Li-Ning reported net earnings vaulted 110 percent in its year ended December 31 as revenues increased 32 percent.

Revenues reached ¥13.87 billion against ¥10.51 billion a year ago. Net profit attributable to equity holders increased to ¥1.5 billion from ¥715.3 million.

Financial Results
In 2019, the company steadily improved its profitability and further enhanced operating leverage. During the year, the Group’s revenue amounted to ¥13.87 billion, representing an increase of 32.0 percent as compared to that of 2018. Gross profit rose 34.7 percent to ¥6.81 billion, against ¥5.05 billion in 2018. The Group’s overall gross profit margin improved to 49.1 percent (2018: 48.1 percent). The increase in gross profit margin was mainly attributable to the Group provided higher percentage of tag price on delivery to franchised distributors due to the increasing brand recognition, and there was better sales discount on both new and old products in self-operated channel, while the tag-cost-ratio further improved.

During the year, the Group’s operating profit was ¥1.54 billion, up 98.6 percent as compared to ¥777 million of 2018. Profit attributable to equity holders amounted to ¥1,499 million (2018: ¥715 million) with a year-on-year increase of 109.6 percent; while after excluding the one-off profit and loss not related to the operation, the profit attributable to equity holders amounted to ¥1,266 million with a year-on-year increase of 76.9 percent. The margin of profit attributable to equity holders was 10.8 percent (2018: 6.8 percent), while after excluding the one-off profit and loss not related to the operation, the margin of profit attributable to equity holders was 9.1 percent. The return on equity attributable to equity holders was 23.2 percent (2018: 13.1 percent), while after excluding the one-off profit and loss not related to the operation, the return on equity attributable to equity holders was 19.9 percent.

Basic earnings per share were ¥61.94 cents (2018: ¥29.63 cents). The Board has recommended payment of a final dividend of ¥15.47 cents per ordinary share of the company issued or to be issued upon conversion of convertible securities for the year ended 31 December 2019 (2018: ¥8.78 cents).

In terms of cash flow management, the Group’s net cash generated from operating activities for the year amounted to ¥3,503 million (2018: ¥1,672 million), up 109.6 percent year-on-year. As at 31 December 2019, cash and cash equivalents amounted to ¥5,961 million, representing a net increase of ¥2,290 million as compared with the position as at 31 December 2018. As the Group’s cash flow from operating activities improved significantly year-on-year and reasonable investment arrangement has been made simultaneously, the utilization and operation of funds of the Group have become more reasonable and efficient.

Operational Summary
During the year, the Group implemented the strategy of “Single Brand, Multi-categories, Diversified Channels” to further strengthen the brand and product competitiveness. We comprehensively optimized marketing resource allocation, accelerated the enhancement of sales channel efficiency and operating efficiency, thereby consolidating and optimizing Li-Ning’s experience value.

In respect of products, the Group continued to focus on five core categories, namely basketball, running, training, badminton and sports casual. We deeply explored the product’s core competitiveness and continued to enhance the brand’s professional sports attributes. At the same time,we also scaled up the efforts on research and development in sports technology to enhance product reputation. Meanwhile, the Group actively revealed the brand image with creativity, focusing on popular trends. The Group successively attracted consumers through multiple approaches, including “China Li-Ning”, collaborations with designers and cross-sector crossover, which effectively expanded our consumer groups and further enhanced both our product and brand competitiveness.

During the year, Li Ning kept enhancing the professional attributes with technology and earned high recognition from the consumers. The Group launched its self-developed “Li-Ning 䨻 ” (李寧䨻 ) technology with lightweight and high resilience features, aiming to establish the matrix for world-class professional running shoes. 2019 is the 70th National Day of the PRC, as the leading national brand, Li Ning provided sports equipment for the civilians’ processions during the military parade, which significantly improved the image and public’s perception of the brand. In addition, Li Ning is also the exclusive sports equipment partner of the Chinese delegation of the 7th CISM Military World Games, during which the Group showed its brand image on a worldwide stage.

For channels, the Group upgraded its cooperation policy with retailers in accordance with the direction of retail transformation, aiming to enhance the quality of market coverage, optimize the structure of channels and improve channel efficiency. During the year, the Group focused on the promotion of diversified sales channels development. On the basis of developing conventional shopping streets, department stores and sports cities, the company focused on making breakthroughs in channels with shopping malls and outlets. The Group also opened full-category model stores and China Li-Ning stores in shopping mall channel, while actively exploring new channel types. To enhance channel efficiency and optimize store structures, the company continued to accelerate the closure of loss-making stores, as well as upgrade and improvement of low-efficiency stores.

As of December 31, 2019, the total number of Li Ning POS (excluding Li-Ning Young) in PRC amounted to 6,449, representing a net increase of 105 POS since the beginning of the year 2019. The total number of Li-Ning Young POS in China amounted to 1,101, representing a net increase of 308 POS since the beginning of the year.

In terms of retail operation, the Group continued to consolidate and improve the retail operation platform, aiming to enhance the retail operation standards of stores and hence improving its retail efficiency. Meanwhile, the Group improved the operation efficiency, by all means, namely focusing on the enhancement of product operation management efficiency of a single store, strengthening the management over product sales plan of a single store, formulating the retail operation standard for big stores with high efficiency, establishing a new visual image for the stores and continuing the cultivation of retail talents.

In terms of the supply chain, we further established the supply chain management system centering on business needs and continued to strengthen the responsiveness and elasticity of our own supply chain. In pursuit of a “Precise, Flexible and Efficient” supply chain, the Group further promoted the “Demand-driven” business model and continued to optimize the supply chain resources, thereby fostering a positive and dynamic supply chain platform.

In 2019, the e-commerce of the Li Ning company continued to grow under fierce competition with a further increase in terms of both revenue and profitability. During the year, we continued to develop the “Counterflow-溯” series on the e-commerce platform, an independent product line with a focus on middle-to-high-priced sports footwear and apparel featuring both sporty lifestyle and Chinese culture elements. Popular products including “ALIEN 星際”, “Glass” (璃), “Space Jump” (光輪) and “Cornice Brackets” (飛簷斗拱) have been launched and achieved satisfactory sales performance and positive market reputation accordingly, hence boosted sales growth continuously and further solidified and expanded our consumer base, which has, in turn, enhanced our brand influence and the brand value of Li-Ning.

In addition, the Group actively promoted the development of new business. 2019 is a year of steady development for Li-Ning Young, during which it continued to establish a professional brand image for kids’ sportswear and gradually enhanced the brand influence. In respect of products, the Group focused on the consumers’ mainstream demands and promoted the sales contribution of products as a whole from both marketing and retail levels; in terms of the supply chain, the Group laid out quality supply chain resources and continued to improve the supply chain system exclusively for kidswear business; in terms of channel development, the Group promoted diversified channel establishment; in terms of brand marketing, the Group continued to optimize the digital marketing matrix, interacted with its consumers with a view to enhancing customer loyalty.

Outlook
Stepping into 2020, which marks the 30th anniversary of the establishment of Li-Ning brand, the Group will stay committed to the guiding strategy of “Single Brand, Multi-categories, Diversified Channels”, strengthen and improve the following core business focuses, remain devoted to creating Li-Ning’s experience value, and focus on improving products and enhancing efficiency in order to achieve healthy and sustainable profit growth for the company in the future:

  • In respect of products, the Group will provide more inspiration for the integration of cultural elements and creativity with professional sports attributes. the Group will also keep abreast of the fashion trend to increase the fashionable elements in its professional sports products so as to attract more consumer groups and expand our brand influence. Moreover, the Group will increase its investment in research and development in relation to sports science to enhance the technological features of its professional sports products, which will, in turn, improve the wearing and usage experience of consumers and constantly enhance its product competitiveness;
  • In respect of channel development, the Group will continue to focus on enhancing the efficiency of its sales channels, further promoting the diversified development of its sales channels and progressively implementing the strategy of stores with high efficiency and model stores. Meanwhile, with a view to refining the structure of sales channels, the Group will continue to reform or close down inefficient and loss-making stores;
  • Continuous optimization of the retail operation platform and supply chain management system will remain as one of our major tasks. The Group will optimize the retail experience in stores, improve the standards of store operation and improve store management ability. The Group will also continue to explore new retail businesses, as well as strengthen and improve the online and offline integrated operation mode. Meanwhile, the Group will step up its efforts in establishing the supply chain management system to continue enhancing the capability in terms of its own supply chain management and research and development regarding the application of technology and knowledge;
  • The Group will make full use of digitalization to further strengthen its comprehensive marketing layout both online and offline. Based on actual consumer demand, the Group will strive to create and lead the market trend, at the same time strengthening the interaction with consumers to enhance their recognition and loyalty to our brand and increase our brand value; and
  • In respect of new business, enhancing single store profitability will remain as our major development goal. The Group will make reasonable and prudent use of resources to explore business opportunities and potential markets, in order to foster new opportunities for the company’s profit growth in the long run.

Li Ning, executive chairman and joint CEO of the Group, concluded, “In 2019, in view of the increasingly segmented sports consumption demand, the Group remained devoted to creating and enhancing Li-Ning’s experience value. We have adopted diversified strategies and approaches to consolidate the advantages of our online and offline and also made use of digital marketing to further promoting our engagement with different consumer groups and hence enhancing the image and value of Li-Ning brand. During the year, key operational indicators of the Group have been further optimized, the Group’s revenue has maintained steady growth and the profitability has improved continuously.

Looking forward, we will remain pragmatic in making every move and devote our main resources into gaining sports knowledge, technological research and development, as well as proactively explore and broaden room for business development. Additionally, I would like to welcome Mr. Kosaka Takeshi to officially join the big family of Li Ning as Joint CEO in 2019. I believe that Mr. Kosaka will add momentum to the Group’s development and his extensive experiences will lead the company to the next level.

The raging outbreak of COVID-19 at the beginning of 2020 has posed severe challenges for the overall outlook for 2020. Since the outbreak of the epidemic, the Group has been closely monitoring the trend of the epidemic and market conditions and promptly responded to the emergencies by leading all employees to join hands to “fight against the epidemic” and minimize the impact of the epidemic. We believe that people will become more concern about their health and physical exercise after this epidemic, hence more potentials of the industry will be released, and we are still fully confident about the Group’s development in the long run.”

Photo courtesy Li Ning