China's homegrown sports brand Li Ning Co Ltd has announced that it will reduce staff numbers to rein in costs after it had predicted its revenue for 2011 had fallen by 6 to 7 percent year-on-year.
The company, which was founded by the famous Chinese gymnast Li Ning and is listed on the Hong Kong stock exchange, said on its website on Friday that it will streamline the organizational structure of various departments, including those for human resources, information technology and strategic development. That will help it increase its operational efficiency, lower its human resources costs and channel resources into its core business.
The company plans to reduce its human resources costs as a percentage of its sales by 0.5 percent this year, said Demi Luo, who is in charge of Li Ning's public relations. The company's human resources costs as a percentage of its sales were 8.7 percent in the first half of 2011, he said.
The organizational restructuring is part of the company's ongoing strategic reforms and follows an announcement the company made in October.
China Business News reported on Monday that 4,215 employees worked for Li Ning in 2010, and the total cost of salaries and benefits exceeded 710 million yuan ($110 million). Each employee on average could earn 168,500 yuan a year, which is two-thirds more than was earned by their peers at Anta Sports Products Ltd, another Chinese sportswear company.
"The adjustment will be beneficial to the group's long-term development," Zhang Zhiyong, CEO of Li Ning, said.
As competition in the Chinese sporting-goods industry intensifies, and the industry's costs continue to rise, the company will be faced with difficulties, Li Ning, who is also chairman of the brand, said last August. That month, it reported that its net profit for the first half of the year had fallen by 49.5 percent to 293.7 million yuan, according to the company's interim report.
According to the company's "Estimated Results for 2011 and Outlook for 2012" issued in January, the group's revenue had declined by about 6 to 7 percent below what it was in 2010 because of flat growth in orders and the repurchase of a portion of inventory from distributors.
"Because the cost of resources, rent and labor all rose last year, the clothing industry was greatly affected," said Zhu Qinghua, an analyst with the CIC Industry Research Center. "Worse still, most sports brand made a wrong evaluation of the market, which caused high growth in reserves."