Li Ning and other sports brands saw a sharp drop in net profit of 65.2%.

Recently, domestic sports brand listed companies have successively announced their 2011 financial statements. Li Ning’s net profit fell by 65.2% in the domestic “one brother”. The Chinese trend of counterattack with the price also hurt itself. Net profit dropped by 93% during the reporting period. The growth of companies such as Anta, Xtep, and 361 Degrees slowed down. Last year, the growth rate of net profit was 11.5%, 18.8%, and 16.8% respectively.

According to statistics, as of the end of 2011, the inventory of all sporting goods companies increased by 25.7%-81.8% year-on-year.

“In the past few years, the wholesale model has played the most important role in the rapid expansion of the sporting goods industry. Listed companies only need to deliver products to distributors to confirm sales, and then distributors transfer inventory to sub-distributors. The burden of capital expenditure is low and there is no need to recruit sales staff for new store openings.” An industry researcher analyzed that “these brand companies intend to increase sales by extending the credit terms of distributors and increasing sales rebates before they are ready to list in Hong Kong. After listing in Hong Kong, it has enough cash support to give the distributors a credit period and subsidize their rapid expansion of the network, resulting in a backlog of retail inventory."

In the eyes of listed companies, discount promotions are a destocking method.

According to a researcher's channel survey, the price war in the sporting goods industry has become increasingly fierce. "Even if it is new, Anta and Peake will hit 8.5 fold and 8.8 fold, respectively, and inventory will hit 3-5 fold."

"Most of the inventory will be sold through existing stores and it is expected that it will damage the brand value in the long run," the researcher said.

“Sports brand is a 'small industry' with a small market capacity and a convergence of consumer choices, and there is little product differentiation between domestic sporting goods companies, and Nike and other international big names are taking the whole market through price cuts. When companies are experiencing the most difficult time, the valuation of sports listed companies will also be suppressed," said an industry source.