The Li Ning Company substantially improved its revenues and profits in 2017. The Chinese sports company's annual sales moved up by 11 percent from the previous year to 8,874 million yuan renminbi (€1.1bn-$1.4bn). The group's operating profit increased by 16 percent to RMB 446 million (€57.3m-$71.1m) and it ended the year with a 56 percent jump in net profit from continuing operations to RMB 515 million (€66.2m-$82.1m), excluding the divested Double Happiness business.
The sales rise was driven by a growth of 11 percent to RMB 8,819 million (€1.1bn-$1.4bn) for the Li-Ning brand alone, with strong demand for its running, basketball and cross-training gear. Footwear revenues rose by 5 percent, while apparel sales went up by 19 percent, reaching about the same level as shoes.
Surging by more than 40 percent, the Li-Ning brand's online sales grew to represent 19 percent of its total sales in China, compared with 15 percent in 2016, on the back of continuous investments in this part of the business. Retail sales accounted for 32 percent of total sales, down from 33 percent in 2016, while the share of wholesale revenues declined to 49 percent from 52 percent.
Comparable store sales for the Li-Ning brand were up by a mid-single-digit rate, with a higher proportion of sales at full price. Aside from its investments in digital, the group continued to open flagship stores with stand-out displays and designs in key locations, while closing down underperforming stores and improving its network of factory outlets. The company had 6,262 Li-Ning branded stores at the end of December, 178 fewer than a year earlier.
Meanwhile, it opened 173 LN Young stores, which cover the market of the age group from 3 to 14 years. The company said it plan to open 100 to 200 new stores in 2018. The group also expanded its business through a new partnership with Danskin, targeting women with fashionable sports performance product, but this didn't prevent a 39 percent decline to RMB 54.7 million (€7.0m-$8.7m) in the turnover of its “other brands” segment, which also includes the distribution in China of Lotto, Aigle and Kason.
Li Ning says it is transforming its operations in a bid to deliver more rapidly and to be more closely aligned with consumer demand. Since the start of 2017, the group has been trying to directly deliver products from its national distribution center to retail outlets. It has also been developing sourcing and replenishment procedures that allow retailers to directly place orders with factories.
The gross margin was up by 0.9 percentage point to 47.1 percent, due to a more favorable mix of sales channels, a higher proportion of new products sold in the wholesale channel, and improved discounts in directly operated stores. The operating margin inched up by 0.2 percentage points to 5.0 percent.
