Chinese sports brand Li Ning 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% year-on-year.
The company said on its website on 3 February, 2012, that it will streamline the organisational 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.
Li Ning plans to reduce its human resources costs as a percentage of its sales by 0.5% in 2012, said Demi Luo, who is in charge of the brand’s public relations. The company’s human resources costs as a percentage of its sales were 8.7% in the first half of 2011, he said.
According to China Business News, 4,215 employees worked for Li Ning in 2010, and the total cost of salaries and benefits exceeded $110 million.
“The adjustment will be beneficial to the group’s long-term development,” said Zhang Zhiyong, CEO of Li Ning.
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% 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 labour all rose last year, the clothing industry was greatly affected,” said Zhu Qinghua, an analyst with the CIC Industry Research Centre. “Worse still, sports brand made a wrong evaluation of the market, which caused high growth in reserves.”