Li Ning Company Limited reported revenue for the year ended December 31, 2022, increased 14.3 percent to RMB25.80 billion, compared to RMB22,57 billion in 2021. 

The company, which develops and sells athletic products primarily in the PRC, said that in the face of the repeated, yet sporadic, outbreaks of domestic pandemic during the year, local governments in many regions put in place lockdown and pandemic control measures at different periods, which weakened the immediate consumption power of consumers.

Maintaining its focus on the needs of the end consumers, the Group sought professional sports technology to enhance the competitiveness of its products and brand. Despite a lower growth rate as compared with the previous year, revenue growth remained steady:

  1. Direct Retail. The direct operation channel was affected by the closure of directly-operated stores in urban areas. During the pandemic, store sell-through declined, and revenue growth slowed with a year-on-year growth rate of 6.4 percent. The Group continued to strengthen the management of retail channels by increasing efforts to develop big stores with high efficiency and consolidating low-efficiency stores during the year. Retail stores were developed to communicate with consumers and to provide sports product experiences to address the increased demand for product quality, functional features and fashionable style;
  2. E-commerce. The restrictive local policies in the post-pandemic period also impacted its e-commerce channel. The slowdown of logistics challenged revenue growth. During the year, the Group placed more emphasis on efficient ad placement and channel promotion and improved its online and offline membership systems, contributing to revenue growth of 16.4 percent; and
  3. Franchised Distributors. Revenue from sales to franchised distributors grew by 15.7 percent, which was underpinned by the franchised distributors’ strengthened business integration and channel management. Following the adjustment to the pandemic control policies, the development prospect of the sports products market is promising. The Group will further strengthen the cooperation with franchised distributors to facilitate the recovery of sell-through as soon as possible.

The overall cost of sales of the Group amounted to RMB13.32 billion in 2022, generating a gross margin of 38.4 percent of sales, a 460 basis point decline from 2021. 

During the year, given the trend of weak consumer demand in the market due to the impact of the pandemic, the Group increased the discount at retail stores and online channels. 

With the upgrade of the domestic supply chain and industries, raw material prices and labor costs have also risen, resulting in an increase of purchase costs. Adopting a prudent inventory management policy, the Group not only actively de-stocked inventories but also optimized the inventory aging structure and boosted the reserve of new products to meet the post-pandemic market growth and sell-through demand.

SG&A expenses for the year increased 19.2 percent to RMB7.31 billion 

The selling and distribution expenses accounted for 28.3 percent of sales, a 110 basis point increase versus the 2021 expenses. During the year, along with the increase in revenue, rental, license fees, wages and bonuses of direct sales staff, investment in advertising and marketing, commission for the e-commerce channel and logistics expenses that related to revenue recorded increases to varying degrees, and thus higher overall selling and distribution expenses incurred as compared to last year. As certain fixed fees, including depreciation on store fittings and fixed rental charges for retail stores, may not be adjusted in line with the sluggish revenue growth, the percentage of selling and distribution expenses to revenue also increased.

The overall cost of sales of the Group amounted to RMB13.32 billion in 2022, generating a gross margin of 38.4 percent of sales, a 460 basis point decline from 2021. During the year, given the trend of weak consumer demand in the market from the impact of the pandemic, the Group increased the discount at retail stores and online channels. With the upgrade of the domestic supply chain and industries, raw material prices and labor costs have also risen, increasing purchase costs. 

Adopting a prudent inventory management policy, the Group not only actively de-stocked inventories but also optimized the inventory aging structure and boosted the reserve of new products to meet the post-pandemic market growth and sell-through demand.

SG&A expenses for the year increased 19.2 percent to RMB7.31 billion. The selling and distribution expenses accounted for 28.3 percent of sales, a 110 basis point increase versus the 2021 expenses. During the year, along with the increase in revenue, rental, license fees, wages and bonuses of direct sales staff, investment in advertising and marketing, commission for the e-commerce channel, and logistics expenses that related to revenue recorded increases to varying degrees, and thus higher overall selling and distribution expenses incurred as compared to last year. As certain fixed fees, including depreciation on store fittings and fixed rental charges for retail stores, may not be adjusted in line with the sluggish revenue growth, the percentage of selling and distribution expenses to revenue also increased.

The Group’s EBITDA amounted to RMB6.54 billion, up 1.6 percent from the RMB6.44 billion year-on-year increase of 1.6 percent. Equity shareholders’ profits increased 1.3 percent to RMB 4.06 billion in 2022. Basic EPS declined 2.9 percent to 155.38 RMB cents.