China's Li Ning stumbles from gold medal position to no man's land
By Donny Kwok
HONG KONG (Reuters) - In 2010, former Chinese gymnast Li Ning led a surging $4 billion sportswear business, a gold-medal pinnacle echoing his victories at the 1984 Olympic Games.
Now, the Li Ning 2331.HK business is more reminiscent of the ex-sportsman's exit from the 1988 Olympics without a podium finish. As customers have turned to aspirational global brands like Nike Inc (NKE.N: Quote) or cheaper local firms, Li Ning has racked up heavy losses, losing four-fifths of its market value.
The company has long pinned a turnaround plan on targeting trendy, fast-growing areas of sport in China, like basketball, hoping to attract younger consumers with a mid-range pricing strategy. But company watchers fear what Li Ning sees as the middle ground could turn out to be a no-man's land, while still-loyal older customers may be turned off by the focus on youth goods.
"They tried to go younger, but in the course of doing that they lost a lot of those aged over 30 who were traditionally a more loyal customer base," said James Roy, senior analyst at China Market Research Group in Shanghai.
Equally, many younger customers have yet to buy into the strategy.
"It seems like (Li Ning) products are targeted mostly at students aged 13 or 14," Ding Jianan, a 22-year-old student, told Reuters in China's commercial capital Shanghai. "I can afford higher-priced items from Western brands, which offer better quality. In college, people like to compare each other's outfits so the peer pressure will push us to buy Nike or Adidas (ADSGn.DE: Quote)."
Li Ning, backed by private equity powerhouse TPG Capital [TPG.UL] and Singapore wealth fund GIC [GIC.UL], last month reported a first-half net loss of nearly $100 million, more than three times that of the corresponding period a year earlier.
It said at the time its recovery could take up to two more years as it invests hundreds of millions of dollars in promotion and advertising. The company declined to comment for this article. Continued...