Losses Continue To Expand, Lining Spanformation Continued Labor Pains

5 days after a short suspension, the domestic sporting goods brand Lining (02331.HK) announced in December 17th that it plans to raise about HK $1 billion 518 million to HK $1 billion 518 million by offering common shares and convertible securities at a price of HK $2.6 per share, to supplement the company's next stage of operating capital and optimize its capital structure.

Since returning to the essence of sports in 2012, Lining has tried to reverse the loss situation through series of reform measures such as closing stores, stocktaking, reshaping the supply chain and revitalization of channels. In the first half of this year, Anta, PEAK, 31st degree, Pathfinder and other sporting goods. brand Both achieved profits, but Lining lost 586 million yuan, not only widened the deficit of 184 million yuan in the same period last year, but also higher than the full year loss in 2013.

The key Road Sports Consulting Co., Ltd., CEO Zhang Qing, said in an interview with the twenty-first Century economic report that due to the heavy burden, Lining's spanformation results were not as obvious as predicted. But he believed that Lining's current strategic direction for professional sports market segments conformed to the development trend of the sports goods industry. The key to the success of the reform after the fund-raising was the implementation and implementation of various reform measures.

"After the implementation of the channel revival plan, the optimization of the channel has enabled some distributors and two tier dealers to gradually restore profitability." In December 18th, Li Ning Co replied to the newspaper that the company will continue to carry out channel innovation next year, including opening up new sales channels for high-end sports such as LNC stores, urban community stores and sports shoes monopoly stores.

Discount stock issue financing

According to the Lining announcement, the existing shareholders can directly subscribe for new common stock or apply for convertible securities. Lining will sell securities to eligible shareholders on the basis of 5 issued certificates issued by each of the 12 existing common shares. The subscription price is HK $2.6 per share, which is 25.07% higher than the closing price before the last trading day, and is expected to be raised from HK $1 billion 518 million to HK $1 billion 695 million.

If no subscription is made, the remaining shares will be underwritten by the distributor. It is worth noting that apart from the 8032.HK TPG, the TPG, Singapore Investment Bureau GIC and Milestone, which have been promised to subscribe to the original shareholders, Luo Yu West will also take part in the underwriting. According to the distribution agreement, Luo Yu West will have a maximum holding of 4.87%.

Statistics show that Luo Yuxi is mainly engaged in industrial and financial companies in Hongkong, and has always been relatively low-key, but is familiar with Lining. In 2012, Luo Yuxi attended the Lining Foundation's donation in Kunming as the chairman of Hongkong Dayu company.

Zhang Qing believes that in the first half of the performance losses, Li Ning Co shareholders are willing to act as distributors of this fund-raising, proving that shareholders' level is still hopeful and confident in the spanformation and reform of the company. "Now that Lining is taking the strategy of light assets, the company has relatively weak control over upstream suppliers and downstream channels. I believe these two pieces are the direction of Lining's future efforts." Zhang Qing said.

According to the reporter, Lining established an industrial park in Wuhan in the past few years, introduced the upstream suppliers into the park, and produced by the Li Ning Co "sending orders". However, in the actual operation process, this mode has created problems such as the laziness of suppliers, the lack of market competition, and so on, making the cost difficult to come down.

The response to the stock market is generally rather cold. Haitong International believes that executive risk and capital expenditure, as well as high operating costs, will bring short-term pain to Lining. If the convertible securities are fully exercised, the earnings per share will be substantially diluted.

On the morning of 17 th, Lining's stock price continued to suffer from pressure after resumption, and it had fallen from 11.1% to HK $2.95 at most, a new low since 2004. At last, it closed at HK $3.06, with a single day drop of 8.1%.

But in fact, this is not the first time that Lining has raised the stock price by raising the price. In January last year, Lining raised more than HK $1 billion 800 million in the form of public offering of convertible securities, which was publicly available. A two convertible Lining stock was issued for a convertible securities of HK $3.5.

Promoting reform and spanformation

After ten years of rapid development of sporting goods industry, Lining, Anta, PEAK, PEAK, XTEP and a number of local sporting goods brands collectively fell into a predicament of performance decline in 2011. At the worst time, the number of major sports brand stores exceeded 3000 in one year.

"All the way up and running shop, Lining gradually extended the original sports orientation to leisure. Clothes & Accessories However, such a wide and long positioning and product line will increase business risks. Once the market changes, something will happen. " A person familiar with Lining told reporters.

In 2012, Lining lost 2 billion and closed 1821 stores in just one year. Since then, Lining has opened a long road of reform and spanformation, in addition to cutting off too long leisure. Clothes & Accessories Besides, the brand has been returned to the essence of sports, and the five major categories of management strategies, such as basketball, running, badminton, training and sports life, have been established. The supply chain and channels have been reformed.

"We have set up a platform dominated by sports marketing, product and retail operation, which is ready for the company to enter a new stage of growth. The funds raised from the public offering will support the company's efforts to deepen new product development, continuously enhance the competitiveness of its products, and enhance the overall retail operation capabilities of channel partners and companies. " Li Ning Co said.

It is understood that in Lining's road map, "rectifying the channel and going inventory is only a secondary goal". The core of the spanformation is "sports marketing" based on the experience of competition, retail experience and product experience. Take basketball as an example, Lining layout according to the middle, high and low end sports resources, and combine sports experience and product experience together to play a great role in sports marketing.

However, frequent high-level changes have increased the number of unknown indices. It is understood that, in July 2012, when Zhang Zhiyong, the elder statesman, announced his resignation as chief executive of the company, Jin Zhenjun, who was expected to lead Lining out of the trough, announced his resignation last month.

According to Lining's latest display, as of June 30th this year, the total number of Lining brand stores was 5671, compared with 244 at the end of last year, and 52 dealers, 3 fewer than the end of last year. In the first half of the year, the company realized revenue of 3 billion 137 million yuan, an increase of 8% over the same period, but a loss of 586 million yuan.

"This kind of reform and spanformation requires a process, not only with enough funds to support, but also enough time to let the new structure release." Zhang Qing said.