Li Ning Group revenues down 12.8 percent in 2013

REPORT_ Li Ning Company reported that in the year ended 31 December 2013, revenues amounted to 5,824 million Chinese Yuan (937 million dollars), representing a year-on-year decrease of 12.8 percent, mainly due to resizing of the retail network and sell-in related to the Channel Revival Plan

as well as inventory clearance. Gross profit showed an year-on-year increase of 3.2 percent. Li Ning backed by private equity firm TPG Capital and Singapore's sovereign fund GIC, also announced appointment of Jin-Goon Kim, Executive Vice Chairman and Executive Director of the company, as interim CEO of the company with effect from 21 March 2014.

During

2013, the group's inventory, sales network, profitability and operating cash flow significantly improved, while the capital structure was strengthened in the year, with over RMB 1 billion reduction in debt. The group exited unprofitable markets, products and channels and resized its retail network, closing further underperforming stores in the year.

Commenting on the results, Li Ning, founder and Executive Chairman of the Group, said, "Chinese consumers have become more sophisticated and expect better quality and value, as well as great performance in their sportswear. We are responding to the needs of our customers - by promoting a sports culture and combining sports functionality and fashionable design in our products.”

In 2013, the turnaround involved over 90 percent of the distributors signing up to the Channel Revival Plan. Through the implementation of the Retail Business Model (RBM), the Hong Kong-based group's store mix was improved with an increased number of both self-owned stores and efficient distributors' stores, resulting in healthier cash flow and profitability in channels as well as significantly improved cost structure, better operating cash flow and healthier inventory levels for the group.

During the year, the group transformed from a traditional Chinese wholesaler to a fast-fashion and direct-retail operating model that has clear cost and productivity advantages. Furthermore, Li Ning has fully embarked on its RBM program to build a fully integrated end-to-end retail business platform connecting four key modules - demand forecasting, merchandising planning, supply chain collaboration and retail operation at company, subsidiary and channel level.

Company expects negative financial impact from the turnaround to be limited in 2014 as recovery in high margin new products continues, but the risk remains with the performance of the remaining weak channel partners and disposal progress of old inventory, and market uncertainties could pose challenges to the continued progression of our transformation.