(Yicai) Sept. 25 -- China's Guirenniao, a 36-year-old sportswear brand, will exit garment and apparel retail to focus on grains, its biggest segment after restructuring two years ago.

Agricultural produce will become the brand owner's main business direction, the Shanghai-based firm said in a statement recently. Middle and small-sized brands for sports shoes and sportswear are facing pressures due to the intensifying competition and the rise of niche brands, it added.

Guirenniao intends to lease its brands Guirenniao and Prince. However, industry insiders say that such licensing tends to reduce the owner's control over quality. In China, brand licensing generally decreases brand value, Cheng Weixiong, founder of Liangqi Brand Management, said to Yicai.

Grains have become the largest business of the company since Guirenniao went through bankruptcy restructuring in 2021. Heilongjiang province-based grain giant Taifujingu Network Technology became the firm's largest shareholder with its almost 20.4 percent stake in Guirenniao. In August 2022, the actual controller of the retail firm was changed to Li Zhihua, chairman of Taifujingu.

Income statements prove the rationale. In the six months ended June 30, Guirenniao's total revenue increased by 10 percent to CNY715 million (USD97.9 million) from a year ago. Meanwhile, its grain business rose by 44 percent to CNY342 million while income from its sporting goods business dropped by 20 percent to CNY232 million.

Last year, Guirenniao posted a loss of CNY9.4 million (USD1.3 million) and in the first half of this year, its net loss expanded to CNY18.1 million (USD2.5 million). Before the restructuring, it was unprofitable between 2018 and 2020, logging a net loss exceeding CNY1 billion (USD136.9 million) in 2019.

Guirenniao's shares [SHA: 603555], which are marked with a 'special treatment' tag due to the firm's financial troubles, rose by 4.9 percent to CNY1.93 (US 30 cents) as of 2.55 p.m. but the shares are still down by almost 47 percent since the start of this year. The firm went public in Shanghai in 2014, with a market capitalization topping CNY40 billion (USD5.5 billion) in 2015.

Editor: Emmi Laine