Under the storm of "national tide", Li Ning's revenue exceeded 20 billion yuan for the first time

In 2021, Li Ning's revenue exceeded 20 billion yuan for the first time, and net profit exceeded 4 billion yuan. Li Ning revealed in the financial report that under the strategy of continuing to deepen the implementation of "single brand, multi-category, multi-channel", the company has continuously optimized and upgraded its product performance, product innovation, channel structure, store sales rate, supply chain management system, new business planning and other aspects in the past year. In 2022, we will continue to implement the above strategic directions, consolidate business development, strengthen retail operation capabilities, and realize the "Li Ning-style" experience value in an all-round way.

The Beijing News shell financial reporter noted that under the strategy of "single brand, multi-category, multi-channel", Li Ning took the main brand as the core, and at the same time cultivated sub-brands such as LNG, China Li Ning, and Li Ning YOUNG. Last November, Li Ning launched a new independent sports fashion brand LI-NING 1990. Some analysts believe that whether Li Ning, who relies on the concept of "national tide" to go out of the circle again, can continue the "national tide" storm, the new high-end sub-brand is an important step in its response, and it is also a bet on future growth. Behind this, Li Ning still has the first problems that need to be solved.

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Net profit increased by 136% to $4,011 million, and cash flow was outstanding

In 2021, Li Ning's revenue increased by 56% to 22.572 billion yuan, profit attributable to equity holders increased by 136% to 4.011 billion yuan, net profit margin increased from 11.7% to 17.8%, and gross profit margin increased by 3.9 percentage points to 53%.

Equally striking is cash flow. According to the data, as of December 31, 2021, Li Ning's net cash from operating activities was 6.525 billion yuan, an increase of 136% year-on-year; cash and equivalent cash items were 14.745 billion yuan, an increase of 7.558 billion yuan over the same period in 2020. Together with the funds recorded in bank time deposits, the cash balance was $18.481 billion, an increase of $11.039 billion over the same period in 2020.

Since 2015, Li Ning has been adhering to the strategy of "single brand, multi-category, multi-channel". As a single brand of the company, Li Ning has five core categories covering basketball, running, training, badminton and sports fashion, under these five core categories, li Ning's footwear products are relatively stable. In 2021, Li Ning's clothing accounted for 52.38% from 50.9% in the previous year, and the proportion of shoes fell slightly from 43.9% in the previous year to 42%. Under the optimization of product performance, Li Ning's new product sales performance is good, of which the new product offline retail flow accelerated to record a high growth of 60%-70%, and the proportion of new product flow increased by about 7 percentage points.

In recent years, Li Ning has paid more attention to the efficiency optimization of channels. In terms of direct sales channels, Li Ning actively promotes the landing of efficient large stores such as flagship stores, accelerates the construction of eight generations of image stores, and cleans up loss-making, inefficient and micro-area stores. As of December 31, 2021, the proportion of eight generations of image stores has exceeded 40%; the direct operating sales flow increased by 53.5% year-on-year. In terms of e-commerce channels, while consolidating the advantages of traditional e-commerce platforms, with the help of emerging live broadcast platforms, business opportunities and consumer circles have been expanded, and e-commerce revenue has increased by 58.4%. In addition, in 2021, Li Ning's average inventory turnover period dropped from 68 days in the previous year to 54 days, and the inventory age structure was greatly optimized; the overall retail turnover (including online and offline channels) recorded a high growth of 50%-60%.

As of December 31, 2021, the number of regular stores, flagship stores, China Li Ning fashion stores, factory stores and multi-brand collection stores of Li Ning brand (including Li Ning core brands and Li Ning YOUNG) was 7137, a net increase of 204 over the same period of the previous year.

Continue to bet on the "national tide" to create a new sub-brand with a higher end

With the popularity of the sub-brand "China Li Ning" in New York Fashion Week in 2018, Li Ning once again entered the vision of young people with the image of "national tide" and became a representative of the original spirit of domestic sports brands. This also makes Li Ning deeply bound to the word "national tide", and expanding the "national tide" business has become an important direction for Li Ning.

In terms of products, Li Ning deeply excavated Chinese culture and popular culture elements, such as the launch of new products such as the United Nations Treasure IP; in terms of channel expansion, Li Ning emphasized the combination of Chinese culture with sports and shopping experience. In addition, Li Ning also used the official Xuan Xiaozhan as a global spokesperson in 2021, further deepening communication with the "Generation Z".

Li Ning's bet on the "National Tide" track is not only these. In November 2021, Li Ning officially released the new independent sports fashion brand LI-NING1990, emphasizing the concepts of "classic return" and "unchanged original intention", which was deeply marked by the "national tide" from the beginning. According to official disclosures, the brand's design inspiration comes from the sports career of founder Li Ning, with elements such as "champion gold medal" and "medal collar" as the main one.

According to the price announced by official channels, the price of LI-NING1990 products is mostly 1.3 times -1.5 times that of "China Li Ning" products, of which the highest price of women's down jackets of the brand is 3899 yuan, the highest price of men's down jackets is 4299 yuan, and the price of another spring men's coat is 3990 yuan, and the price of women's coats in spring is 3399 yuan. After opening five offline stores in Beijing, Wuhan, Shenyang, Nanning and Chongqing, LI-NING1990 opened an online flagship store on Tmall in March this year.

Unlike other product lines, LI-NING1990 is considered to be Li Ning's first self-incubated high-end brand. Some analysts pointed out that most brands will create different series and even brand branch lines due to different design concepts and different customer groups, so as to establish different images in different levels of audiences. This time, Li Ning chose an independent brand with a higher cost to open up the sports market segment in the name of "Li Ning Story", which is undoubtedly a gamble with the "national tide" as a chip. For Li Ning, guochao is a sustainable format.

Judging from the turnover of some e-commerce platform guochao sports brands in recent years, Li Ning's judgment is not wrong, and Huajin Securities also said that at the moment when the high self-confidence of the Chinese people provides a huge opportunity for the rise of domestic products, the launch of a new high-end sub-brand is an important step for Li Ning's response and a bet on future growth. At the same time, it pointed out that after consumers tend to be rational, brands should realize that a more mature supply chain system and a stronger e-commerce channel capability are the core competitiveness of domestic brands to regain market share. As for Li Ning, who is trying to take a more expensive and high-end route, if he wants to continue the "national tide" storm, from the current situation, he must first solve the balance between marketing and research and development.

The Beijing News Shell financial reporter noted that in 2021, Li Ning's marketing expenses were 1.779 billion yuan, and the investment in research and development was only 414 million yuan, accounting for about 1.83% of the revenue. This proportion is far lower than nike and Adidas's perennial research and development investment of more than 7%.

Increase the children's clothing business and set up a children's clothing company

In the outlook for 2022, Li Ning said that he will continue to implement the strategic direction of "single brand, multi-category, multi-channel", consolidate business development, strengthen retail operation capabilities, and fully realize the "Li Ning-style" experience value. Among them, in terms of new business represented by Li Ning YOUNG, it will continue to develop the children's clothing business in depth, strengthen the promotion of children's clothing brands, and promote Li Ning YOUNG to become the preferred professional sports children's wear brand for Chinese children.

An industrial and commercial change in March 2022 made the industry realize that Li Ning was going to increase his weight in the children's clothing business. According to Tianyan, Li Ning (China) Sporting Goods Co., Ltd. has recently added a new foreign investment, the investment enterprise is Li Ning Sports Children's Clothing Co., Ltd., which was established on March 3, 2022, with an investment ratio of 100%, a registered capital of 250 million yuan, and the legal representative is Du Daoli, the financial general manager of Li Ning.

Previously, Li Ning's children's clothing business was only a brand of LI-NING KIDS, which adopted a third-party agency model. In the second half of 2017, Li Ning set up a separate children's clothing division, began to rearrange the children's clothing business, and created a new brand Li Ning YOUNG, which set up two product lines, respectively, for children aged 3 to 6 and 7 to 14 years old, from the product, supply chain, channels, brand marketing and other aspects of the children's clothing business reform.

With the blessing of multiple resources, the number of Li Ning YOUNG stores has increased year by year. As of December 31, 2021, Li Ning YOUNG has 1202 stores, an increase of 17.7% year-on-year, and the average store efficiency has also improved, but in the current sports children's wear market pattern, compared with the head sports children's wear brand, Li Ning YOUNG's children's clothing market share advantage is still not large.

Founder Securities said that the final decision on children's clothing consumption lies with parents, and the continuous strengthening of sportswear brand power makes parents who can buy a sports brand also have the ability and tendency to buy the same brand of children's clothing for their children. The children's clothing track is the second largest monetization channel for sports brands.

In order to promote the development of the company's children's clothing business, this time Li Ning is no longer limited to the development path of product lines or sub-brands, but directly established a children's clothing company. Huajin Securities believes that combined with the current policy dividends, Li Ning set up a children's clothing company, broadening its business scope, accurate market positioning and differentiated competitive strategy, or will bring Li Ning YOUNG a generous market share in the future.

Beijing News shell financial reporter Wang Zhenzhen

Edited by Li Zheng Proofreader Li Ming