Li Ning Reports 11.2% Revenue Gain in First Half

Li Ning Group Limited reported revenue grew by 11.2% in the six months ended June 30, to RMB4,504.6 million (U.S. $667 mm). Last week, Li Ning made waves in the U.S. when it signed Evan Turner, the second pick in the NBA draft, to an endorsement deal.

The Chinese sporting goods giant earlier this year established U.S. headquarters and opened a store in Portland to expand into the U.S.

Profit attributable to equity holders grew by 23.1% to RMB581.6 million ($85 mm). Earnings per share increased by 22.1% to RMB55.58 cents. The board of directors declared payment of an interim dividend of RMB22.15 cents per ordinary share, up from RMB13.58 cents a year ago.

“Despite continued growth in China's economy during the first half of 2010, uncertainties remained as we witnessed the outbreak of the Euro debt crisis on the international front and the ongoing re-adjustment of China's economy,” said Li Ning, chairman of the Group. “In addition, competition in the sporting goods industry was keen. Thanks to the continuous efforts in enhancing the development of the Group's capabilities in brand marketing and promotion, product design, research and development, sales channel expansion and management, as well as supply chain management, the Group has strengthened its competitiveness in key areas such as brand awareness and product performance, thus achieving stable and sustainable business development.”

During the period under review, the Group's core Li-Ning brand generated revenue of RMB4,133 million ($608 mm), which accounted for 91.8% of the Group's total revenue, representing an increase of 10.6% as compared to the corresponding period last year. Sales of LI-NING brand footwear products, apparel products and accessories grew by 7.4%, 12.3% and 22.6% respectively.

Li Ning said it adhered to the strategy of developing multiple brands. Following continuous marketing efforts, more consumers are recognizing product characteristics. Lotto brand recorded sales revenue of RMB47.3 million ($70 mm), up 206.7% versus the year-ago period. Revenue from Double Happiness grew by 7.8% to RMB236.2 million ($35 mm). Total revenue generated by AIGLE, Z-DO and Kason brands aggregated RMB87.2 million ($13 mm), an increase of 8.3% as compared to the corresponding period of last year.

As part of its branding efforts, the Group continued to boost its sponsorship activity during the period, including its first ever sponsorship of a Europan football team – Espanyol, a team in Spain La Primera. It also sponsored top Norwegian javelin thrower, Andreas Thorkildsen, also known as the “Prince of Javelin”.

The Group said it will continue to beef up its arsenal of sponsorship resources by signing up more world-class sports stars as well as up-and-coming athletes, especially in basketball as well as track and field categories.

As at 30 June 2010, there were 7,478 Li-Ning brand retail stores in China, representing a net increase of 229 stores for the period. During the period, the Group placed emphasis on strengthening the development and management of sales channels in shopping centers and sports towns in metropolitan and first-tier cities.

The Group also noted that ongoing efforts in optimizing its supply chain and inventory management resulted in the average inventory turnover cycle shortening to 48 days from 56 days of the corresponding period of last year, demonstrating the continuous enhancement in asset turnover.

Ning said “While from a macroscopic perspective, the economy is improving, the recovery is still fragile and not without concerns. It also takes time for the economic re-adjustment to be successfully completed. Meanwhile, competition in the sporting goods industry has also been intensifying. Discrepancy between sell-in and sell-through in the industry will continue for some time and discounted sales will still have an impact. In light of the challenging environment, the Group will continue to implement its proactive yet prudent strategy to cope with its strategic objectives for 2009-2013 in the second half of 2010. The Group endeavors to maintain its competitiveness through long-term brand establishment.”