Li Ning, with revenue of 14.3 billion yuan in the first half of the year, wants to "seek stability" this year
2024-08-17
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On August 16, as the Paris Olympics fever continued, Li Ning announced its 2024 interim results before the market opened. After the opening of the day, Li Ning's stock price opened more than 8% higher at HK$14.32 per share. As of the close of the day, Li Ning's stock price closed at HK$13.1 per share, down 0.76%, with a market value of approximately HK$33.86 billion.
At the mid-term performance briefing, Qian Wei, co-CEO of Li Ning Group, said that the core of Li Ning this year is not scale as the main goal, but "stable operation and pragmatic development" is the main axis of operation. At the same time, Li Ning also announced a reduction in the expected full-year revenue target.
Seeking stable development, gross profit margin increased to 50.4%, and inventory continued to be optimized
In the first half of 2024, Li Ning achieved operating income of 14.345 billion yuan, a year-on-year increase of 2.3%; profit attributable to equity holders was 1.952 billion yuan, a year-on-year decrease of 8%. Although Li Ning's revenue continued to grow in the mid-term of 2024, the mid-term revenue and net profit still hit a new low since the mid-term of 2016 (excluding 2020). However, in Li Ning's view, the company achieved steady development goals in the first half of the year while the market is still in the process of gradual and healthy adjustment.
Photo/Map made by Beijing News Shell Financial Reporter
Li Ning has been focusing on "stability" throughout the entire performance reporting period. Qian Wei said that in accordance with the tone of steady operation, from the perspective of revenue, the company will try its best to effectively deploy opportunities in different levels of the market, different groups of people and different categories; under the premise of controlling risks, the group will make corresponding predictions on revenue.
Under this tone, in the first half of this year, Li Ning's channel revenue developed relatively evenly, among which franchised dealers' revenue was 6.59 billion yuan, down 2% year-on-year, and the proportion fell by 2 percentage points to 46%; direct sales were 3.503 billion yuan, up 2.7% year-on-year, and the proportion increased slightly by 0.1 percentage point to 24.4%; e-commerce channel sales were 4.004 billion yuan, up 11.4% year-on-year, and the proportion increased by 2.3 percentage points to 27.9%. Benefiting from the effective optimization of the efficiency of various channels and the improvement of the internal efficiency of corporate operations, Li Ning's gross profit margin in the first half of the year improved by 1.6 percentage points compared with the same period last year to 50.4%.
As of June 30, 2024, the number of Li Ning's sales outlets is 7,677, a net increase of 9 from the end of 2023. Li Ning is more cautious in opening stores and pays more attention to store efficiency. During the reporting period, the total area of Li Ning's stores increased by mid-single digits, with an average area of 245 square meters and an average monthly store efficiency of 310,000 yuan; in addition, the number of upgraded ninth-generation stores exceeded 450, with an average monthly store efficiency of about 450,000 yuan.
In the first half of the year, affected by the market environment, Li Ning's overall turnover slightly decreased, of which offline turnover decreased by a mid-single digit year-on-year, but e-commerce turnover achieved a mid-range growth. Qian Wei said that the offline business environment was under pressure in the first half of this year and was affected by extreme weather, and customer flow showed a downward trend. It can be clearly felt that consumers are becoming more cautious in their consumption, and companies are also actively responding. For example, optimizing retail operation efficiency to ensure that the transaction rate remains stable; improving the discount rate to drive the average unit price to increase by a low single digit, etc.
In addition, Li Ning, which has listed inventory management as a high priority for the company, has continued to optimize its structure in the first half of this year, with an inventory turnover of 62 days and a full-channel inventory-to-sales ratio of 3.9 months. Qian Wei said that inventory itself is dynamically changing, and a good situation now does not mean a good situation in the future. To this end, Li Ning will dynamically manage the changes in future market flow. What needs to be done is not to solve the current problems, but to make an estimate of future flow and changes in the external market environment as quickly and accurately as possible, and effectively adjust the inventory in the next 3 months and 6 months. In short, do not solve the problem after the inventory problem occurs, but solve some of the previous reasons that may bring inventory risks as soon as possible before the inventory is likely to occur.
Advertising expenditure: 1.25 billion yuan, "Investment in events and sports resources does not require a significant increase in short-term business"
In the big year of sports marketing, all sports brands are increasing their marketing investment, and Li Ning is no exception. In mid-2024, Li Ning's sales and distribution expenses increased by 9.6% year-on-year to 4.327 billion yuan, accounting for 30.2% of total revenue, of which advertising and marketing expenses increased by 20% year-on-year to 1.25 billion yuan, accounting for 8.7% from 7.4% in the same period last year.
Photo/Map made by Beijing News Shell Financial Reporter
At the Paris Olympics this year, the Chinese National Shooting Team, the Chinese National Diving Team and the Chinese National Table Tennis Team sponsored by Li Ning achieved brilliant results. Regarding how to continue to attract consumers by taking advantage of the sports trend set off by the Olympics, Qian Wei said that from a business perspective, we cannot rely on a single sports event or a sports event held every four years to drive huge changes in the business in the short term. For the investment in events and sports resources, we do not require a significant increase in business in the short term. In the long run, these investments will bring more consumers' attention to sports and build awareness of Li Ning's professional brand, which I think is very important.
Along with the increase in advertising and publicity expenses, research and development expenses also increased. In the first half of the year, Li Ning's research and development expenses increased by 7.2% year-on-year to 316 million yuan, and the proportion increased to 2.2%. At the technology conference held in May this year, Li Ning focused on displaying the group's six major innovative technologies - "Carbon Core", "Fastest Curve System", "Super 弜", "GCU", "Super 䨻", and "Extreme 䨻丝". At the same time, it also released three major innovative achievements for the first time, the "Jueying 3" running shoes, the top racing running shoes "Dragon Bird", and the anti-rainstorm double-transparent nano technology.
Li Ning, which continues to invest in research and development, still positions itself as a professional sports brand, among which footwear products are its main force and one of the key areas of development. In the first half of 2024, the revenue share of Li Ning footwear products will increase from 46.5% in the first half of 2018 to 54.7% in the same period of 2024, reaching 7.84 billion yuan, which is about 3.6 times that of the same period of 2018; among them, the running category revenue increased by 25% year-on-year, and the three core running shoes IPs of Ultra Light, Chitu, and Feidian, which are built with "Li Ning 䨻" and other technologies as the core, sold more than 5 million pairs in half a year, among which the professional running shoes Chitu 7PRO sold more than 1.9 million pairs in the first half of the year, a significant increase year-on-year.
In addition, during the reporting period, the proportion of Li Ning's clothing business revenue dropped to 37.5%, and revenue decreased by 4.7% year-on-year to 5.375 billion yuan; the proportion of equipment and accessories increased to 7.8%, and revenue increased by 30.3% year-on-year to 1.126 billion yuan, among which the sales of badminton accessories performed well.
At the performance briefing, Qian Wei admitted that after entering July and August of the third quarter, the group found that the challenges of overall offline cash flow were far beyond expectations. Therefore, this year's core goal is not to increase scale, but to operate steadily and control risks as the tone of the whole year's operation.
At the same time, in view of the current market consumption situation, Zhao Dongsheng, vice president and chief financial officer of Li Ning Group, stated at the performance meeting that Li Ning has lowered its full-year revenue target expectations, and expects full-year revenue growth to slow to low single digits. At the same time, it will carry out cost planning and control more rigorously to maintain the goal of a low double-digit net profit margin for the whole year.
In addition, Beijing News Shell Finance reporter noticed that when talking about the future outlook, in addition to continuing the steady development of the fundamental business and optimizing and upgrading the product structure, Li Ning also expressed his intention to tap the huge potential of the women's, outdoor and youth markets, in order to seek breakthroughs in these new sports consumption tracks; in addition, after spending HK$2.208 billion to buy a property in Hong Kong last year, Li Ning's overseas layout is still advancing steadily in the development of emerging markets.
Wang Zhenzhen, a financial reporter of Beijing News Shell
Editor: Huang Xinyu
Proofread by Zhao Lin
