Li Ning adjusts Lotto franchise contract to strengthen integration

In the overall environment where the global economy is sluggish and where industry growth is hampered, actively adopting measures for self-reform is one of the most effective means.

Recently, Li Ning issued an announcement that it will adjust the cooperation with the Italian sports brand Lotto for the duration of its franchise business and amend the Lotto franchise contract from the original period of 20 years to 10 years.

It is reported that on August 1, 2008, Li Ning, a local sports brand, and Lotto, an Italian sports brand, entered into a concession agreement. Lotto will award Li Ning Sportswear's licensed products in China for the development, manufacture, marketing, promotion, promotion, distribution and sales of trademarks. About 20 years of exclusive franchise.

As for the reasons for shortening the contract, Li Ning stated that compared with when the agreement was signed in 2008, the market environment has undergone great changes, and shortening the contract period is in line with Li Ning’s strategic initiatives focusing on its core business.

According to reports, shortening the contract period is beneficial to Li Ning's significant decline in the amortization amount borne by the Lotto concession, which helps Li Ning focus its resources on its core business.

Earlier this year, Li Ning undertook a strategic adjustment of “focusing on its core business and optimizing its organizational structure” and issued an announcement saying that in order to increase operational efficiency, some non-core business units, such as its sub-brands, will be further integrated.

The ability to continue to provide professional sports equipment for professional athletes and sports enthusiasts is an important criterion for measuring a sporting goods brand. As a leader in domestic sporting goods, Li Ning’s focus on core business operations has been further confirmed at the just-concluded Li Ning 2012 Olympic Equipment Launch Conference. Li Ning has created “Red Scale” competition suits and other competition equipment for athletes that best meet the needs of sports functions.

Analysis of the industry, to provide professional competition equipment for China's five national teams is a reflection of Li Ning's focus on core business. In addition, Li Ning’s practice of adjusting the Lotto contract period is also extremely beneficial to improving its financial performance. The company said that adjustments will help improve its cost structure and keep the overall cost rate relatively stable.