Net profit in the six months to June 30 fell 3 per cent year on year to 2.12 billion yuan (US$293 million), the company reported on Friday. Revenue increased 13 per cent to 14 billion yuan, but gross profit margin fell 1.2 percentage points to 48.8 per cent, which the company blamed on higher sales discounts.
Net profit margin declined 2.5 percentage points to 15.1 per cent due to a decline in government grants and investment income, the company said, adding that net margin remained “at a healthy level”. Grants received from local governments in the first six months fell 30 per cent to 110 billion yuan compared to the same period last year.
“The market is recovering gradually but it is still below expectations,” Zhao Dongsheng, the company’s chief financial officer, said in a media briefing on Friday. “We are under pressure to achieve the company’s annual goal of a 10 to 20 per cent revenue increase, and a net profit margin of 10 to 20 per cent.”
The company foresees a continuous increase in demand for sports and fitness gear as China’s economy recovers from the shocks of the pandemic period. In the past six months, revenue in offline retail stores grew 22.3 per cent compared to the same period last year, while the e-commerce channel recorded a 1.7 per cent increase.
“The sports industry in China has a lot of potential,” said Li Ning, the founder and co-CEO, who added that the company benefited from new hi-tech product launches and exposure at major sports events such as the Tokyo and Barcelona marathons in March.
Although Li Ning is not sponsoring the Hangzhou Asian Games, taking place in September and October, the hosting of such events is seen as a signal that the Chinese government will continue to support the sports industry’s development.
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Li Ning will focus on retail channels in the second half of 2023, especially the efficiency of offline stores.
“It does not mean that we want to open as many stores as possible,” said Qian Wei, executive director and co-CEO. In fact, the company closed more than 150 stores during the first six months as part of its strategy to concentrate on the best-performing locations.
“We still focus on the overall performance of each store, like foot traffic and turnover rate,” Qian said. “If there is profit, we will open more stores. If it’s low-efficiency, we will close it.”
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As part of a move to expand its overseas sales, Li Ning has opened four stores in Hong Kong, including a flagship shop in the Tsim Sha Tsui district last December.Qian said he “would love to open more stores” in Hong Kong but has no plans to do so at the moment. The four current stores are performing “within the company’s plan and expectation”, he said.
Li Ning declared an interim dividend of 36.2 yuan per share, its first since 2011.
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