Li Ning spent as much as 1.4 billion on advertising investment last year but he was unable to control pollution

Five environmental protection organizations, including the Public Environmental Research Center, recently released reports on pollution investigations in the textile industry in China. Li Ning was named after a large amount of pollutants and has low water use efficiency.

Can become the representative of the world's leading sports brand company, Li Ning Company after more than 20 years of exploration, listing in Hong Kong so far, this company has been in the capital market for almost eight years. Today, Li Ning, the company behind the proud sports brand of the past, seems to hand over unsatisfactory responses.

A few days ago, environmental groups once again pointed to the existence of pollution in China's supply chain of big textile brands, including Li Ning, the leader of the local sports brand.

According to the 2011 annual report published by Li Ning last year, the overall distribution cost of Li Ning in the previous year was 2.9 billion yuan, which was 13% higher than the 2.5 billion yuan in 2010 and accounted for 32.6% of the total revenue. Li Ning continued to increase investment in brand promotion. Li Ning brand advertisements and related promotion expenses were 1.4 billion yuan, a year-on-year increase of 10.8%, accounting for a 2.7% year-on-year increase in revenue.

Insiders pointed out: "In the context of slowing industry growth, sports brand Li Ning has shown a declining trend in recent years. High costs have kept profits from being high and Li Ning has become a 'heart disease'. However, this does not mean that pressure can be passed on. There are trade-offs in the selection of businesses and so on, and more attention should be given to environmental protection in production."

Li Ning boarded the black list of pollution pollution brand image

Recently, five environmental protection organizations such as the Public Environment Research Center released a pollution investigation report on the textile industry in China on April 9. Many well-known companies have different levels of pollution control violations in their supply chains. Li Ning is on the list. The report pointed out that the polluted enterprises had large amounts of pollutants and had low water use efficiency.

The reporter called Li Ning and the relevant person responded: “For the pollution problem, the company has actively communicated with suppliers about the emission of harmful chemical substances and made a commitment to zero discharge of harmful substances, and has long-term plans for related issues.”

Li Ning promised to achieve zero emissions of hazardous chemicals by 2020: to systematically change the zero emission targets of hazardous chemicals in the supply chain and product life cycle. Li Ning will gradually use harmful chemicals to fade out suppliers, accelerate the elimination of hazardous substances of high concern levels, and continue to cooperate with other brands, material suppliers and other stakeholders.

Zhong Ye, a contemporary Chinese research institute, believes that: “Over-exploitation of enterprises seeks benefits without regard to environmental protection, and there are chances for misconduct in the process of pollution treatment. Environmental protection and economic development are both important, and listed companies should pay attention to their personal image. Due to pressure transfer, the brand image is damaged."

In addition, Li Ning's investment in pollution control is far less than his advertising investment.

It is understood that Li Ning's annual investment in spokesperson advertisements, sports event sponsorships and other funds is not cheap, and it will take a long time to prevent the maintenance of huge brand image costs.

Sharply Decreased Gross Profit Margin and High Cost Become Deadly Tool

An indisputable fact was placed in front of Li Ning. The cruel competition in the sporting goods industry slowed down the industry growth rate.

In the past year, sporting goods companies handled a lot of inventory, and Li Ning did not escape fate. Li Ning’s inventory provision for 2011 was 188 million yuan, an increase of 63.48% over the same period of 2010. Gross profit margin continued to decline due to the new wholesale discount rate policy and rising production costs.

Of the top five local sportswear companies, Li Ning ranked first in revenue, but it had the lowest net profit. Anta ranked first with 1.73 billion, and Li Ning was 386 million, or even nearly half of the top one.

The 2011 annual report shows that Li Ning realized operating income of 8.92 billion yuan for the year, a decrease of nearly 500 million yuan from the previous year, and a 5.8% decrease in revenue. At the same time, gross profit decreased by 8.02 percentage points to 46.1%.

Zhang Zhiyong, chief executive officer and president of Li Ning, said that this year it will increase the net inventory of 200 factory stores and discount stores. The sixth-generation stores have more income before the upgrade and will increase to 1,500 by the end of the year.

The sluggish growth of orders and the inventory influence of some dealers caused the gross profit margins to drop significantly. Li Ning never gave up its brand image publicity, and the harvest was gradually reduced, but the cost was not effectively controlled. The report shows that the total distribution costs and administrative expenses increased by 3% from the previous year to RMB 3,223 million. Li Ning's performance pressure is evident.

Analyst Zhao Xiao believes that Li Ning is currently facing the pressure of a significant slowdown in the growth of the industry, and sales performance has slowed down. Due to the slow increase in the number of sports people participating in sports, more than half of the products in the market are sports products, which reduces barriers to entry and increases competition in the industry. At the same time, costs rose more than expected. Labor costs may still grow at a compound annual growth rate of 10-15% over the next 3-5 years.

In addition, the data show that last year, the number of Li Ning brand factories reached 270 or so, and the year-on-year increase remained at a low single digit level; the number of Li Ning brand stores reached 9,000, and the inventory level and retail discount rate both increased compared to the same period of last year. The annual amount of orders calculated by the Li Ning brand for wholesale shipments in 2011 decreased by more than 5% from the previous year.

Li Ning said that in 2012, it will carry out organizational reforms to reduce costs other than brand marketing and product R&D expenses in order to improve the level of net profit margin. At the same time, it will carry out channel changes, strengthen retail efficiency in the second, third and fourth tier markets, and further clean up the retail end. Inventory, speed up cash flow.

"The high cost has become a fatal problem in Li Ning's development and performance. To solve the pollution problem, it should be more from the point of view of technological innovation, actively conscientiously respond to green science, and commit to systematic changes." Industry sources pointed out.

Unknown governance structure appears

Using the capital market to raise funds to seek expansion and development has become the only way for many companies to develop to a certain scale. However, the waste of resources caused by blind expansion is not worth encouraging, especially when the results are not satisfactory.

With falling orders, turbulence in personnel, and serious pollution, Li Ning has been questioned in the market.

An informed source pointed out: "Li Ning has always been unclear in the market positioning. Due to deviations in management strategy and strategic guidance, the company has repeatedly adjusted the impact of performance. Staff communication is not in place and there is a problem with corporate governance."

A few years ago, the overlord of the local sports brand was none other than Li Ning. Excessive expansion maintained hegemonic status against attacks by groups such as Anta, and Li Ning began to engage in various industries.

Previously, as Li Ning’s company happily saved energy and ransacked plans to reconstruct the old district of Shenyang’s Heping District with 40 billion yuan, a project—the “Eco City” surfaced. Li Ning was said to be entering real estate. However, it may be forced by financial pressure. As the plan collapses, it will eventually disappear. However, Li Ning’s intention to involve in real estate development is quite obvious.

Excessive running, always stop and breathe.

Due to unsatisfactory performance and pressure from the industry, Li Ning has been shrinking the front line in recent years, and has seen several large-scale layoffs. At the beginning of this year, the company once again announced large layoffs to adjust the structure of the back office functions and reduce personnel costs. Li Ning said that the small business pressure brands will make corresponding adjustments and contractions.

Judging from the development of Li Ning, the road can be described as bumpy. From the second venture to the remodeling of the brand, the company’s philosophy has been clearly visible, resolutely stabilizing the Li Ning brand tree in the country, but if it is not watered and fertilized to create a fertile In the soil, improper drainage leads to the destruction of pollution, which eventually causes the roots to rot and rot.