Sports brand Li Ning will be 1 billion in stock or will stir the market

Li Ning and China Dongxiang will repurchase inventory from channel distributors. The two will add up to a total of 500 million yuan. After the discount is converted into retail price, the figure will be about 1 billion yuan.

After the repurchase, how will inventory be handled? Industry insiders joked that destruction on the spot is impossible, and a new round of price war in the sports goods market seems to be expected.

Inventory crisis?

Prior to this, Li Ning Company stated that in order to speed up the inventory clean-up at the retail side, it plans to recover some dealers’ inventory and said that it will invest RMB 300 million this year. China Dongxiang also said that it made a non-recurring provision of RMB 220 million before taxes and bought back excess inventory from dealers, which would reduce its net interest rate to 17%-19%.

"Li Ning repurchased about 3 billion yuan worth of inventory, and converted it into retail price between 500 million and 600 million yuan, which is about 6.4% compared with Li Ning's 2010 sales of 9.3 billion yuan. Objectively In fact, this proportion is not very large, but it is also slightly higher.” Zhang Qing, general manager of key sports consulting strategy Co., Ltd. believes.

“The sales volume of Li Ning’s fourth quarter 2011 sales meeting is expected to decline, and it is expected that the annual results will be reduced by approximately 5% from the same period of last year. China’s trend is even a 59% drop in the first quarter 2012 trade fair. Franchisees and distributors, which reflect the problem is that their historical inventory is relatively large, so the order for the next year will be conservative, which can reflect the status quo of the two companies from a larger inventory." Sports industry Observing home Magang said.

At the same time, Magang reminded that the current amount of RMB 300 million for Li Ning and China’s move to 200 million yuan may not be exact. The specific data will not be known until the two companies publish their semi-annual reports in the first half of this year.

After repurchasing inventory, what impact will it have on corporate sales? Ma Gang used Li Ning as an example to make the following analysis: The repurchase of 300 million yuan, after magnifying into the retail price, and then taking into account the terminal discount price, this figure usually comes Look at about 480 million yuan. In the terminal retail, if the average store is an annual sales of 1 million yuan, then 400 discount stores will be required to sell inventory in order to digest.

According to data released by Li Ning, Li Ning has 191 discount stores. It can be seen that it is difficult to digest 480 million yuan worth of inventory with these brand discount stores. "About half of the inventory in a physical store can be digested, and the rest will take e-commerce channels and sell online. This may leave the rest of the goods sold through other channels, such as trading companies that sell out-of-the-box merchandise. Ma Gang analysis.

For China's trends, the role of online sales is even more important. “Because discount stores in China are not currently on the market, the effectiveness of network channels to clean up inventory is not as good as we thought. For example, its annual sales of about 100 million yuan in e-commerce will not exceed 200 million yuan at most, and these sales will not completely absorb the inventory, but also include the sales of seasonal products.” Magang thinks There can be too much hope for e-commerce channels.

“Inventory quantity is also a necessary condition to support retail, and it is not terribly necessary to have stocks. The key lies in the turnover rate. If it cannot be increased to effective speed, it will affect the entire capital chain. Li Ning and China’s trends are Listed companies, cash reserves are very abundant, they can take out funds to recover the inventory in the channel.” Zhang Qing believes that the inventory situation of the two companies do not have to worry too much.

Talking about the reasons for the formation of stocks, Ma Gang believes that this must be traced back to last year's orders. The two companies' expectations of market prospects may be overly optimistic. This is similar to Adidas's inventory shortage in 2008. “As far as the impact may continue until the end of next year, These goods need to be cleaned up in nearly a year."