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Li Ning’s Earnings Call: Mixed Sentiments and Strategic Growth

Li Ning’s Earnings Call: Mixed Sentiments and Strategic Growth

Li Ning Company Limited ((HK:2331)) has held its Q2 earnings call. Read on for the main highlights of the call.

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The recent earnings call of Li Ning Company Limited presented a balanced mix of optimism and challenges. The company reported growth in revenue and strong performance in its footwear and accessories segments, particularly in e-commerce and professional running shoes. However, the apparel and basketball categories faced hurdles, with declining gross profit and net margins. Strategic partnerships and a robust cash position were highlighted as positive indicators for future growth.

Revenue Growth

Li Ning Company Limited reported a revenue increase of 3.3%, reaching RMB 14.817 billion. The net operating cash inflow stood at an impressive RMB 24.11 billion, showcasing the company’s ability to generate cash effectively.

Footwear and Accessories Growth

The footwear segment saw a 5% year-on-year revenue growth, while accessories revenue surged by 24%, driven by the Badminton category. This highlights the company’s successful diversification within its product lines.

E-commerce Performance

E-commerce revenue increased by 1 percentage point, now constituting 31% of total revenue. Retail sell-through achieved a high single-digit percentage increase, underscoring the strength of Li Ning’s online presence.

Professional Running Shoes Success

Sales of professional running shoes exceeded 14 million pairs, with core running shoes surpassing 5.26 million pairs. This success underscores the brand’s strong foothold in the running shoe market.

Strong Cash Position

The company reported a net cash increase of RMB 1.61 billion year-on-year, totaling RMB 19.191 billion. This strong cash position ensures robust support for future opportunities and strategic initiatives.

Strategic Partnerships

Li Ning signed a significant contract to become the official partner of the Chinese Olympic Committee and the Chinese national sports delegation from 2025 to 2028, positioning the brand prominently on the global stage.

Decrease in Apparel Revenue

Apparel revenue saw a decline of 3% year-on-year, indicating challenges in this segment that the company needs to address.

Gross Profit Margin Decline

The gross profit margin decreased by 0.4 percentage points to 50%, attributed to intensified promotional competition and adjustments in channel structure.

Basketball Category Downturn

The basketball category experienced a downturn, with sell-through down by 20%. This reflects broader challenges in the basketball market that Li Ning is facing.

Direct Retail Revenue Decline

Direct retail revenue decreased by 4% year-on-year, with a reduction of 217 points of sale due to store structure optimization efforts.

Net Margin Decline

The net margin fell by 1.9 percentage points from 13.6% last year to 11.7%, highlighting the financial pressures the company is navigating.

Forward-Looking Guidance

Looking ahead, Li Ning Company Limited provided guidance for the first half of 2025, with expectations of continued revenue growth at 3.3%, reaching RMB 14.817 billion. The company aims to maintain a net profit margin of 11.7% and a gross profit margin of 50%. Despite a challenging market, Li Ning is focused on channel optimization and strategic investments in core product categories to drive long-term growth.

In summary, Li Ning’s earnings call reflected a mixed sentiment, with notable achievements in revenue growth and strategic partnerships, contrasted by challenges in the apparel and basketball segments. The company’s strong cash position and focus on strategic initiatives are poised to support its future growth trajectory.

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