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Li-Ning posts profit loss, as margins tighten

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China’s Li Ning posted a better-than-expected 19.9 percent fall in annual profit late last week, on the back of e-commerce growth and improved inventory controls.

For the twelve-month 2017 period, the sportswear firm said net profit fell to 515.16 million yuan ($81.5 million), after posting a net profit of 643.3 million yuan in 2016. The year prior included a 313 million yuan uptick following the sale sale of 10 percent of table tennis equipment maker Double Happiness. Excluding the one-off gain, the underlying profit was at 330.3 million yuan.

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In 2017, total revenue rose 10.7 percent to 8.87 billion yuan for the year, while gross profit margin expanded 0.9 percentage points to 47.1 percent. E-commerce now accounts for 19 per cent of total sales of its core brand, said the firm, adding total comparable sales saw mid-single digit growth for the year.

The most recent fiscal year saw Li-Ning focus on sports research and market evaluation, to offer products that suited professional athletes and fashion-savvy customers.

“Incessant imagination, on the other hand, is driving Li-Ning to be more trend-setting by integrating fashion, entertainment and leisure elements with professional sports, therefore creating more professional and stylish products and sports experience for sports enthusiasts and life enjoyers,” the company said in a statement.

“To enhance retail capability, we are dedicated to enhancing the precision of our product planning and optimising the supply model, so as to satisfy end-user demands in a ‘swift + precise’ way. As for retail stores, we upheld the consumer-oriented approach by enhancing and re-shaping retail experience at stores constantly.”

The number of Li Ning-brand outlets or sales counters in China amounted to 6,262 as of end-December, a net decrease of 178 from end of last year.

“The group has taken continuous initiatives to refine channel structure and raise channel efficiency by implementing various measures including closing down and renovating inefficient and loss-making stores and opening highly efficient stores and key experience-concept stores,” the company said.

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“During the year, the overall retail sell-through registered a high-single digit growth, with product discount rate and sell-out rate further improved.”

The news comes as China’s largest sports retailer in value terms ANTA Sports Products clocked a record annual profit for a third straight year. ANTA saw a huge demand locally for sportswear and associated goods, adding it now plans to push into major markets overseas.

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