On August 14, Li Ning (HK:02331) released its performance announcement for the first half of 2020. Affected by the new crown epidemic, sales revenue fell 1.2% year-on-year to 6.181 billion yuan, which fell short of the expected target, with a gross profit margin of 49.5%. , down 1.6% year-on-year. Profit attributable to equity holders of the group (i.e. net profit) fell 14.1% year-on-year to RMB 683 million. This was due to the one-time gain of RMB 270 million from the disposal of land by the associated company Shanghai Hongshuangxi in the first half of 2019. If one-time non-operational items are excluded, In terms of profit and loss, profit attributable to equity holders of the group increased by 21.7% year-on-year.
In order to overcome the impact of the epidemic, the group reduced bonus expenses, consulting fees, travel costs, etc. for management personnel through effective management during the period. Administrative expenses in the first half of the year were 346 million yuan, which was 346 million yuan compared with the same period last year. 451 million yuan, a decrease of 105 million yuan. In addition, benefiting from factors such as rent reductions and exemptions for some stores, distribution expenses in the first half of the year dropped by 74.7 million yuan compared with the same period last year. The reduction in administrative expenses and distribution expenses was an important factor in the year-on-year increase in profit attributable to equity holders of the group.
The specific analysis of this financial report is as follows:
Li Ning’s online revenue accounted for more than offline retail sales
In terms of channels, the Group’s Chinese market sales channels mainly include Sales to franchised dealers (wholesale), direct sales (retail), and e-commerce channels. During the period, the Group fully negotiated with franchised dealers and partially reduced futures orders. Based on franchised dealers’ confidence in market recovery and brand, franchised dealer revenue recorded a slight increase compared with the same period last year. Since most of the direct-operated stores are established in high-level cities, and the impact of traffic decline on these cities is more serious, the sales of offline retail terminals have been greatly affected, and direct-operated sales revenue has recorded a decrease of approximately 24%.
The group firmly grasped the trend of sales rebound in the second quarter. The e-commerce channel performed particularly well, with revenue increasing year-on-year. 23%, making up for the losses caused by the epidemic to offline channels. The current proportion of e-commerce revenue (27%) has exceeded offline retail (21.6%). During the period, the e-commerce platform continued to create the “COUNTERFLOW BY LI-NING” series, creating an independent product line with culture as the theme based on sports fashion, and joined hands with the Dunhuang Museum to take root in traditional art and culture and deeply explore Taking advantage of the long history of the Silk Road and the beauty of the scenery in northern Saibei, the “Dunhuang Tuo” series of products are launched to reproduce the glory of national culture under the yellow sand.
Sports fashion categories continue to make efforts in the trend field
During the period, the Group still The five core categories are basketball, running, training, badminton and sports fashion. Qian Wei, co-chief executive of Li Ning Company, said at the performance meeting. In addition, despite the decline in retail sales of running, training, basketball and other categories, the sports fashion category of “China Lining” increased by 12% in the first half of the year. This category accounted for 37% of the overall retail sales, which is the largest proportion. category.
In July this year, China Lining released the “Game Begins” video clip at the 2021 Spring and Summer Digital Paris Men’s Wear Week, showing important historical moments of the brand. And showed the 2020 autumn and winter series, which is themed on the red and white console games of the 1990s. Li Ning once again interpreted the mark of the times in a trendy way. In the first half of this year, the group followed trends and social hot spots in the sports fashion category and created multi-themed and multi-dimensional cross-border cooperation. Cooperated with Disney to launch the “Wulin Miji” series of products, adding color to the cute Mickey. During the epidemic, we launched the “Always Ready” themed series, using products to express greetings and a positive attitude towards life. Start a cross-border cooperation with Tencent’s classic game “QQ Dance” to explore “neo-retro-futurism”, and join hands with the game’s virtual idol “Xingtong” to discover the infinite possibilities of the integration of music, dance, sports and fashion, and break the dimensional wall.
In February this year, Li Ning announced the signing of singer Hua Chenyu as Li Ning’s sports fashion spokesperson. Hua Chenyu is also Li Ning’s first non-athlete celebrity spokesperson. It has great appeal among young people, with more than 36 million fans on Weibo.
Create stores with more regional characteristics
The financial report disclosed that the group will continue to upgrade the types of store props in 2020 and will increase spaces with clear regional elements.Strengthen consumer awareness. On May 1 this year, the first Li-Ning brand benchmark store in Liuzhou, Guangxi was officially opened. The store area is more than 2,000 square meters, becoming the Li-Ning brand store in Guangxi with the largest area and the most comprehensive products. At the same time of the opening, it specially designed and launched the Guangxi limited Zhuangjin series.
In August this year, Li Ning Lhasa Wanda’s full category benchmark store officially opened. This is also Li Ning’s first 1,000 square meters full category benchmark store in Tibet. At the same time It is also the Li-Ning benchmark store with the highest altitude. At the same time, an exclusive store-limited T-shirt was launched, with the design inspired by the world’s highest altitude of Mount Everest at 8844.43. In addition, the group will adhere to the efficient large store strategy and close inefficient small stores. As of June 30, 2020, the number of Li Ning points of sale (excluding Li Ning YOUNG) in China totaled 5,973, a net decrease of 476 so far this year. Li Ning YOUNG has a total of 1,010 points of sale, a net decrease of 91 points so far this year.
The group’s inventory increased by 42%, and the unit price still increased despite discounts and promotions
Affected by the new crown epidemic, the financial report shows that as of the end of June 2020, Li Ning’s cumulative inventory provisions were 189 million yuan, a significant increase of 42.1% from the 133 million yuan at the end of 2019. The group stated that the digestion of old product inventory has slowed down, the original value of inventory has increased, channel inventory has recorded a low growth of 10% to 20%, and the sell-out rate of new products has dropped by about 5 percentage points in three months. New product inventory has been adjusted in a timely manner. order reduction and adjustment measures, and use discount promotions to digest existing inventory.
Despite the promotional pressure faced by the retail environment, the average unit price still achieved low single-digit growth. As for the order meeting situation in the latest quarter, the financial report disclosed that based on the tag price, the orders for Li-Ning brand products (excluding China Li-Ning and Li-Ning YOUNG) from the fourth quarter 2020 order meeting held by franchised dealers in April 2020, based on Recorded mid-single digit growth in the year.
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