Lining, Who Has Been Surpassed: How Long Will It Take To Return To The First Place In The First Place?

In the hearts of many Post-80's, Lining's brand has always been the "boss" of the domestic sports brand.

In their eyes, Lining is not only a pair of shoes or a dress, but also a generation of young memories of youth.

From the starting time, the listing of the market, and the revenue before 2010, Lining is indeed the senior of the domestic sports brand.

Li Ning Co Ltd (hereinafter referred to as Li Ning Co) was founded in 1990.

A year later, another sports brand, Anta, was founded.

In June 28, 2004, Li Ning Co listed on the main board of Hongkong stock exchange and became the first domestic sports brand listed in Hongkong.

Three years later, Anta went public in Hongkong.

Subsequently, two other domestic sports brands, XTEP and 361 degrees, were listed in Hongkong.

More than ten years later, after experiencing the fast developing period of the sports apparel industry and the stock market crisis, the development strategies and market share of several domestic sports brands have changed.

Lining was completely surpassed by Anta in 2012, and the later XTEP international and 361 degrees were not enough to show their best, but they were also catching up.

Revenue exceeds first billion business channel revenue accounted for 21.1%

In 2018, the Li Ning Co did not achieve the target of billions of revenue in 2011.

In March 22, 2019, Li Ning Co released the 2018 annual results announcement.

According to the announcement, in 2018, Li Ning Co's annual revenue was 10 billion 511 million yuan, revenue for the first time exceeded 10 billion, an increase of 18.4% compared with the same period last year. The net profit of the company's owners should be 715 million yuan, an increase of 38.8% compared with the same period last year. Gross profit margin was 48.07%, compared with 47.06% in 2017, a 1.01% increase; net interest rate 6.80%, and 5.81% in 2017, an increase of about 1 percentage points.

As for the growth of revenue in 2018, the results showed that the earnings mainly benefited from three aspects: first, the rapid development of the electricity supplier channel, and the continuous increase in the proportion of income; two, the improvement of product, channel control and operation capability, the promotion of Lining's brand and product market recognition, the good sale of terminal sales, the double digit growth of direct income and dealer income; three, the excellent performance of basketball and sports fashion, and the children's clothing also received good market reaction, and the growth was obvious.

Because the above three reasons are too general, we explain from product category, channel, inventory turnover and so on.

From the perspective of product category, the products of Li Ning Co are classified into footwear, clothing, equipment and accessories.

Among them, footwear and clothing were the largest revenue of Li Ning Co, and revenue in 2018 was 5 billion 316 million yuan and 4 billion 601 million yuan respectively, up 10.6 and 26.8% respectively over the same period.

In addition, equipment and accessories revenue 594 million yuan, an increase of 13.4% over the same period.

From the point of view of the channel, in 2018, the proportion of franchised dealers accounted for 46.7%, and the direct sales revenue accounted for 29.8%, while the e-commerce channel sales accounted for 21.1%.

Since the launch of Li Ning Co from wholesale mode to retail oriented pformation in 2012, Lining's retail sales have achieved initial success.

In 2018, Li Ning Co's direct sales and e-commerce sales accounted for 50.9% of the total retail sales, which has exceeded wholesale sales of franchised dealers.

On the growth rate, 10%-20% growth was recorded in offline channels (including retail and wholesale). Among them, the retail channel recorded high unit growth and low 10%-20% growth in wholesale channel; the virtual store business in e-commerce recorded a growth in the middle of 50%-60%.

In addition, children's wear brand Lining YOUNG store grew rapidly, from 173 in 2017 to 793 in 2018, an increase of 358.4% over the same period last year.

As of December 31, 2018, the sales volume of Lining brand (including Lining core brand and Lining YOUNG) regular store, flagship store, China Lining fashion shop, factory store and discount store was 7137, a 702 increase compared to December 31, 2017 (January 1, 2018 Lining YOUNG business took over 361 authorized dealer's dealership), 46 dealers (including China Lining fashion shop channel), a net increase of 14 compared with December 31, 2017.

From the perspective of urban distribution, by the end of 2018, 23 of China's Lining stores mainly concentrated in high-end and second tier cities.

From the point of view of inventory turnover, in 2018, Lining's average stock turnover period dropped from 80 days in 2017 to 78 days, and the average turnover period of receivable trade fell from 52 days to 36 days.

The average inventory turnover period decreased, indicating that the efficiency of inventory operation in all links of Li Ning Co production and operation has been improved. The average turnover of receivable trade volume has shown that the return of Li Ning Co funds has accelerated and profitability has been enhanced.

In addition to the problems of products, channels and inventory turnover, Lining also improved the overall management efficiency and reduced the cost side expenses through internal meticulous management, which further raised the company's net interest rate level.

This is mainly reflected in the reduction of sales and distribution costs, the ratio of revenue to sales and the proportion of revenue from administrative expenses.

Starting from 2013, Li Ning Co's sales and distribution costs accounted for a continuous decline in revenue, from 45.93% in 2013 to 35.28% in 2018. The proportion of administrative expenses dropped from 24.83% in 2012 to 6.47% in 2018.

How long does it take for Li Ning Co to return to the first place?

All of the above data point to a problem, Lining slowly "better".

In the 2018 performance press conference, Lining himself expressed his ambitions very little: we want to be China's first, Asia's first and international leading sports brand.

To return to the first place of the local sports brand, Lining's first competitor is Anta.

Since 2012, Anta's revenue has surpassed Lining for the first time, and in 2012, Lining fell into a 3 year loss period. Anta has been hanging on the dust and left Lining far behind.

In 2018, Anta's revenue was 24 billion 100 million, two times that of Lining, and the net profit of Anta was 4 billion 103 million yuan, 5.7 times that of Lining.

After 3 years of loss and 4 years of adjustment, how long will Lining want to catch up with Anta in terms of revenue and net profit?

We can speculate from gross margin, net interest rate and brand strategy.

In terms of gross profit margin, Anta's gross profit margin has been higher than that of Lining since 2014, but the overall difference is not large.

In 2018, Lining's gross profit margin was 48.07%, and Anta's gross profit margin was 52.64%.

From the net interest rate perspective, since 2008, Lining's net interest rate has been lower than Anta, and the gap has remained at 10 percentage points.

In the three years of Lining's loss in 2012-2015 years, Lining's net interest rate has even been 40 percentage points lower than that of Anta.

Why is Lining's net interest rate so low? From the perspective of changes in the cost of sales over the years, Anta's cost control capability is much higher than that of Lining.

From the sales and distribution costs of the two companies in 2008 -2018, although the proportion of Anta's sales and distribution costs has been on the rise, the overall control is about 20%, while Lining's sales and distribution costs in 2008 account for 28.15%, and even 45.92% in 2012, which is one of the reasons for Li Ning Co's loss in 2012.

Beginning in 2013, Li Ning Co began to control sales and distribution costs. The revenue share of this indicator has been declining, and its lowest is 35.28% in 2018, but it is still nearly 10 percentage points higher than Anta.

It is important to note that Li Ning Co's distribution expenses include advertising and marketing expenses, logistics expenses, variable rent and commission, while Li Ning Co's advertising and marketing expenditure has been declining since 2013.

That is to say, the rental and logistics costs of Li Ning Co are on the rise. This is also related to the retail pformation, the direct sales channel increasing year by year, and the annual increase in the rental cost of the Li Ning Co in 2012.

From the point of view of the proportion of revenue from administrative expenses, Anta's administrative expenses accounted for a relatively stable proportion of control, which has been around 5% since 2015, but Lining's administrative expenses accounted for a big fluctuation.

In 2012, Li Ning Co's administrative expenses accounted for 24.78% of the revenue, which was one of the reasons that led to Lining's huge losses in 2012.

In 2018, the administrative expenses of Li Ning Co accounted for 6.47%, which was 1 percentage points higher than that of Anta.

Therefore, if Lining wants to catch up with Anta, he also needs to elaborate on internal fine management, reduce expenses and enhance overall management efficiency.

Finally, look at the difference between Lining and Anta in brand strategy.

In recent years, Anta has been pushing forward the strategy of "single focus, multi brand and all channels", focusing on the sporting goods market. Through diversified brand portfolios, including Anta, Anta children, FILA, FILAKIDS, DESCENTE, SPRANDI, KINGKOW, KOLON SPORT and NBA brands, we have grasped the public and high-end sporting goods market.

According to brokerage research, the gross profit margin of FILA brand is around 70%. In 2017, FILA business accounted for more than 30% of the total revenue, thereby enhancing the overall gross profit margin of Anta in 2017. This also reflected the impact of "multi brand" strategy on Anta's overall profitability from the side.

Unlike Anta's "multi brand" strategy, Lining first put forward the strategy of "single brand, multi category and multi channel" in 2018.

"Single brand" is mainly reflected in concentrating on the main brand Lining.

In addition to Lining's main brand, Li Ning Co has Kason, Kasen, red double happiness, AIGLE (Ai Gao), Lotto (Le Tu) and many other styles and functional subdivision brands, but other brands contribute little to Li Ning Co's revenue.

In 2018, Lining earned 8 billion 819 million yuan, other brands earned 54 million yuan, and other brands accounted for less than 1%.

In other words, as the founder is a well-known sports celebrity, Li Ning Co's products inevitably need the blessing of Lining and his glory.

In this regard, Lining publicly told the media: "when a brand's core competence is not mature, it is more inefficient to disperse and copy other brands, the possibility of failure is greater, and dispersed their resources and energy, so that the team which was originally not very strong was much more dispersed."

In 2019, Lining will continue to promote "single brand, multi category, multi-channel" strategy.

From now on, it is not easy for Li Ning Co to catch up with Anta and return to the first place of domestic brands.

He has to elaborate on internal meticulous management, reduce expenses on expenses, improve overall management efficiency, and reduce reliance on the brand effect of founder Lining and his company.

But one thing can not be ignored. In 2018 and 2019, Li Ning Co made a "national tide" label for New York through the fashion week of Paris and New York, which made the "China Lining" sports fashion category quickly start the market, and is expected to become an important performance contribution category of Li Ning Co in the future.