Li Ning closing regional HQ in S'pore

Li Ning, the eponymous giant Chinese sportswear firm founded by the gymnast who became the most decorated Chinese athlete at the 1984 Olympics, is closing its regional headquarters here.

A source close to the firm told The Straits Timesthat Li Ning Sports Singapore would cease to exist by December 31 - a victim of the parent firm's radical cost-cutting amid fierce competition.

Most of its 23 employees here have left, the source added, but five from the human resource and finance departments are still settling outstanding transactions as the entity winds down.

Li Ning has its office at Scorpio East Building in Tai Seng and one retail outlet in Ion Orchard.

The firm's local distributor will take over the reins of its South-east Asian business, including the Ion Orchard shop.

Li Ning's Chinese headquarters warned on Monday that it will post a significant loss this financial year as it is spending as much as 1.8 billion yuan (US$286 million) to buy back inventory from distributors, get newer products into stores and improve its sales network.

Li Ning, which is China's largest sportswear maker, is also facing tough competition from rivals such as Adidas and Anta.

Its withdrawal from Singapore is just one move to scale back operations worldwide. Li Ning shut its only retail outlet in the United States in March and began selling products online instead. Its shops in Asia will remain open.

Its Asia-Pacific distributor, Sunlight Sports, said the company had been planning to close the Singapore office for about a year.

"Since Li Ning set up its regional headquarters in Singapore in 2009, we have been its sole distributor for 14 countries in the region, including South-east Asia, India, and South Korea," said Sunlight's regional promotions manager Jason Guan.

"Li Ning felt that we were now mature enough to take over the business."

Sunlight will run Li Ning's retail outlets in the region, marketing and promotions, he added.

Since setting up shop here, Li Ning has mainly focused on raising its profile by sponsoring badminton events, but Sunlight plans to expand the brand's scope to include sports such as running and basketball, he said, adding it is on the lookout for venues for more Li Ning retail outlets.

Li Ning's ongoing three-year contract with the Singapore Badminton Association (SBA) will not be affected, said SBA chief executive Bobby Lee. The deal, amounting to a cash value of about S$1 million a year, involves sponsoring three annual events. It ends in December next year.

"It is transferring sponsorship rights to its Hong Kong office, so the funds for next year's events will come from Hong Kong instead of Singapore," Lee said.

The situation is a sharp reversal of fortune for Li Ning, which had been on an expansion blitz since the 2008 Beijing Olympics.

In January this year, the Government of Singapore Investment Corp (GIC) invested 189 million yuan in the firm, taking its stake to 8 per cent. United States private equity fund TPG Capital also injected 561 million yuan then.

Li Ning said the funds would be used to further promote its brand in China's huge market for sportswear and athletic shoes.

But in August, it reported that first-half net profit plunged 85 per cent as higher prices for materials, labour, rent and discounts for distributors hit margins.

GIC declined to comment.