Rising interest in exercise and fitness in China after lockdowns were lifted contributed to improve Li Ning’s revenues, which grew 4.2 percent to 14,456.9 million yuan renminbi (€1.86bn-$2.09bn) in 2020. Net income increased by 13.3 percent from the previous year to RMB 1,698.4 million (€218.6m-$246.1m). Excluding a one-time financial gain in the previous year, it jumped by 34 percent.
The gross margin remained flat at 49.1 percent, as higher prices on new products offset promotional markdowns and a lower proportion of revenues from company-owned retail operations. The operating margin expanded by 0.9 percentage points to 11.7 percent.
The Chinese sports brand said that it adjusted its strategy in a timely manner during the Covid-19 outbreak, contributing to the brand’s resilience. The management maintained close contact with various large nationwide commercial real estate groups to develop a rent waiver policy, optimizing its rental costs.
Li Ning continued to transform its operations in a bid for faster deliveries and closer alignment with consumer demand, intensifying efforts to directly deliver products from its national distribution center to the retail outlets. It has also been developing product sourcing and replenishment procedures that allow retailers to directly place orders with factories.
The group strengthened the integration of its supply chain, moving from “passive production” to “active production” by building a flexible and efficient supply chain management system for more agile supply and rapid response. It also devoted more efforts in member and omni-channel development, in order to boost business growth through online and offline synergies.
Footwear and apparel sales both increased by 4 percent to RMB 6,338.2 million (€815.8 m-$973.9m) and RMB 7,365.2 million (€948.3m-$1.13bn), respectively, while equipment sales gained 12 percent to RMB 753.6 million (€97.0m-$115.8m).
In terms of products, the group stayed focused on five core categories, namely basketball, running, training, badminton and sports casual.
Revenues from the international segment, which consists of the U.S. and Europe, fell by 19 percent to RMB 219.5 million (€28.3m-$33.7m). Li Ning said retail sell-through increased low-single digits, but brick-and-mortar sales declined. Owned retail sales were down 10 percent due to a drop in foot traffic, which was offset by a 30 percent gain in e-commerce, to represent 28 percent of turnover.
The company drew attention to the good performance of the Counterflow by Li-Ning series on its e-commerce platform. It is an independent product line with a focus on medium-to-high-priced sports footwear and apparel featuring a sporty lifestyle and elements of Chinese culture.
During the period, the group closed down many under-performing stores while improving its network of factory outlets. The company had 5,912 Li-Ning branded stores at the end of December, 537 fewer than at the start of the year.
The company closed 80 LN Young stores in the past twelve months, reducing the chain to a total of 1,021 locations. This sub-brand covers the market of the age group from 3 to 14. As the product and brand competitiveness of the kidswear business continue to grow, the segment has promising potential and could be driving the overall growth of the group, the management said.
Looking ahead, Li Ning will focus on maximizing the efficiency of its sales channels, focusing on bigger stores, while strengthening its omni-channel model.