* Chief executive steps down with immediate effect
* Founder Li Ning to help run firm during search for new CEO
* Shares jump on hopes of stronger management
By Donny Kwok
HONG KONG, July 5 China's best known local
sportswear group Li Ning Co Ltd, grappling with a
slowdown that has halved its share price in recent months,
replaced its chief executive on Thursday and said it will focus
more on its business in China.
The company said founder and Olympic gymnast Li Ning and
executive vice-chairman Kim Jin-Goon, who is a managing director
at U.S. private equity fund TPG Capital that invested in the
retailer this year, will lead the firm during the search for a
new CEO after the departure of Zhang Zhiyong.
Shares in the company, which have dropped abount 20 percent
this year, jumped on the news on hopes of more effective
management and a clearer strategy for China.
"Investors put a bet on the new jockey. Kim has a strong
track record in retail and comes from the private equity front,
and that fuels hopes of better prospects going forward," said
Steve Chow, head of research of Kingsway Group Research.
"It's set to strengthen the management team. At least the
management is now facing the problems of the industry and trying
to solve them."
Li Ning, backed also by Singapore sovereign fund GIC, has
struggled in recent months as China's economy has slowed,
leaving inventories bloated. Like many other local sportswear
groups, it plans to cut back on new stores openings after an
expansion blitz following the 2008 Beijing Olympics.
"The first most important focus for us is to build a very
clear and strong brand with clear brand strategy that focuses on
the core businesses in China," Kim said on a conference call.
"Secondly, to continue to make investments into this brand
with a much clearer focus in building comparatively exciting
products with much better design and technology, and shortern
the development cycle to keep track with market changes."
Li Ning said Zhang, who has been with the company for 20
years, had agreed the time was right for new leadership, but
would continue as an executive director and adviser.
The change of management comes just three weeks after Li
Ning, which competes with local player Anta Sports as
well as Adidas and Nike, warned that profits
for 2012 would be weaker than expected because of soft sales and
high marketing costs.
Kim said it could take 6-12 months for inventories to return
to a normal level, while it may be three years before the
group's earnings rise steadily.
Li Ning's inventores of finished goods swelled to 1.25
billion yuan as of December 2011, up from 872 million a year
Li Ning's shares rose nearly 6 percent to HK$4.96, outpacing
a 0.4 percent drop in the benchmark Hong Kong index. They
have shed half their value since a mid-March peak.
"It brings new excitement and may help strengthen the
management," said Patrick Yiu, a director at CASH Asset
Management. "It brings new hope of a potential breakthrough in a
Kim has a successful track record in driving transformation
at consumer and retail companies in South Korea and China,
including Dell Korea, China Grand Auto and footwear and apparel
distributor Daphne International Holdings Ltd.
He was previously an executive at Daphne, a family-run
Taiwan shoe firm in which TPG invested through a convertible
bond in 2009 and turned the company around.
TPG's other investments in China have included Shenzhen
Development Bank and Wumart.
TPG and GIC agreed in January to invest around $115 million
in Li Ning through a convertible bond, giving much-needed
capital to a company whose stock fell more than 60 percent in
2011. TPG also acquired 5 percent of existing stock of the
company from a family trust.
Li Ning also appointed Samuel Su as an independent
non-executive director. Su is Chairman and CEO of the China
Division of YUM! Brands, Inc, a restaurant group with
brands including Pizza Hut, KFC, Taco Bell and Little Sheep.