A pedestrian walks past a Li-Ning advertisement in Beijing. The company plans to consolidate inefficient outlets and add a net 600 stores next year, as it competes with global brands in smaller cities. Bernardo De Niz / Bloomberg

Company to open 600 stores in 2011 to compete with global brands

Li Ning Co Ltd, one of the leading sports brand enterprises on the mainland, aims to close inefficient outlets while adding a net 600 stores in 2011, as it competes with global brands expanding into lower-tier Chinese cities.

Li Ning aims to operate a network of 8,500 stores in 2011 and its 7,900 stores target for 2010 is achievable, a company spokesperson said Friday, adding it plans to consolidate 500-600 less-efficient stores into major distributors next year.

"The move aims to boost same-store sales growth while store targets remain unchanged," the spokesperson said. Current same-store sales growth is in the mid-single digits.

The company said last month that its Li-Ning brand same-store sales growth for the third quarter of 2010 was 4.0 percent compared with the same period last year.

Li Ning operated 7,478 stores as at the end of June, up from 7,249 in 2009. It aims to have 9,300 stores by the end of 2012 and 10,000 by 2013, according to its presentation material.

The company booked a net profit of 582 million yuan in the first half of 2010, up 23.1 percent from a year ago as revenue rose 11.2 percent to 4.51 billion yuan. The management has predicted that the company's profit growth in the second half of the year will be higher than that in the first half, thanks to the Asian Games held in Guangzhou currently.

Adidas AG, the world's second-largest sporting goods maker after Nike, plans to open more than 2,500 stores in smaller Chinese cities as the companies tap into rising incomes in those areas.

Competing with Anta Sports Products and China Dongxiang Group, Li Ning plans to increase wholesale discounts by up to 3 percentage points starting in 2011 to provide incentives for distributors and retailers selling Li-Ning products.

The additional wholesale discount, together with a new urban development and education tax in China, will lead to about a one percentage point decrease in gross profit margin to 46-47 percent, from 47-48 percent, the spokesperson said.

Li Ning also aims to increase sales from discount store networks to 10 percent of its sales in 2011, from the current 5-6 percent.

Consumer goods exporter Li & Fung Ltd said earlier it would become a sourcing agent for Li-Ning's brands in international and China markets.

Shares of Li Ning fell 1.4 percent Friday to HK$20.95, as compared to a 0.13 percent drop in the broader market.

Reuters

(HK Edition 11/20/2010 page2)