Is TPG Playing The Role Of Lining?

"Nothing has changed.

Zhang Zhiyong retire from CEO, but he is still in the board.

Jin Zhenjun, the new top Lining, sent a reassurance to investors in the conference call.

At 6 in the morning of July 5th,

Announcements Zhang Zhiyong resigned as chief executive officer, appointed TPG partner of private equity fund Jin-GoonKim (Jin-GoonKim) as executive director and executive vice president, and added an independent non executive director to Su Jing, chairman and chief executive officer of China business department, yum group (Yum!).

Zhang Zhiyong worked in Lining for more than 20 years, and was listed as CEO in 2004. This time he retired from the firing line and aroused the suspicion of the market. After the introduction of TPG in January this year, the current team and new investors disagreed.

Lining himself repeatedly stressed at the press conference that Zhang's resignation was a unanimous decision after his communication with the board of directors. Although Zhang Zhiyong had always been considered the main inducement of Lining's defeat, Lining denied that "Zhang Zhiyong's departure is responsible for previous strategic mistakes".

Lining added: "Zhi Yong came to the company from the early days of Lining's establishment. At that time, sales were still less than 1 billion.

He has deep feelings for the company and deep friendship with me.

Zhang Zhiyong's new position is the chief adviser to the Executive Committee of the board.

In fact, there are only 3 members of the board of directors: Lining, Jin Zhenjun and non - Chen Yue, in other words, on the framework, Zhang Zhiyong still has a key role, and Jin Zhenjun's "nothing has changed" for investors.

But Lining himself and the market actually expect TPG to bring about substantial changes.

Founded in 1992, TPG, the US private equity fund, is smaller than Li Ning Co, but its assets have amounted to $51 billion 500 million.

According to the company's data, TPG follows the idea of "reverse the investment", and injecting expertise and airborne management team to reverse the bad operation of Target Corp.

Asia was the first station for TPG's overseas expansion. In 1994, it set up an office to look for projects. It has invested in Lenovo and Shenzhen Development Bank. Its existing projects include CICC and Shanghai medicine.

Although the retail industry did not account for a major proportion of the 254 existing and completed projects, it successfully helped women's shoes Daphne turn over in 2009 to make them famous in the first World War in Hongkong.

Lining's investment in TPG is exactly the same as the way he invested in Daphne: first, he can detect the temperature in the form of convertible bonds, then put in the professionals to the management level of the company, and make the pformation plan and execute it step by step.

The problem Daphne faced at that time was very similar to that of Lining: the inventory turnover period was too high.

In 2009, Daphne's inventory turnover time hovered around 180 days, twice as long as that of the industry.

TPG took the lead in drastic reforms, including airborne finance officers, operations officers and human resources director, to speed up the frequency of ordering and inventory management.

When TPG entered Daphne for the first time in June 2009, its stock price was less than 3 yuan. In April this year, it had risen to a high level of 11.8 yuan. From the perspective of stock price, the return to TPG can reach 400%.

Investors in Hong Kong stock kept a fresh memory of Daphne. So after the announcement of Lining's change of management, the share price rose all the way, up 10.8% on that day.

Prior to that, Lining's share price had tried 4.2 yuan for 6 and a half years, 85% off higher than the 2010 high.

The reason why stock prices go down is that profits are out of shape.

In July 2011, the first earnings warning was issued, and Lining's business indicators became worse quarter by quarter.

Last year, profits fell by 65%, inventories increased by 41%, and stock turnover days increased from 52 days in the previous year to 73 days.

Lining chief financial officer Zhong Yiqi once appease investors "the three quarter of 2011 is the worst moment", but in June 11th this year issued a profit warning, the first half of this year refers to the fourth quarter of this year, the order will be "volume and price down", footwear and

All types of products have double-digit declines.

In the first half of this year, the results will be announced at the end of August. Zhong Yi Qi will give the market "preventive measures", which means that the promotional cost of the CBA sponsorship (China Professional Basketball League) will not be good in the first half of the year.

Lining, who once had the strongest local sports brand, lost to the end of the team.

At the same time, Lining needs to face many challenges such as inventory, channels, products and management.

TPG has worked out a four year plan for Lining, which is implemented in three steps. First of all, clear inventory and help the retail terminal to increase the selling rate.

What is the final goal of the TPG plan? Compared with the empty answer to "remodeling the brand" and "improving efficiency" at the press conference, Jin Zhenjun himself is more honest and outspoken in the investor teleconference.

Jin Zhenjun said in a conference call, whether it is improving channels or reducing the design cycle, the ultimate goal is: "every Lining store is making money".

Will Jin Zhenjun close the unprofitable shop? He didn't respond directly. He only stressed that "it is not a problem of opening new stores or closing old stores. We are more focused on how to help retailers upgrade and maintain existing stores".

Jin Zhenjun put the inventory at the top of the task. He pointed out that the inventory should be restored to a reasonable level before considering selling the goods to dealers again, but the recovery rate may be slower than expected.

As for his emphasis on "restoring the health level of inventory," neither Lining nor he ever gave any data indicators.

In sports industry, only Anta and 361o have announced the inventory sales ratio, that is, assuming no more new goods, and at the current selling speed, how many months can the inventory be cleared?

The index given by Anta is 3 to 3.5 months as the ideal level, that is, inventory quarterly clear.

In February this year, Anta chairman Ding Shizhong pointed out that its Treasury sales ratio was 4.5, which is "the healthiest in the industry".

Now Lining's wholesale price discount is about 45%, although it has concession 50% earlier than two years, but still higher than the 40% discount rate of Anta and XTEP.

Some investors are concerned whether they will further reduce the discount rate and give profits to distributors. The reply given by Lining is: "it is still under study and has not been finalized."

It is worth noting that Jin Zhenjun has repeatedly mentioned the establishment of retail channels in his plan.

Two years ago, Lining went all out to get rid of the role of pure wholesalers, set up a direct store, and repurchase the unsalable sweater from distributors to the outlet discount sale.

The annual report shows that in 2011, it repurchased 310 million of the stock from dealers.

The move to enter the retail sector is not regarded as "the first to eat crabs".

But analysts say that Lining's move is now the trend.

Recently, there have been rumors that Anta has plans to imitate Lining, open stores to do direct sales.

At the beginning of the year, Ling Shengping, chief financial officer of Anta, told reporters that he would not consider buying back stock, because "we only have factories without shops, where to buy back stocks, only to destroy them".

Old bottles for new wine, CLSA mainland China Consumer Research Director Wei Xiaopo listened to Kim Chun Chun's pformation plan, said, "his speech reminds me of China's trend in October 2010, the airborne Adidas's former president of Greater China San-drine Zerbib, when she took office, and Kim Chun Jun thought the same, so that the sports brand back to the ground: focus on doing sports products, improve the efficiency of channels.

But she resigned after a year.

China's Kappa brand is currently operating at 4 billion 100 million of its market value.

Lining, whose size and brand is stronger, has fallen to 5 billion 300 million, while Anta has more than 12 billion of its market value.

Retire: is management incompatible?

Kim Chun Jun, who was elected to Lining, played an important role in the Daphne campaign.

According to the announcement, Kim Kim Chun, a native of South Korea, graduated from Harvard University. After joining McKinsey and DELL Korea in 2006, he joined TPG. He served as Daphne's non-executive director to help Daphne pform its core operation and establish the industry's first rapid retail business mode.

Zhang Zhiyong and Kim Chun Jun are the same age. They are all 44 years old this year.

Recalling Lining's speech at the press conference, "the highly recognized board of directors" by Zhang Zhiyong and "the belief that TPG has the most advanced retail concept" does not seem to be contradictory, but the market has different interpretations: the old and new management is at variance.

Wei Xiaopo of CLSA pointed out that in March this year, when he was asked by the analyst, he asked whether he would resign as CEO, and received a negative answer to Zhang Zhiyong.

"Obviously, Zhang Zhiyong's resignation is not the result of his initiative, but the result of TPG's leading Li Ning Co affairs."

Guo Haiyan, a retail analyst at CICC, expressed concern in the e-mail. She thought Zhang Zhiyong resigned had a significant negative impact on Li Ning Co. It reflected that TPG was not happy to cooperate with the existing team after joining the company. Zhang was the core figure of the company's strategy, execution and finance.

Airborne, layoffs, the sale of non core assets, profits and exit, a market participants summed up the path of TPG investment in listed companies.

Jin Zhenjun's admission and Zhang Zhiyong's resignation seemed to have completed the first two steps.

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TPG emphasizes cost control, and staff cost is also an important part.

Lining's staff costs accounted for nearly 8.5% of the income ratio of Anta, but in 2011 it was around the same level, but executive salaries were far from the same. Analysts pointed out that Lining had left executives at the end of last year because they were too expensive.

At the beginning of this year's performance meeting, Zhong Yiqi told investors that this year, he would try to reduce the cost of staff to the income ratio by at least 1%, with a 8 billion 900 million target of last year's income and a 90 million target of employee remuneration.

Before retiring, Zhang Zhiyong was Lining's most expensive employee.

In 2011, together with salary, director remuneration and bonus, Zhang Zhiyong got a total of 11 million 550 thousand, significantly higher than Lining's 3 million 980 thousand and Zhong Yi Qi 4 million 910 thousand.

When Zhang Zhiyong recorded a 1 billion 100 million profit peak in 2010, he received a 14 million 160 thousand reward.

Zhang Zhiyong will be the chief adviser to Lining's executive director and Executive Committee of the board after leaving office as chief executive. The announcement stated that the move was aimed at "ensuring a smooth pition of the company's management before the new chief executive takes office."

The latest situation is that Lining will pay only 3 million 700 thousand yuan to Zhang payment consultant in the future, and the deadline is only one year.

At the same time, as the comfort of being "retired", Zhang Zhiyong received a 1 million stake in Lining's stock and the exercise price was 4.69 yuan.

Su Jingshi, chairman and chief executive officer of the Yum division group's China business division, did not see investors in Hongkong with management. Li Chuan, senior manager of Lining's investor relations, told the newspaper that Su Jingshi was appointed as "the joint decision of the board and TPG", but how the Soviet Union to participate in the operation remains to be communicated by management.

According to the announcement, Su Jing Shi has worked in Yum group for 23 years and now leads KFC, pizza hut, Oriental White and little fat sheep in China.

Su Jingshi served as an independent non Lining executive for three years, and the annual remuneration of directors was 250 thousand yuan.

Under the nest

Goldman Sachs, who always sang Lining, gave a "neutral" investment rating in July 5th, which means that the industry is still in the face of adversity, and it is hard for the company to run in the headwind.

Another reason that makes securities firms cautious is Nike's bad performance.

Nike (NKE:US) announced its first quarter profit in June 28th, down 6% year on year, far from market expectations.

According to the analysis of hedge fund analysts attending the conference call, Nike CEO repeatedly stressed in the meeting that "China's regional inventory surplus is serious", and the cost remains high, forcing profits to suffer.

It is worth noting that inventories in all parts of Nike increased by 23.4% to 3 billion 350 million US dollars at the end of last year. Analysts said this trend was worrying and the stock price had dropped by 13% on that day.

The analysts said to the newspaper, "even if Nike is unsalable, how can Lining break through?" she is cautious about TPG's entry to Lining, pointing to the fact that she has no eggs under her nest, and can not rely solely on one or two people to fight against the weakness of the whole industry.

In a pessimistic voice, Lining still has confidence: "everyone is just looking at the general, in-depth look at sports goods, there is still much room for growth, I believe that more people will participate in sports and create more business space."

Jin Zhenjun added that the demand for sporting goods industry is actually not bad. It is estimated that the number of units from 2011 to 2015 will increase.

Lining told reporters that the reason why he was a Li Ning Co was his dream to become a great sports brand in China.

The past efforts of the company have laid a good foundation for the future, but the company must continue to move forward, and now is the best time to change.

Two years ago, when Lining started the "brand remolding" plan, the slogan was "let change happen".

The introduction of TPG, Zhang Zhiyong's resignation, sponsorship of CBA and the Olympic Games changed gradually.