Li Ning Company Limited

Sector: Apparel and footwear Countries of operation: Mainly operates in China and has businesses in countries such as Malaysia Key product categories: Professional and leisure accessories, apparel, equipment and footwear Annual Metrics [caption id="attachment_154056" align="aligncenter" width="700"] Fiscal year ends on December 31
Trailing twelve months ended June 30, 2022[/caption]   Summary Founded in 1989 and headquartered in Beijing, China, Li Ning is a leading sportswear company in the country, primarily offering professional and leisure accessories, apparel, equipment and footwear. In addition to its core Li-Ning brand, the company also develops, manufactures, markets, distributes and sells various sports products that are owned by or licensed to the company, including Double Happiness (table tennis equipment), AIGLE (outdoor sports equipment), Danskin (fashionable fitness products for dance and yoga) and Kason (badminton equipment). As of December 31, 2021, the company operates 4,770 LI-NING brand franchised stores, 1,165 directly-operated LI-NING brand retail stores, and 1,202 LI-NING YOUNG stores. Company Analysis Coresight Research insight: Li Ning’s fiscal year 2021 report shows that the company’s revenue increased by 55.9% to ¥22.6 billion ($3.5 billion), reaching a new record high and illustrating that the company is on a strong path of organic growth. Li Ning has a high exposure to wholesale channels, with sales to wholesalers (termed franchise distributors by the company) comprising almost half of the company’s sales in fiscal 2021. We expect Li Ning to continue to rely on the wholesale channel over the next few years, because of its large, deeply rooted franchise network. Li Ning’s e-commerce sales accounted for 28.4% of total sales in fiscal 2021, up 58.4% on a currency-neutral basis, indicating that the firm’s digital capabilities are strong. Although Li Ning is strengthening its own e-commerce platform, we still expect to see strong product sell-throughs through third-party marketplaces and retail giants such as Tmall, JD.com and Pinduoduo.

Tailwinds	Headwinds
Consumers’ growing interest in sports and fitness Major leagues and tournaments around the world returning to normal operations The Chinese government’s policy to expand domestic apparel production and demand	A challenging overall environment as the pandemic continues to disrupt operations and manufacturing velocity Pressure from competitors including Adidas, ANTA, NIKE, Puma and other growing athleisure brands

  Strategy Li Ning focuses on its strategy of “Single Brand, Multi-Categories, Diversified Channels”: 1. Single Brand: Enhance the core Li-Ning brand

• Convery Li-Ning’s unique brand value by incorporating elements of both Chinese and popular culture
• Bolster the brand’s core competitiveness in the field of professional sports

2. Multi-Categories: Focus on five core categories

• Focus on basketball, badminton, running, training and sports casual categories
• Emphasize the company’s scientific research and develop products in terms of their professional sports attributes

3. Diversified Channels: Enhance the company across channels

• Cooperate with high-quality retailers, optimize the efficiency of its retail channel and improve the quality of market coverage
• Negotiate with major domestic commercial real estate partners closely for rent reduction, and accelerate the closing down of underperforming and loss-making stores
• Accelerate the deployment of new retail businesses and consolidate the advantages of the company’s online and offline platforms

Revenue Breakdown (FY21) [caption id="attachment_148780" align="aligncenter" width="700"] Source: Company reports[/caption]   Company Developments

Date	Development
March 18, 2022	Li Ning reiterates the strategy of “Single Brand, Multi-Categories, Diversified Channels.”
January 27, 2022	Li Ning collaborates with Chow Tai Fook, a Hong Kong-based conglomerate, to launch a new jewelry collection.
August 23, 2021	Li Ning is included as a constituent stock in the Hang Seng Index.
August 13, 2021	Li Ning deepens its strategy of “Single Brand, Multi-Categories, Diversified Channels.”

  Management Team

• Li Ning—Executive Chairman and Joint Chief Executive Officer
• Takeshi Kosaka—Joint Chief Executive Officer
• Terence Wah-Fung Tsang—Chief Financial Officer

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Source: Company reports