the rehabilitation plan.

That is to say, if we deal with bad debts and inventory problems through the rehabilitation plan, we will be able to allocate the provision we made last year to cover the cost of the whole recovery plan.

So 2012 is not a real loss, but after a one-time deal, let's have a cleaner start in 2013 and 2014. "

Jin Zhenjun revealed.

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< p > according to Lining's reform plan, the first move of Lining's revitalization plan is to expand the scale of the network.

"Because a number of networks may be challenged by the speed and scale of our customers, these stores are relatively low-end.

So some of the stores we shut are shops that are relatively poor in terms of shops and profits. "Two

Jin Zhenjun added.

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< p > Jin Zhenjun stressed, "there is also the whole state of inventory now. We once said that to return to normal, we need to achieve a sales ratio of about 6 times (6 times the level of monthly sales volume).

In February this year, almost 7 times the sales ratio.

Of course, sales increase by more than 20%, so the actual inventory absolute decline is higher than this.

The time to return to normal is estimated to reach 6 times the ratio of Treasury to sales at Q2 or Q3 this year.

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