Chinese sportswear brand Li Ning bucks retail decline, posts better-than-expected net profit for 2020

Cheryl Arcibal
·3-min read

Chinese sportswear brand Li Ning said on Friday its net profit rose by 13.3 per cent to 1.7 billion yuan (US$261.3 million) last year.

The company, which bears the name of China’s most famous Olympic gymnast, said its sales rose across all product categories, bucking a general downturn in the retail segment across the world as the coronavirus pandemic hit consumer spending.

“Although the Covid-19 pandemic has yet to come to an end, the socioeconomic and consumption sentiment [in mainland China] improved gradually,” said Li Ning, the company’s executive chairman and joint chief executive. “As one of the leading enterprises in the professional sports industry in the PRC, the group kept pace with industry developments to constantly capture new opportunities and embrace new challenges and developments,” he added.

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Despite China’s retail sales contracting 3.9 per cent in 2020, there were pockets of optimism for retailers and global brands, with several reporting strong sales in the country. For instance, Vancouver-based yoga and fitness apparel maker Lululemon Athletica said its revenue in China surged by more than 100 per cent in the third quarter last year. British fashion house Burberry also reported that in the December quarter, its sales rose 11 per cent in Asia-Pacific, lifted mainly by the China and South Korea markets.

Li Ning’s revenue jumped 4.2 per cent to 14.46 billion yuan. Its equipment and accessories segment saw an 11.7 per cent rise in sales, while footwear improved by 4.2 per cent and apparel grew 3.6 per cent, according to a filing with the Hong Kong stock exchange. However, fewer outlets and shops were selling Li Ning’s products as of the end of 2020, down by 537 to 5,912 outlets, compared with the start of the year. The number of shops and outlets selling Li Ning Young’s products also decreased, by 80 to 1,021.

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Its annual earnings, which reversed a first-half slump where its net income slipped 14 per cent to 683.3 million yuan, beat expectations, according to analysts at US investment bank Jefferies. They recommended the stock in a note on Friday. “Earnings came in 13 per cent ahead of our forecast. However, revenue results were 5 per cent weaker than our forecast likely due to more volatile demand in (fourth-quarter 2020),” they said. Li Ning’s shares were trading lower on Friday.

The company, which has sponsored the likes of NBA basketball superstars Shaquille O’Neal and Dwyane Wade, was looking to “explore and broaden room for business development to capture new opportunities and embrace new challenges and developments”, it said.

Besides its core brand, Li Ning also manufactures and sells various sports products that are either owned by the company or licensed to the group, including Aigle, a joint venture company with the French sports apparel maker.

Li Ning, a former Olympic gymnast and the company’s executive chairman and joint chief executive, says consumption sentiment in mainland China has improved gradually. Photo: Edward Wong
Li Ning, a former Olympic gymnast and the company’s executive chairman and joint chief executive, says consumption sentiment in mainland China has improved gradually. Photo: Edward Wong

The company’s fortunes contrast with that of Xtep, another Hong Kong-listed mainland Chinese sportswear brand, which counts NBA basketball star Jeremy Lin among its endorsers. Xtep’s profit in 2020 fell 29.5 per cent to 513 million yuan.

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