Li Ning stabilized in the sports big year

Author | Wang Xiaojuan

Editor | Huang Yu

2024 is a big year for sports, from the Asian Cup to the European Cup, from the Olympics to the five major leagues, globally watched events that have brought more exposure to sports brands, especially Li Ning, a sponsor of multiple Chinese national teams at the Olympics.

Li Ning wants to capture the traffic of the Olympics to help the performance break through the bottleneck as soon as possible.

Recently, Li Ning released a moderately satisfactory semi-annual report.

Revenue increased slightly by 2.3% to reach 14.345 billion yuan; gross profit increased by 5.8% from 6.839 billion yuan in the same period of 2023 to 7.236 billion yuan. The overall gross profit margin was 50.4%, up 1.6 percentage points year-on-year.

At the same time, Li Ning's net profit decreased by 8% year-on-year to 1.95 billion yuan, narrowing the decline compared to a 20% drop for the full year of 2023. This is mainly due to reduced investments in channels and other areas by Li Ning.

However, due to the poor performance in the 2023 annual report, the market previously expected Li Ning's revenue to be 142.3 billion yuan and net profit to be 16.7 billion yuan, with a market expectation of 48.7%. Now, all three key indicators have exceeded market expectations.

The footwear business remains key to stabilizing Li Ning's revenue. In the first half of the year, footwear sales revenue was 7.844 billion yuan, a year-on-year increase of 4.4%, accounting for 54.7% of total revenue.

The growth in footwear is mainly due to Li Ning launching corresponding products for the general public.

In terms of various sports categories, since the beginning of this year, the three core professional categories of running, basketball, and fitness accounted for 66% of the total revenue, reaching a five-year high. These three categories are also the most popular sports with the highest number of participants. With these three major professional sports as the driving force, Li Ning's three major series of running shoes - Ultra Light, Chitu, and Feidian - collectively sold over 5 million pairs in the first half of this year.

On the other hand, revenue from clothing has declined year-on-year, being the only category among all business classifications to experience a decline. Revenue in the first half of the year was 5.375 billion yuan, a decrease of 4.7% year-on-year, accounting for 37.5% of total revenue.

Improving the competitiveness of clothing products remains a major challenge for Li Ning.

In July, Li Ning released the "2024 China Table Tennis Team Dragon Uniform" series, even inviting all Chinese table tennis team athletes and coaches who were training in Chengdu at the time.

However, on the Olympic stage, Fan Zhendong, sweating profusely in the dragon uniform, faced controversy over its lack of breathability. In addition, in the mixed doubles table tennis match, Wang Chuqin and Sun Yingsha kept pulling up their pants on the court, putting Li Ning in the hot search again. So far, whether it's the dragon uniform top or the champion's matching shorts, they are hard to find in their Tmall flagship store.

Facing an uncertain market environment, Li Ning has also slowed down its expansion pace.

In terms of channels, Li Ning's various brand stores totaled 7,677, with a net increase of only 9 stores compared to the end of 2023. The brand emphasizes "consolidating the quality of high-level channels, strengthening emerging market channels, and accelerating the upgrade of store image."

Therefore, in the first half of this year, Li Ning closed 30 stores, approaching the total number of store closures for the entire previous year. Compared to the growth in scale, Li Ning has started to pay more attention to the quality and efficiency of its stores The adjustment of channels is also because the growth of online platforms has become a key driver of growth.

The financial report shows that e-commerce channel revenue increased by 11.4% year-on-year, indicating a gradual recovery in the online consumption environment. Li Ning has also increased its investment in online channels.

In the first half of the year, Li Ning's sales and distribution expenses amounted to 4.327 billion yuan, a year-on-year increase of 9.6%, accounting for 30.2% of total revenue. Li Ning stated that this increase was mainly due to higher investments in market promotion and product advertising, especially in the popular live streaming channels where Li Ning has increased content promotion to tap into potential consumers.

However, Li Ning is currently facing a more intense competitive environment, driven by sports events and changes in consumer consumption habits. Brands are recognizing the market potential of combining sports and fashion, and each is making efforts in this direction.

Li Ning has always aimed to elevate its brand to a higher level and sell at higher prices, but frequently finds itself criticized for being too expensive.

Against this backdrop, Li Ning's stock price has fallen by over 80% compared to its peak in January 2023. In the future, Li Ning will need to tell a more compelling business story to boost market confidence