Lining, China's Two Failed Reform, Smashed 30 Million Before Coming To UNIQLO Executives To Run For Him.

The local sports brand leader Li Ning Co Ltd (hereinafter referred to as "Lining") announced in September 2nd that the board chairman and acting CEO Lining was transferred to joint CEO, and appointed the former UNIQLO China COO Takasaka Takeshi as executive director and joint CEO, responsible for group operation affairs. The 56 year old Lining himself will carry out overall control and strategic planning for the company, and continue to lead the company's business development with the management team.

The notice shows that Takasaka Takeshi will receive the annual remuneration of about 10 million yuan before tax and the discretionary division of work decided by the board of directors on the basis of annual performance. The appointment will take effect from now on and the contract period will be 3 years.

Takasaka Takeshi graduated from the University of Kansai in Japan and joined the fast selling group of UNIQLO parent company in 1996. He worked in different departments and many Asian regions. He has rich experience in supply chain, product and sales and retail management. He served as deputy general manager and chief operating officer of China in 2001 and 2005. He has over 15 years experience in the development and management of the Chinese market.

Affected by this news, Lining shares opened 3.2% higher. As of today's afternoon, Li Ningshou reported at HK $24.25 / share, with a market value of HK $56 billion.

Industry analysts from Citigroup believe that Lining's joint CEO structure will help smooth transition of CEO positions at lower execution risk. As the founder of Li Ning Co, Mr. Lining will focus on the company's overall control and strategic planning, and will continue to work closely with the management team to promote the company's business development. Mr. Takasaka Takeshi will make full use of his rich experience in operation and management as well as his in-depth understanding of the Chinese market, focusing on the operation of the company, including supply chain, product, sales and retail management.

Public information shows that as one of the leading sports brand enterprises in China, Li Ning Co mainly provides professional and leisure sports shoes, clothing, accessories and accessories products with Lining brand. The company has established a huge supply chain management system and retail distribution network in China. At present, the market share of Lining in China's sports footwear industry reaches 5.3%, lower than that of Anta 7.9%, and ranks second among domestic brands. In addition to the core brand Lining, the company also produces, develops, promotes, distributes / sells other brand sports products owned by itself, licensed / operated with third parties, including red double happiness table tennis products, AIGLE (Ai Gao) outdoor sporting goods, Danskin dance and yoga fashion fitness products and Kason (Kai Sheng) badminton products.

Li Ning Co's main sportswear and footwear products have been increasing gradually in recent years. The I shows that in 2018, the income of clothing accounted for 50.6%, and footwear income accounted for 43.8%. In addition, the income of four core categories of basketball, running, training and sports fashion accounted for 25%, 25%, 22% and 25% respectively in 2018. The company's distribution structure: with the increase of self owned stores, the proportion of self retailing revenue rose from 12.8% in 2008 to 29.8% in 2018, and the proportion of distribution revenue decreased from 86.3% in 2008 to 46.7% in 2018. Besides, in recent years, the electricity business of the company has developed rapidly, and the income of 2018 channel has already accounted for 21.1% of the revenue, while the international market accounts for a relatively small proportion, maintaining around 2%.

Li Junsong, a researcher at Zhongtai securities, said that in view of the evolution of Li Ning Co, because of the low efficiency of channel management and the lack of self production capacity to control the terminal and products, the Li Ning Co made two reforms. In 2010, the company rebuilt its brand and changed its logo and slogan. In 2012, the company began to carry out channel reform, but the two reforms failed.

The first reform: the brand remolding reform led by Zhang Zhiyong. Since 2010, the overall sales of the industry have been sluggish, while the major sports brand manufacturers are too optimistic about the growth of the industry and continue to open a large number of stores, resulting in more intense competition, and the industry has entered the inventory cycle as a whole.

Measures: in the face of the severe industry situation, in 2010, the company began to remodel its brand, replace the brand logo, and position the product as the post-90s, issuing a new slogan "MaketheChange" to cater to the consumption demand of the younger generation. In addition, due to the internationalization positioning and brand upgrading, the cost increased, the company made three price increases during the 08-10 period, and the price of clothing and footwear products increased by 37% and 26% respectively.

Impact: because of the embarrassment of brand positioning, the younger generation has a low sense of brand identity, and the price of products has been promoted, resulting in the loss of a large number of old customers. In addition, the launch of the new standard product makes the old product inventory backlog and can only be sold at a discount. So since 2011, the company's revenue and net profit growth has begun to turn negative, and the market share has dropped from 9.7% in 2010 to 8.2% in 2011. Anta has surpassed Lining by 9.1% of the market share and has become the highest domestic sports brand in the market share.

The second reform: the reform of operation management led by Jin Zhenjun. In 2012, the company introduced TPG, a strategic investor, and introduced TPG partner Jin Zhenjun to reform the company's channels and management.

Measures: strengthening the construction of direct network, increasing the proportion of Direct stores from 22% of 2012 to 37% in 2014, covering 80% of the Pose, strengthening the terminal's control efforts, closing the stores with poor management, closing 1821 stores in 2012, cleaning up the inventory, reclaiming 1 billion 800 million yuan from the terminal in 2012, restocking the terminal from the terminal, adjusting the management level, new CEO, CFO, COO, etc., and increasing the head sports resources, sponsoring CBA and star Wade.

Impact: due to the large number of repurchase stocks and inventory impairment, the gross profit margin of the company decreased by 7.4 percentage points to 38.7% in 2012. At the same time, due to the declining capacity of the dealers, the company made a large number of accounts receivable impairment, superimposed marketing sponsorship fees and research and development expenses. The company's cost rates continued to rise and net interest rates first changed. The net profit of the companies in the 2012, 2013 and 2014 was -19.8, -3.9 and -7.8 billion respectively; due to a large number of stores, the market share of the company dropped from 8.2% in 2011 to 5.2% in 2014. Of course, we need to point out that increasing the number of Direct stores in the second reforms, improving the terminal control power, going to inventory, signing Wade and other measures have laid the foundation for Lining's next stage of performance recovery.

In 2015, founder Lining returned to CEO as the following measures:

1, focus on the five core categories and relocate the mass market. Earlier, Lining took the high-end route through raising the price, in order to build an international brand, and eventually led to the loss of customers. This time, the company repositioned the mass market and adjusted the price of products, accounting for 55% and 35% of the SKU of less than 250 yuan and 250-450 yuan. In addition, Lining built three professional departments such as basketball, running, badminton, training, and sports life to build three professional departments such as basketball, badminton, indoor sports, running, training and sports fashion, and coordinated various departments to build professional products.

2, expand distribution channels, fine management. Lining's operating expenses increased sharply in 2014, mainly due to the addition of 276 new stores, but the construction of the direct network at the previous stage made a significant contribution to the future performance. By the end of 2018, the proportion of self owned stores in the company reached 23.7%, and the increase in Direct stores increased the capacity of inventory management. The number of days of inventory turnover in the company had dropped from 109 days in 2014 to 78 days in 2018. In addition, Lining also began to actively expand the channels of e-commerce.

3, optimize supply chain management and improve operation efficiency. On the one hand, Lining set up data feedback mechanism for terminal products, adjusted the supply mix of store products, and improved the operation efficiency of the supply chain; on the other hand, Li Ning Co integrated the supplier platform, and the two chief supply chain leaders of shoes and clothing reported directly to Lining.

Impact: with the continuous improvement of the company's channels and products, and the reduction of expenses and the reduction of expenses, Lining lost three consecutive years of losses in 2015, realized a net profit of 14 million yuan to the parent company, and increased revenue from 17% to 7 billion 89 million yuan. In 2018, Lining realized 10 billion 500 million yuan in revenue, an increase of 18.2% over the same period, and a net profit of 450 million yuan, up 36.8% over the same period last year.

In Li Junsong's view, unlike the founder of other domestic sports brands, the founder, Mr. Lining, is a famous gymnast, whose brand name "Lining" has a natural brand influence, and is the first Chinese local sports shoes and clothing brand. In 1990, Mr. Lining wore a Lining sports suit to relay the Olympic flame. In 2008, Mr. Lining lit the main torch of the Beijing Olympic Games, and pushed the brand influence to a new height. In addition, in recent years, Lining has begun to enhance the interactive experience of consumers, including the introduction of running Corner and Lining iRun club, combining brand marketing with member activities, thereby enhancing user's consumption experience, enhancing consumer loyalty and strengthening the building of brand competitiveness. According to C-BPI's data, Lining's brand influence on sports shoes and shoes has always been the top three in 2019. In 2019, Lining ranked second in the brand influence of sportswear, ranking only third behind the Nike brand.

Li Junsong believes that Li Ning Co has gone through the period of brand initiation, rapid development and failure of reform, and has entered the growth recovery period since 2015. From the perspective of profitability, Li Ning Co's net interest rate has a larger room for improvement than other companies. With the increasing proportion of Direct stores, product structure optimization and supply chain efficiency, the profitability of the company will continue to improve. In terms of revenue growth, the scale of Li Ning Co's revenue will also continue to increase with the expansion of stores, the increase in the growth rate of all sectors, and the rapid development of children's clothing, sports fashion and sportswear.