Li Ning's clothing revenue had a slight decline compared to the previous year, but the running shoe, equipment, and accessories business achieved rapid growth, maintaining the company's overall revenue growth. As for the impact of consumer downgrading or replacement, it is still too early to draw conclusions. However, overall trends indicate that consumers will become increasingly cautious and careful when shopping, thus posing challenges to the industry's offline revenue growth.
On August 16, Caixin reported (researcher Liang Youyun) that Li Ning released its financial report for the first half of 2024, and its overall business growth was stable. The driving effect of the Olympic Games still remains to be seen.
After the financial report was released, Li Ning's stock price rose more than 8% at one point, but fell after the midday trading, dropping more than 1% at one point. As of the close on August 16, Li Ning's single-day stock price fell by 0.76%, with a total market value of 33.86 billion Hong Kong dollars.
Li Ning's clothing performance was not as good as footwear, so the company increased its investment in live broadcasts.
According to the financial report, Li Ning's revenue in the first half of the year was 14.345 billion yuan, a year-on-year increase of 2.3%; the gross profit increased from 6.839 billion yuan in the same period of 2023 to 7.236 billion yuan in 2024, with an overall gross profit margin of 50.4%, a year-on-year increase of 1.6 percentage points.
As for product category sales, Li Ning's clothing revenue had a slight decline compared to the previous year, but the running shoe, equipment, and accessories business achieved rapid growth, maintaining the company's overall revenue growth. Specifically, in the first half of the year, Li Ning's footwear sales revenue was 7.844 billion yuan, a year-on-year increase of 4.4%, accounting for 54.7% of total revenue; clothing revenue showed a decline, with revenue of 5.375 billion yuan, a year-on-year decrease of 4.7%, accounting for 37.5% of total revenue.
Among them, the three core professional categories of running, basketball, and fitness accounted for 66% of the total flow, reaching a five-year high for the same period. As of June 30, Li Ning's running category's flow increased by 25% compared to the same period last year, and the brand's core IP products continued to break sales records.
"The size of the entire running market's consumer base is relatively large, and the consumer group is wide-ranging, and the demand is relatively strong. Based on this broader environment, Li Ning has been continuously improving its product matrix for Li Ning professional running shoes over the past two to three years. In the first half of this year, Li Ning's three series of running shoes, the FlyVolt, Ultra-Light, and Chitu, have sold more than 5 million pairs." said Qian Wei, co-CEO of Li Ning.
2024 is a big year for sports, and the Paris Olympics have also driven sports consumption. As an important sponsor of China's national table tennis, diving, and shooting teams, the market is also watching whether this wave of sports consumption can bring potential growth to Li Ning.
"From a business perspective, we cannot depend on a single sports event, or a quadrennial sports event, to drive significant changes in our business in the short term." Qian Wei believes that participating in Olympic events sponsorship and marketing is not for short-term revenue growth considerations for Li Ning's brand's long-term development. "Activities and events can help us gain the trust of more consumers, as well as encourage more consumers to try and experience Li Ning products."
On the retail front, Li Ning's online channels performed well. Li Ning's financial report shows that in the first half of the year, the online consumption environment gradually improved, traffic rebounded, and e-commerce channel revenue increased by 11.4% year-on-year.
It is reported that Li Ning increased investment in marketing and product promotion in the first half of the year, especially in the more consumer-friendly live broadcast channels, to increase content promotion and tap potential consumers.
"Not focusing on scale growth as the primary goal."
In terms of store operations, as of June 30 this year, Li Ning's various store sales points totaled 7,677, a net increase of 9 from the end of 2023; it had 44 dealers (including the China Li Ning fashion store channel), a net decrease of 2 from the end of 2023. Among them, the company adjusted the layout of its directly operated stores, and overall retail water revenue tended to be stable, and direct sales revenue increased slightly by 2.7% year-on-year.
However, Li Ning's offline channel sales performance is not optimistic. In the second quarter, Li Ning's offline channel (including retail and wholesale) recorded a decrease in sales of medium unit numbers, among which retail (direct operation) channels remained the same, while wholesale (franchisee) channels recorded a high unit number decline. The brand's second-quarter platform retail flow recorded a decrease in unit numbers compared to the previous year.
It is too early to draw conclusions about the impact of downgrading or level substitution in consumption. However, overall trends suggest that consumers will become increasingly cautious in shopping, bringing challenges to the industry's offline revenue growth. Qian Wei also stressed at the financial report meeting that the company is actively responding to the new changes in consumer situations, "This year our core goal is not focused on scale growth. 'Steady operation, pragmatic development' is our guiding ideology."
It is worth noting that Li Ning achieved operating profit of 2.402 billion yuan in the first half of the year, a year-on-year decrease of 2.84%, and a net profit attributable to the company's shareholders of 1.952 billion yuan, a year-on-year decrease of 7.98%.
It is reported that in order to maintain steady operations and control risks, Li Ning will continue to estimate changes in income scale, and effectively control costs to ensure profits. At the same time, Qian Wei also stated when adjusting inventory pressure, "Although in the first half of this year, the external market environment has been constantly changing, and offline revenue also faces certain challenges, the overall inventory management level and goals of the Li Ning Group remain in a very healthy and stable state."
Looking ahead to the second half of the year, Li Ning will continue to implement the core strategy of 'single brand, multiple categories, and multiple channels', and continuously strengthen its product capabilities. The focus is on developing five core categories: running, basketball, fitness, badminton, and sports life. By investing in research and development innovation, we will achieve continuous upgrades of product matrix to meet the growing demand of consumers for high-quality and personalized sports equipment.
In addition, in new fields and markets, Li Ning plans to take the lead in tapping into the new sports consumption track, exploring the huge potential of women, outdoor and youth markets, formulating targeted marketing strategies, and launching products that meet the needs of target groups. The company also plans to develop strategies for overseas markets, striving to achieve breakthroughs in overseas markets while maintaining steady growth.