Bet On "Internet +" Competition In The Whole Industry Is Hard To Say.

In March,

The company's earnings report showed a net profit of 14 million in 2015, which ended the three year decline.

But only a month away, Lining released the first quarter results in 2016.

Same store sales recorded only low single digit growth, far below 2015.

For a time, Lining's future is in the uncertain future, and the continuous profitability has been tested.

In fact, a closer look at Lining's 2015 earnings report shows that the reason for the company's "turnaround" is quite complicated, and the situation is far from simple.

Let's take a look at some important components of profitability.

Administrative costs reduced by half of the 281 million reduction in expenditure.

According to Li Ning Co's 2015 earnings report, revenue in 2015 was 7 billion 89 million yuan, up 17% over the previous year, and operating profit amounted to 157 million yuan during the year, while net profit of 14 million 309 thousand yuan was achieved.

Profits were only over ten million, while administrative expenditure in 2015 dropped from 627 million in 2014 to 346 million, a 281 million decrease.

It is mainly the management of consulting fees and travel and business hospitality, which is not a long-term sustainable profit.

Since the establishment of Li Ning Co, turnover has been growing, climbing to 9 billion 478 million in 2010, only one step away from 100 billion, and is firmly in the position of the local sporting goods company.

In 2010, the company implemented an inappropriate marketing strategy, replaced LOGO and slogans, put forward a new concept, locked the users in the 90s, so from 2011, the company began to stock a lot, cut off stores in 2012, lost 1 billion 980 million annually, 2013 and 2014 continued to make losses 390 million and 780 million.

Until the beginning of 2015, Lining, the founder of the company, was re appointed as the acting chief executive officer of the company. At that time, he promised to devote himself to the strategic development and daily operation of the company and lead the company back to the track of profit growth.

Cost control has always been a major problem in Lining's daily operation. In 2011, the company's administrative expenses increased by 16% to 717 million compared with the same period last year. Compared with Anta's revenue, Anta's administrative expenditure was only 373 million, which accounted for only half of Lining's.

In 2015, Lining saber cut costs and said that in 2016 it would continue to maintain cost control efforts, significantly reducing management consulting fees and travel and business entertainment expenses, but the related fees such as commission and ordering fees increased significantly, and this part was not a long-term sustainable profit.

Earnings report also showed that in October 2015, Li Ning Co announced that it would sell 10% of red double happiness and generate an income of about 125 million.

The sale of shares of red double happiness is net income, so the important part of Lining's earnings is also relying on equity income.

After Lining bought 57.5% of the red double happiness in 305 million in 2007, red double happiness indirectly became a wholly owned Affiliated Companies of Li Ningfei. After selling 10% stake in 2015, Li Ning Co is still the largest shareholder of red double happiness, but red double happiness will no longer be a subsidiary of Lining and will not be included in the consolidated financial statements.

The sale of red double happiness has brought a net income of more than 100 million. The cash sold has raised the company's net cash by about 25%, improving the company's debt ratio. But in the long run, selling one of its most profitable brands is not good for Lining, and equity earnings are also not long-term sustainable profits.

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Bet on "Internet +" competition in the whole industry is hard to say.

Since Lining, chairman of the board of directors, returned to the company, the biggest change is the pformation of service providers who are moving towards "Internet + sports life experience".

2015 earnings showed that the annual electricity supplier income increased by 95% over the same period, but in the first quarter of 2016, the business platform business grew by 60%-70%, showing a sharp slowdown.

And now has ushered in the era of intelligent movement, the whole industry is aiming at this development path, thousands of troops across the single log bridge, and the executive power of the Li Ning Co has yet to be improved. At present, it can not get far more products and projects than other companies.

Company pformation three end of profit pformation target completed only 30%

Since 2012, Li Ning Co has pioneered the pformation from the traditional wholesale mode to the retail oriented rapid response business mode, and launched a "channel revival plan" with a cost of 1 billion 400 million -18 billion, which supports dealers to clean up inventory, buy back and integrate sales channels.

This change led to the loss of Li Ning Co for three years, and it began to make profits in 2015. However, in the view of building a professional retail system, it only finished 30%.

Lining pformation retail mode can optimize inventory allocation and operation efficiency, and also increase the proportion of retail revenue.

However, the retail mode exerts pressure on the company's capital expenditure, and the number of retail outlets increases, and the corresponding selling point rental costs, staff costs and so on increase, and terminal logistics costs also increase.

Compared with Anta's dealer mode, the selling cost is about two times that of the Anta, and it is also two times the average of the industry.

Although Lining has made great efforts to control costs in recent years, the reduction of sales costs is more difficult.

The most important thing is that in the first quarter of 2016, Lining's brand sales in the same store only recorded low single digit growth, and the profitability of retail stores declined.

Lining's pformation to the retail business mode has only completed 30% of the target of pformation in three years, and the pformation from the wholesale mode to the retail mode is inevitably the increase of the cost of sales. At present, the earnings report shows that the profitability of the retail store has declined, and the future Lining's profit challenge is very large.

Overall profitability of the market is the weakest in the industry.

China's sports industry has gone through 2012 to 2013 stagflation and recession. It has entered the recovery stage since 2014 and began to warm up in 2015.

Against this background, not only Li Ning Co realized profits, but also Anta, PEAK, XTEP and 361 degrees achieved profits.

The following table shows the revenue of five major sporting goods companies in 2015:

In 2010, Lining lost the opportunity to "billions of enterprises", and in 2010, Anta jumped into a local sporting goods brand for the first time to enter tens of billions of companies, with a net profit of 2 billion 40 million.

Sales of other companies, though not as good as Lining, far exceeded that of XTEP. XTEP reached 478 million, 361 and 518 million, and PEAK reached 390 million.

Therefore, Lining and domestic sports goods company horizontal comparison, we can see that its profitability is actually the lowest.

In 2015, Lining strongly returned to the Li Ning Co management line and promised to lead the company back to the track of profit growth. In the same year, the company also ended the three consecutive losses, with a net profit of 14 million 300 thousand.

But earnings include reducing administrative costs by 281 million and selling 125 million of red double happiness, which are not long-term sustainable profits.

In spite of the development of "Internet +", the pformation of companies, and the overall development of the industry, they did not show their advantages or even lag behind the same industry companies.

It can be seen that Lining's future development is not clear, and there is still a long way to go to get rid of the mire of losses.