Increasing Manufacturing Costs Cause Trouble For Chinese Retailer

Chinese sportswear retailer Lining announced its performance expectations for 2011, stating that its revenue may decrease by as much as 7% compared with 2010 due to slow order increases and inventory problems of some distributors.

The company said that because of the impact of the new wholesale discount rate policy and the increase of manufacturing costs, its gross margin continued to decrease, and it expects to decrease by one to 1.5 percentage points from 47.3% in 2010.

For expenditures, Lining continued to increase its investments in brands, products, and human resources in 2011, and its overall cost rate may increase by about 7-8% compared with the 33% in 2010.

Attributing to the decrease of revenue and gross margin and the increase of expenditures, Lining predicted about seven to eight percentage points decrease for net profit rate in 2011, comparing with the 11.7% in 2010. That means its net profit rate for 2011 was lower than 5%.

The Chinese company said that for 2012, it will focus on core businesses, improve operating efficiency, implement organizational changes, and reduce costs in all sectors with exceptions of branding and product development. At the same time, it will adjust product structures, control procurement costs, and increase gross margin. The company plans to enhance its retail efficiency in second-, third- and fourth-tier markets, further clearing its retail inventory, and accelerating cash flow.

The company also said that the 2012 London Olympics will be an important opportunity for the company to improve its brand image.

You May Also Like

Leave a Reply

Your email address will not be published.