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Pay Attention To The Half Year Financial Report Of Sports Brand Li Ning

2022/8/15 10:08:00 0

Li Ning

On August 11, Li Ning released the 2022 semi annual report.

Although the factors affecting the epidemic are still in place, the Winter Olympics in Beijing at the beginning of the year once again stimulated the enthusiasm of the whole people for sports, and the sales of sports brands went up with the tide.

Li Ning recorded an income of 12.409 billion yuan in the first half of this year, up 21.7% year-on-year, and the net profit attributable to equity holders rose 11.6% to 2.189 billion yuan.

However, while the income increased, Li Ning showed a situation of "increasing income but not increasing profit" in the first half of the year. The gross profit rate decreased by 5.9 percentage points to 50.0%, and the net interest rate decreased from 19.2% to 17.6%.

In the short term, Li Ning (2331. HK) soared by more than 10% in the Hong Kong stock market on the 11th and 12th, but from a longer perspective, Li Ning has dropped more than 30% from its high of HK $107 in September 2021.

Can Li Ning return to the peak? What is its future?

   1、 Online revenue surged, income structure unchanged

In terms of income, Li Ning increased 21.7% to 12.409 billion yuan in the first half of this year.

According to sales channels, Li Ning's direct sales channels increased by only 10.7% year-on-year, mainly from the dealer channel, with a year-on-year growth of 28.5%. Li Ning disclosed in the financial report that this part of revenue mainly came from the sharp increase of orders from dealers.
After the "big e-commerce" business model proposed a year ago, Li Ning's e-commerce channel continued to focus on the development of live broadcast business, and its online revenue increased by 19.2%.
However, another data can confirm that the surge of orders from dealers may not have been sold to customers, but are pressed in the dealers' warehouses. Li Ning financial report disclosed that as of June 30, 2022, Li Ning's offline channel flow decreased, including retail and wholesale decline. Li Ning did not disclose the specific number of decline, only use "high single digit" to describe. It can also be seen that the epidemic in many places in 2022 has a great impact on the offline business of Li Ning. The high inventory of dealers may also affect this part of revenue in the second half of the year.
E-commerce channel flow has increased, and Li Ning describes it with the increase level of "medium unit number". It can be seen that the improvement of online flow can not offset the decrease of offline flow.

Li Ning is trying to clean up the area of inefficient stores and flagship stores. According to the financial report data, as of June 30, 2022, the number of Li Ning sales outlets (excluding Li Ning young) totaled 5937, a net increase of only 2 this year compared with 5935 at the end of last year. However, among the two points of sale, retail business increased by 100 and wholesale business decreased by 98. The number of sales outlets of children's clothing brand Li Ning young was 1175, a net decrease of 27 compared with the end of last year.
In the first half of 2022, the revenue of distributors, direct sales and e-commerce accounted for 47.5%, 22.5% and 28.5% of the total revenue respectively, and the proportion of distributors and direct sales reached 70%.

Looking at the profit, although the overall performance has increased significantly, the operating profit margin of the company has shown an opposite trend, with the gross profit rate falling by 5.9 percentage points and the net profit rate decreasing by 1.6 percentage points.

Li Ning said in the financial report that due to the impact of the epidemic, retail discounts were increased at the retail end, the revenue of direct marketing channels with high gross profit rate decreased year on year, and the cost of raw materials and labor increased.
Advertising and publicity spending is also the reason for the lower profit margin. Li Ning's distribution expenditure increased by 18% year-on-year, reaching 3.38 billion, and the sales expense rate was as high as 27%.

In addition, the most critical inventory data of clothing enterprises, Li Ning's inventory, inventory turnover days, also increased compared with the same period in 2021. The overall inventory of Li Ning increased by 11.5% on a year-on-year basis, almost all of which was brought by manufactured goods. The average inventory turnover days also increased from 53 days in 2021 to 55 days.

For clothing enterprises, the increase of inventory is a matter worthy of vigilance. History has proved for countless times that overstocking is often the source of crisis.

   2、 Single brand and multi action make people "incomprehensible"

In the financial report, Li Ning said that it would continue to adhere to the "single brand, multi category, multi-channel" strategy and develop in two directions of specialization and trend. However, since 2022, little news about Li Ning has come from products, mainly from a series of cross-border actions.

Single brand, multi action, Li Ning's power point makes people call "can't understand".

First, Li Ning announced that he would join the "coffee" scuffle.

The attraction of coffee to young people is increasingly recognized by the capital market, and more and more brands are enthusiastic about developing coffee "sideline".

In April this year, Li Ning was exposed to apply for "Ning coffee" and also appeared at Ning coffee when it opened its first store in Xiamen. However, this cup of coffee is not for sale, but consumers can get it free after spending 499 yuan in the shop. After that, latte, latte, latte, latte and other classic restaurants in Beijing were introduced. These drinks are also not sold to the public, but only given to consumers who have consumed a certain amount.

Li Ning's move didn't seem to please consumers. One user shared on the social platform that "Li Ning's coffee is not easy to buy, so we should stand on the shoulder of 499 yuan."

In the current public response, Li Ning company positioned the launch of Ning coffee as an innovative attempt for the retail terminal consumption experience. The main goal of providing coffee service in the store is to improve the comfort and experience of customers when shopping. However, will giving coffee be set on the threshold of consumption, will more customers be disgusted?

Before the coffee fever dissipated, Li Ning, the founder of Li Ning company, was revealed to have officially entered the rice wine industry, invested and launched the "Twelve reading" rice wine.

This is after the launch of Ning coffee in May by Li Ning Co., Ltd., it has attracted more attention due to cross-border cooperation.

According to the public information, twelve reading rice wine is the product of Zhejiang laoshaofang liquor industry Co., Ltd. The company was established on May 17, 2021. Its legal representative is Zhao Jianguo, the co-founder of Li Ning group, and the behind shareholders are Tianyang (* *) Co., Ltd. and Huzhou laoshaofang liquor industry Co., Ltd.

Although from the perspective of ownership structure, twelve reading rice wine is the personal investment of the boss Li Ning, and has little to do with the listed company Li Ning company. But as we all know, founder Li Ning's personal IP has long been deeply bound with listed companies,. Even Li Ning's personal investment is virtually endorsing the goodwill of listed companies, which is one of the main reasons why twelve reading rice wine can attract the attention of the industry.

   In addition, Li Ning has not stopped exploring the field of Web3. In 2021, Li Ning designed NFT shoes and sold them at auction house for 1127000 yuan in September 2021. On the evening of April 24, China's Li Ning posted a micro blog announcing the establishment of the "boring ape Club China Li Ning branch" and plans to launch the series.

From the real world to the virtual world, Li Ning also set foot on the "meta universe" wind sweeping the world.

Li Ning's series of actions are directed at completely different groups, weakening the label of "sports brand" of Li Ning, and forming a kind of pull and tear between sports brand and fashion brand.

However, looking at Anta, our competitor, we all know that we must talk about FILA when talking about Anta, because the positioning of FILA sports fashion is completely separated from Anta's main brand. The main brand and a series of acquired brands serve the theme of "Sports".

Anta's main brands focus on the mass line, and the acquired brands are all expensive and refined. They complement each other and jointly maintain the overall image. For example, the brands of dishant, Kelong and yamafen group are in the forefront in the field of outdoor sports, skiing, ball games and sports equipment.

Therefore, Anta's acquisition mainly serves the "professional" image of the overall brand, and enhances the overall brand strength. Now Anta has formed the impression that "it will not miss any sports event", and it will give more points to the overall brand.

   3、 New pattern of sports brand: Nike ADI is popular again

After being abandoned by Xinjiang people for a short time. But more than a year after the incident, Nike ADI became popular again.

During the incident, it was found that most of Li Ning's goods had gone up in price. For example, some netizens said: "a pair of slippers was bought in 18 years, the price was 129, and the price was discounted in 19 years. 99 bought another pair, and this pair of slippers is still in 199 this year."

Taking advantage of the rising price of the industry, many consumers are naturally dissatisfied.

In addition, people's demand for sporting goods is mainly reflected in two aspects: first, the power of high-tech products under high prices; Second, high performance to price ratio.

Nike, ADI and other brands rely on the power of high-tech products to bring brand influence, it is difficult to completely erase because of an event.

Taking the mainstream material cushioning technology in the market as an example, Nike and Adi lead two main lines respectively

The first main line: in 2013, Adidas boost technology uses TPU or e-tpu materials. In 2017, Li Ning and BASF jointly launched drivefoam, using special TPU as foaming raw material; In the same year, Anta launched a-flashfoam, using a mixture of TPU and EVA for foaming.

The second main line: in 2017, Nike zoomx technology uses PEBA materials; in 2018, Li Ning launched boom; in 2021, Anta and Tebu launched nitro speed NUC and power nest Pb, respectively, using PEBA materials for foaming.

Therefore, when pursuing professionalism and product strength, Nike and Adi become the choice. For example, last year's men's and women's marathon champions Renqing dongzhibu and Zhang Deshun both wore Nike vapor next% 2. In addition to Nike, domestic brands Tebu occupied the second place, and Li Ning was not in the top five.

The number of SPU of each brand series summarized in the "exterior appearance" can more intuitively see the gap. Among the three categories of running shoes, basketball shoes and fashion shoes, the running shoes series of Nike yuanyao and Adidas are twice as many as those of domestic brands.

However, Li Ning's investment in R & D is not much. According to the financial report, its R & D accounted for only 1.9% of its revenue in the first half of 2022, compared with the 27% of its sales expenditure, the two are not at the same level of quantity.

Compared with Anta's data in 2021, the R & D revenue ratio is 2.3%, and Anta's revenue in 2021 is more than twice that of Li Ning. It's smaller than Nike and ADI.

As a result, despite a 9% year-on-year decrease in revenue in the Greater China region in 2021, Nike still recorded US $7.547 billion and still ranked first in the market share.

In addition, Nike is also increasing the proportion of e-commerce sales in view of the high growth trend of DTC transformation and online business. It is reported that the new Nike China digital ecosystem will include a series of wechat apps and wechat of stores and enterprises.

There are two types of high-end shoes, such as Li rongdao and Li Shung, which can be classified into high-end and cost-effective shoes, One is running shoes, basketball shoes and badminton shoes that can serve professional athletes, focusing on Sports professionalism.

However, the price of Anta main brand, Tebu, hongxingerke and other brand shoes are mostly around 300 yuan. Li Ning's landing point is really embarrassing when eliminating the scientific and technological elements and pursuing the cost performance ratio.
Conclusion

According to the survey results of this year's national fitness activities, the proportion of people who regularly participate in physical exercise in 2020 is 37.2%, which is 3.3 percentage points higher than that of 33.9% in 2014.

   In addition, the National Bureau of statistics and the State Administration of sport released the national sports industry total scale and added value data announcement in 2020, the total scale (total output) of the national sports industry was 2737.2 billion yuan, and the manufacturing added value of sports goods and related products was 314.4 billion yuan, accounting for 29.3% of the added value of the sports industry.

   A series of data show that in the context of national fitness, the sports industry can still be deeply explored. However, for Li Ning, Anta suppressed the domestic market, followed by Tebu and other brands, while Nike ADI seized the market. If you want to break through, maybe you should sink down and strengthen the brand power.

Rub hot spot is temporary, only brand power can go through the cycle.


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