Lining Spent Thirty Years In The History Of Reform With Smiles And Tears.

In October 15th, Lining (02331), the company with the founder's name, set its stock price of HK $26.45 in recent years. The company's share price has risen more than 200% this year, making it the best performing component of the MSCI AC Asia Pacific Index.

Morgan Stanley said Li Ningzheng has benefited from the growing popularity of sportswear in China, gaining a larger share of the market from fast fashion and casual clothes. The bank raised Lining's rating to super matching, raising its target price by 33% to HK $29.2. Following the NBA incident, Dahua continued to expect Lining to benefit from patriotic sentiment, and sales are expected to grow substantially. The stock rating will be raised from hold to buy at a target price of HK $28.

In fact, this is not the first time that Lining has struck the present high position. In 2010, Lining's share price hit a record high of HK $28.27. But after that, the company's management and operation also had various problems. The company entered a long period of adjustment, and the share price fell sharply. In the past 2012-2016 years, the company's stock price has been below 5 yuan for four years.

Looking back on this period from brilliant to declining to further brilliant, Lining's reform history is a history of full smile and tears.

　 With the golden key

The development of Li Ning Co can be traced back to 1989. At that time, Lining was also a legendary athlete. In his career, Lining has won 14 world gymnastics championship titles and 106 gold medals in gymnastics competitions at home and abroad. After its retirement, Lining registered the brand of the same name and began to form a team to develop and sell sports shoes and clothes and equipment.

In the days when Lining's brand was born, he was closely related to domestic sports events. In 1990, the newly established Lining brand was chosen by the Asian Games as the award winning costume for the torch relay and the national team. In 1992, Lining became the designated Chinese delegation of the Barcelona Olympic Games. In 1996, Lining was first active as a sponsor of Chinese sports delegation on the world stage in Atlanta Olympic Games, and was also called the national sports brand. During this period (1993-1996 years), Lining increased sales by more than 100% a year, and realized 670 million yuan in 1996.

Dancing with Chinese sports, Lining's influence has been expanding, and finally reached the peak in the 2008 Beijing Olympic Games. In 2009, Lining, as the torch bearer of the Beijing Olympic Games, lit the bird's nest main torch tower at the opening ceremony. Lining's brand was temporarily limelight without two.

　　 Difficult transformation Road

In 2012, the domestic garment industry entered a period of adjustment. In the past, domestic clothing brand customary wholesale mode, far from its own consumer group, is less sensitive to consumer feedback. Lead to misjudgement of market trend. At the same time, the layout of international first-line brands has deepened, and the main domestic brands have encountered Waterloo.

Lining also started a self reform with broken arms. The first reform led by Zhang Zhiyong, then CEO, put forward the strategy of brand remolding, and carried out brand image, positioning and pricing adjustment. The specific measures are to start the brand new logo and start the reform of brand younger. At the same time, the new slogan "Make the Change" will be released. The brand will be "cool, fashionable and globalized". In addition, according to the international positioning, the product price 7%-17.9% will be increased, so as to create "90 after Lining".

However, the effect of this reform is not obvious, and a large number of old customers have been lost. According to the consumer survey, the Lining consumer at that time accounted for over 50% of the 35-40 year old middle-aged consumer group. Brand younger strategy makes product design unable to meet the consumer demand of this part of consumers, and has lost a large number of older customers. At the same time, the influence of price increase by internationalized location also reduced the consumption intention of young customers. This reform soon ended in failure.

In 2012, the company began to put forward the "second management channel reform plan" and put forward "focusing on core brand Lining, focusing on core business sports products, focusing on core market Chinese market". Specific measures include shutting down poorly managed stores, closing 1821 stores in 2012, supporting dealers to clean up inventories, setting up a budget of 1 billion 800 million yuan to revive channels to improve channel inventory and cash flow; wholesale to retail oriented, and plan to increase the proportion of fast and reverse products.

Although the two reforms failed to immediately reverse their performance, they were right in the direction of "focusing on Sports", "raising the proportion of direct sales", "signing CBA sponsors at high prices", "closing down the profits not to have a good store" and "cleaning up inventory", which had a crucial impact on Lining's performance recovery after 2014.

At the end of 2014, Lining, founder of the company, announced that the strategic direction will be transformed from "sports equipment provider" to "Internet + sports life experience" provider, and the company will re-use the slogan "anything is possible". In terms of marketing, streamlining marketing expenses, reducing unnecessary TV advertising and non sports celebrity endorsements, the advertising rate in 2017 dropped by -9.20 percentage points to 11.10% in 2014 compared with that in 2014. In terms of channels, the online "big shop" and "online store", the online power business, and 2014-2017 years of electricity supplier income increased 14 percentage points to 19%.

A series of measures led to Lining's performance turning into profit in 2015. By 2017, Lining once again became the leading sports footwear company in China. The market share of sports shoes and clothing in China reached 5.3%, domestic second and domestic fourth. In the past 2015-2018 years, the annual growth rate of revenue and net profit was 11.59% and 498.91% respectively.

　 Back to the summit

In August 2019, Lining released the mid term performance report for 2019. The company earned 6 billion 255 million yuan in the period (33% year-on-year). Gross profit was 3 billion 108 million yuan, an increase of 35.5% over the same period last year. The net profit of equity holders is 795 million yuan, an increase of 196% over the same period last year.

In terms of products, the three major products of the company increased significantly, of which footwear sales amounted to 2 billion 922 million yuan, an increase of 3 billion 336 million yuan compared with the same period last year, and sales of clothing reached 3 billion 60 million yuan, an increase of 33.04% over the same period last year, and sales of equipment and accessories reached 273 million yuan.

It is worth noting that Lining's mid-term performance has not only increased volume but also improved quality. The most obvious feature is that the company's profitability has improved significantly. Gross profit margin increased by 1 percentage points to 49.7% from 48.7% in the same period last year. If compared with the gross profit margin of 44.88% in the middle of 2015, it increased significantly.

Looking back on Lining's development process, it is a process from quantitative change to qualitative change that the company can deliver today's transcript. Judging from the performance of Lining in recent years, the company's strategy of "single brand, multi category and all channels" has become a magic weapon for the successful transformation of the company.

In 2013, the company's "Lining" brand was repositioned as the sports product with the highest price ratio leading the middle end market, the middle class as the target customers, and the main products and functions of sporting goods. It is clear that the market positioning of Lining's main brand is "strong middle end, low end solid, advanced development", focusing on basketball, running, badminton, training and sports fashion five major sports categories.

Under the focus strategy, Lining's main brand accounted for over 95% of sales in 2018, and Lining Young accounted for more than 2%. Other brands, Kaisheng, Lotto and Danskin, account for less than 1% of their revenue in 2018. Red double happiness and AIGLE are operated by joint ventures and joint ventures. They are measured by the equity method in the reports and continue to contribute to the company.