Li Ning says 2020 will be more profitable, even as coronavirus pandemic defers Tokyo Olympics and keeps shoppers away

Pearl Liu

Li Ning Company Limited, the eponymous sportswear brand by China’s best-known Olympic gymnast, said it is on track to improve its 2020 profit margin by 1.4 percentage point, even if the coronavirus pandemic has kept shoppers from stores and forced large sports events to be postponed or cancelled.

The Beijing-based producer of sports shoes and apparel forecasted a 2020 profit margin of 10.5 per cent on the back of a bumper year in 2019, during which revenue beat estimates and rose 32 per cent to 13.9 billion yuan, while net income more than doubled to 1.5 billion yuan on the back of a one-time profit. Li Ning’s shares jumped by 19 per cent before earnings were announced to an intraday high of HK$23.85 in Hong Kong.

“Buyers in our bricks-and-mortar stores dropped dramatically in February and as most of our offline shops were forced to close, business have been hit heavily,” said Takeshi Kosaka, the former Uniqlo executive who is now joint-Chief Executie Officer at Li Ning along with the founder, during an earnings teleconference. “By now 95 per cent of our offline stores have reopened. It is still difficult to see when business will fully recovered from the outbreak, and now we are focusing on exploring more online opportunities and cost control.”

Kosaka’s comments show how businesses in the consumer products industry are coping with the biggest public health crisis to hit the world in decades, and its ensuing economic aftermath. The Covid-19 pandemic has sickened more than half a million people around the world, and claimed 23,000 lives at the most recent count. It has forced the International Olympic Committee to postpone the 2020 Tokyo Olympics, the largest sports event on the planet, and shut tens of thousands of tournaments and shows.

A masked man walks in front of a Tokyo Olympics logo at the Tokyo metropolitan government headquarters building in Tokyo on March 25, 2020. Photo: AP

“We have prepared many products and arrangements for the Tokyo Olympics, but we have swiftly adjust our input on that and the impact is under control,” said Kosaka, a Chinese-Japanese also known as Wei Qian. “We see impact, more or less, on our business following the postponement or cancellation of major sports, as [event endorsements] has always been an important driver of our business, but it is not the sole driver.”

Once China’s largest domestic sports brand, Li Ning was overtaken in recent years by upstarts like Anta Sports and Xtep International Holdings. It has 6.1 per cent of China’s market share, well behind Nike’s 23 per cent and Adidas at 20 per cent. Even Anta, based in Fujian province, had more than double Li Ning’s market share at 15 per cent, according to Euromonitor’s data.

Li Ning has gone through a turnaround in the past few years, as it slashed cost and trimmed its overflowing product line to compete with its much larger rivals. Li Ning – founded by China’s 1989 Olympic gold medallist gymnast – has gone about on its restructuring. Revenue last year grew at double the pace of 2018, while net income tripled the previous year’s after a one-time gain. Net profit attributable to shareholders, after excluding a one-time profit not related to operation, rose 77 per cent to 1.3 billion yuan in 2019, according to results filed to the Hong Kong stock exchange.

The company plans to hand out a final dividend of 15.47 HK cents per share, up from 8.78 HK cents in 2018.

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