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Lining Stocks Remain High And New Products Are Forced To Sell At Twenty Percent Off.

2013/1/14 18:26:00 56

to solve the inventory and account problems of up to 3 billion 600 million yuan, rebuilding the relationship with distributors will be the first hurdle for Li Ning Co to regain vitality.

inventory has become a big problem for all sportswear brands, and Li Ning Co is the most anxious to solve it.

Li Ning Co's earnings report shows that as of June 2012, the stock of the company has reached 1 billion 138 million yuan, and from the accounts receivable, the inventory in the dealer chain is up to 2 billion 500 million yuan, and the two additivity is almost equal to 3 billion 830 million yuan in the same period.

If the huge inventory generated by the failure of the pformation in 2010 can not be solved by the end of the year, the whole distribution channel of Li Ning Co may be dragged down by huge accounts receivable, and its sales plan for the new year will also be affected.

Once the dealers are forced to start their own business under the pressure of repayment, a href= "//www.sjfzxm.com/news/index_h.asp" > inventory < /a > actions, Li Ning Co's brand and the entire price system will be shaken.

this is the difficulty faced by Lining, the founder.

In the past two years, Li Ning Co's brand pformation failed, with its sequelae prominent, and high inventory. Goldman Sachs quit.

Since then, the company has launched a series of self rescue actions: shutting down stores, layoffs and downsizing, introducing new investors, major management groups, and so on.

Five months after TPG entered Li Ning Co, the channel revival plan, which was put forward earlier, finally found the first foothold -- eliminating inventory.

December 17, 2012, Li Ning Co announced that the Board approved the "channel revival plan" fully implemented.

The company will support dealers to clean up inventory, buy back, integrate sales channels, and reorganize dealers' accounts receivable through targeted rejuvenation programmes.

The Li Ning Co plans to invest 1 billion 400 million to 1 billion 800 million yuan in a one-off way to offset accounts receivable.

The company expects to lose money in 2012.

according to plan, eliminating inventory is the beginning of Reseller's cash flow. Next, Li Ning Co will further integrate channels, but deny that it will increase the construction of proprietary stores.

This shows that the company is trying to rebuild relations with distributors.

Jin Zhenjun, executive vice chairman of Li Ning Co, said in an interview with Caixin's reporter that the company will change its wholesale mode of operation in the past. It should take consumer and retail oriented as a guide to strengthen the control of ordering and front-end sales.

On the other hand, the "low discount" of Lining brand and factory store is still continuing all over the country, and dealers eager to cash in late 2012 can't wait to sell their inventory.

Will the sale of stocks at ultra-low prices affect the price positioning and sales of new products? How to deal with the repurchase stock as a brand and whether it will have a negative impact on the brand? This is a problem that Lining and even the whole industry have to face in eliminating inventory.

1 billion 800 million rescue channel /p >

July 2012, the original management of Li Ning Co changed the blood, from TPG's a href= "//www.sjfzxm.com/pioneer/" to "Kim Chun Jun" /a, vice president of Li Ning Co, responsible for internal operation.

As soon as the new management came into power, they put forward three new phased plans. The first stage plan was to focus on channels and stocks first, then expanded to Li Ning Co's "channel revival plan".

plan was implemented in December 17, 2012 after being approved by the Li Ning Co board of directors.

Li Ning Co explains that it does not need to pay cash, but only offset the existing dealership's accounts payable to the company.

Jin Zhenjun also mentioned at the analyst conference that there was no need to provide additional spending on the "channel revival plan" in the future. It was said that the reserve amount of 1 billion 400 million to 1 billion 800 million yuan was enough.

"P > announcement, the market is different: Macquarie immediately raised the Li Ning Co's target price to HK $7.15, giving a" win win "rating; UBS said Li Ning Co's main risk has been lifted, maintaining the" buy "rating and the target price of HK $6.5.

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P, Credit Suisse and Guotai Junan expressed doubts about the "neutral" and "reduction" rating respectively, and the target price was reduced to HK $4.30 and HK $3.92.

According to Credit Suisse's report, in view of the fact that Li Ning Co accounts receivable at the end of June 2012 was 2 billion 500 million yuan, compared with the sharp rise of 1 billion 600 million yuan at the end of 2010, it is not clear whether the expenditure of 1 billion 400 million to 1 billion 800 million yuan is enough to deal with the inventory problem.

in fact, according to Li Ning Co semi annual report 2012, excluding accounts receivable 2 billion 516 million yuan, Li Ning Co still has a stock of 1 billion 138 million yuan.

Expectations for future sales are also not optimistic, with inventory provision of 2 billion 228 million yuan.

Guotai Junan reported that Lining stock repurchase funds will eventually reach 3 billion to 4 billion yuan, and may still face losses in the coming year.

the consequences of a one-time huge investment are losses. Li Ning Co announced the implementation of the "channel revival plan" and issued a "profit warning" at the same time, announcing that it will lose money in 2012.

Credit Suisse expects a loss of HK $1 billion 973 million.

however, for the possible effect of 1 billion 800 million yuan, there is a gap between the market judgement and the Li Ning Co plan.

A public relations official of Li Ning Co told reporters: "1 billion 400 million to 1 billion 800 million yuan book is to eliminate inventory, offset accounts, in fact, the company and the dealer bear some losses, the purpose is to revitalize the channel."

At P, dealers are facing high inventory and are unable to pay the company's debts.

In < a href= "//www.sjfzxm.com/news/index_x.asp" > sports shoes < /a > service industry, the refund period of trade between Brand Company and dealers is usually 90 days, that is, the 90 days after the delivery of the distributor, the total amount of the goods is paid.

but in recent years, sales of front-end products are slow, goods can not be sold, and the phenomenon of delayed payment is very common in the clothing industry.

"Now, which dealer has paid three months, and we have been dragging it for eight months."

A Brand Company executive in China told reporters.

Li Ning Co's data show that the number of accounts receivable turnover has increased from 52 days in 2010 to 102 days in the first quarter of 2012.

cash flow pressure forced dealers to reduce orders.

Caixin correspondent statistics show that in the eight quarter of the past two years, the Li Ning Co product order meeting data found that in addition to the growth in the number and price of footwear products in the two quarter of 2011, the total amount, price and quantity of the whole product showed a downward trend.

In the fourth quarter of 2012, orders were more severe, and the order amount was down by 20% digits (usually a decline of between 30% and P) - editor's note.

Among them, the number of orders and orders for shoes products fell by double digits (a drop of more than 10%), and the average retail price fell by no more than 5%.

Orders and orders for clothing products also fell by more than 20%, while average retail prices also declined.

"old products can not be sold - debt is not yet up - new products have no money to order", backlog of inventory has become a common nightmare for distributors and companies.

Jin Zhenjun said that the support policy for dealers included rebate, rebate and return.

In addition, dealers will be trained to provide more guidance and support for the opening of the store network.

The policy adopted by a single dealer will depend on circumstances.

"Our cooperation with distributors is not limited to size, but mainly for distributors with better operation conditions."

above, Lining pointed out that the estimate of 1 billion 400 million to 1 billion 800 million yuan is calculated according to the current accounts receivable and inventory and the worst anticipation of future sales.

The most urgent goal is to help companies and dealers recover to a relatively healthy account, while eliminating old stocks and replenish new ones.

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over the past few months, Lining has made adjustments with individual dealers in inventory, accounts receivable and new goods shelves.

Li Ning Co promised that the original dealer's arrears would be offset by the withdrawal of stock at a discount price.

The promotion of new products will be based on the pilot and small range of goods, and the product mix should be determined according to the sales situation.

The communication between P and distributors and whether the pilot can be implemented in the national distributors has become the focus of the market.

Jin Zhenjun pointed out that the company has started discussions with the top 20 distributors, which account for 50% to 60% of the company's sales.

For small dealers, the biggest support given by Li Ning Co is no longer pressing goods.

Dealers participating in the channel revival plan will therefore suffer a one-time heavy loss.

Some analysis reports indicate that the plan depends on whether the company and distributor can reach a consensus on the apportionment of losses after consultation.

account cancel what the goods do. /p >

1 billion 400 million to 1 billion 800 million yuan is a bold way to repurchase inventory from dealers and offset accounts payable.

According to the news, the price of repurchase has reached between four and half off, which is generally higher than that of dealers.

usually, sports brand inventory clearance is not so extreme. It is mainly promoted by two main bodies, dealers discount sales, and companies set up discount stores and factory stores to clean up.

a Li Ning Co dealer in Beijing told reporters that the plan has not yet been taken, and that inventory is mainly digested by discount itself.

He reflected that many dealers' discount strategies appeared to be out of order in the early 2011, and small dealers were difficult to cash in and were merged by big distributors and Li Ning Co subsidiaries.

According to Li Ning Co's 2011 earnings report, the number of dealers decreased from 63 to 57 in the past six months, and further reduced to 52 by June 2012.

some dealers can not wait for Li Ning Co to buy back.

According to the news, half a month before the Li Ning Co put forward the plan, Lining special store, Guang Bai department store, has sold a super low price of one to sixty percent off.

compared with the reduction of dealers, the number of closed stores is even larger. As of June 2012, the number of closed stores reached 1200. Even with the addition of 248 new stores, the number of existing stores has returned to three years ago.

On the other side of the P, discount stores and factory stores that companies use to clean up inventories are increasing rapidly.

The 2012 semi annual report shows that Lining is building factory and discount stores according to the plan. As of June 2012, there were 271 factory shops and 394 discount stores, which doubled compared with the end of 2010. There were 133 factory stores and 180 discount stores.

Caixin reporter visited many Lining factory stores in Beijing. The discount has dropped to seventy percent off, which indicates that new products are also selling at twenty percent off.

According to media reports, the Lining factory store in Wuhan and Nanjing is also selling at seventy percent off.

the impact of low discount sales on factory and discount stores on the market price, Jin Zhenjun said, discount products and new product consumer groups are different.

"The key is that stores can get new products. We have identified a quick replenishment for dealers to ensure that new products are on sale."

this time, Li Ning Co's "channel revival plan" starts from inventory backlog and accounts receivable, and ultimately faces the problem of how to deal with repurchase products.

At the analysts' meeting, there were also concerns that this would lead to the possibility of a market disruption between dealers and companies in product handling.

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to this, Jin Zhenjun said that the recovered goods will be digested through established outlets, such as factory stores and discount stores.

The store will ensure that the new products are on sale and gradually reduce the discount products.

If there is a return product after the goods are cleared, the clearance channel outside the system will also be considered. It may be a foreign or domestic channel, or a donation is considered.

the use of clearance channels outside the system, brand movement enterprises have always been careful, once the stock is low into the market, the brand price system will be impacted.

Jinjiang is China's largest sports shoes and clothing production base, Chen Weijin, vice president of the local textile association, pointed out that in the past two years, companies that helped companies eliminate inventories are doing business very well.

"These companies buy out a batch of stocks at once, pay cash in cash, sell their own products."

however, in order to avoid the impact of stock on the market and influence the brand, well-known enterprises usually sign contracts with the elimination of inventory companies to ensure that their stocks are sold overseas.

Zou manager of an inventory clearing company in Jiangsu told Caixin reporter that there was no guarantee of export in reality: "eliminating inventory is very simple. Let's go to the boss to choose the style and talk about the price, which is generally 10 times lower than the market price."

The selling risk is also determined by the inventory clearing company: "it's a one-time purchase, and someone wants to sell it, regardless of domestic and foreign."

eliminate inventory Eight Immortals crossing the sea

Lining's high inventory and declining orders are just the epitome of the whole campaign < a href= "//www.sjfzxm.com/news/index_c.asp > > the apparel industry < /a > deterioration of the operation.

From the international brand Nike to domestic Anta, PEAK and other brands are facing similar problems.

Nike's two quarterly report in fiscal year 2013 (September 2012 to November) shows that revenue in the Greater China region slipped by 11%, and by May 2012, its inventory amounted to $3 billion 350 million, up 23.39% compared with the 2 billion 715 million US dollars in the same period in 2011.

the stock pressure of other domestic brands is also increasing.

Taking PEAK as an example, inventory turnover continued to increase from 49 days to 86 days in the first half of 2012, and inventory rose from 26% yuan at the end of 2011 to 529 million yuan, or 26%.

PEAK's previously compressed channel level has failed to tighten sales expectations.

for the inventory problem faced by the whole industry, Jin Zhenjun believes that the root cause is the incomplete development of the Chinese market. For a long time, the Brand Company has formed the concept of "wholesale only, regardless of terminal".

Dealers also lack training and knowledge in the construction of stores. "The whole industry has no business model at all."

under this concept, ordering will become a wholesale market, and dealers will do so. In order to ensure sales, the company will no longer be a secret to dealers.

Jin Zhenjun introduced that before and after 2000, China's sportswear was a blank market, with fast growth and extensive business mode.

But as the market matures, the whole sports brand market has been over competitive.

"There are three to four foreign mature market giants, accounting for 70% to 80% of the market share, but there are too many domestic brands."

a number of interviewees also pointed out that sports brands began to face overcapacity. After the 2008 Olympic Games, the surge in stocks also lasted for two or three years.

But in Jin Zhenjun's view, few brand companies are willing to face up to inventory problems, so that the situation worsens again and again.

extensive operation, once encountering sales problems, it is difficult to reduce inventory from channel and sale. Finally, we have to clean up inventory and all kinds of companies have different ways.

"P", as mentioned by Zou manager, the inventory on the channel is the inventory that can be seen from the book.

Many of the inventory products they buy are bought directly from the factories, and they will not be reflected on the books of the brand clothing companies.

In the enterprises he contacted, strong brands such as Nike and Adidas usually choose to pfer some stocks to the factories, so that the company's accounts will look better.

"The company is looking for quality problems, all of which are returned to the foundry factory, which is much more than it used to be."

The whole industry has already formed a dealer's delaying account period, and the brand dealers are going upstream to replace the factories.

"The dealer can't sell it, and finally return the goods to the company. When the garment company receives the goods, it says that the quality problem is back to the foundry factory, and many of the final accounts have not been settled."

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clearing stock companies often get international brand names from the foundries at a very low price.

"Nike, Adidas, Reebok style, a sale tens of thousands of double or even tens of thousands of double is not a problem."

Zou manager said that some medium-sized Brand Company are also their customers, but no one in the industry has given bulk inventory to Lining and other big brands.

in his view, Lining's domestic brand is not easy to contact. "If you want to talk about a price, you can't find it, and you can't sell it."

some companies have contracted in order.

Don Blair, chief financial officer of Nike, told the media that in order to strictly control the number of new products flowing into the Chinese market, he cancelled the order and reduced the futures.

The P > Li Ning Co has also taken similar measures, and Jin Zhenjun pointed out that the company has taken the initiative to reduce the number of products at the order, and to adjust the order process.

for the future of Li Ning Co and the whole sportswear industry, Kim Chun Jun put out a pure water bottle cap and drew a large circle around the bottle cap. He said: "the original sports brand market should be so large that the sports brand expanded the market to such a large scale.

Future market maturity should return to the sports market.