Lining Group Released Its Annual Performance Report For 2019.

In March 27th, Lining group released the annual performance report for 2019. In this "only" 38 page report, "retail" two characters appeared up to 44 times.

This is the first annual performance report of Li Ning Co released by Takasaka Takeshi (Chinese name Qian Wei) since September last year as the joint chief executive officer of Lining group. It can be seen that Lining placed retail in the most important position of the company's development and set the single store sales as the main driving force for future growth.

According to the financial report, the income of Lining group reached 13 billion 870 million yuan during the year (-12 31 January 1, 2019), up 32% from the same period last year. Gross profit rose 34.7% to 6 billion 805 million yuan, and the gross profit margin reached 49.1%, up 1 percentage points from 2018.

It is worth noting that in terms of net profit, Lining's performance in 2019 was very strong - net profit increased by about 110% to 1 billion 499 million yuan, and net interest rate increased from 6.8% to 10.8%. This is a direct reflection of Lining's improvement in profitability over the past year.

After the announcement, Hong Kong shares closed at HK $22.70 in March 27th, with a daily gain of 13.22% and a total market value of HK $55 billion 700 million (US $7 billion 200 million). The market value exceeds the US sports brand Cage ($4 billion 200 million) and Lining (4 billion US dollars).

In today's midday conference call, key words related to efficiency such as "same store sales growth" and "new product sales rate" remain the focus of Lining management's repeated mention.

"We used to control the flow of our business as a whole. In the future, we will increase the efficiency of each single store while controlling the whole." Qian Wei said at a conference call.

From a number of important indicators of retail capacity, Li Ning Co's overall revenue rose by 32% in 2019, which was achieved in the same period of average operating capital (the amount before provision) decreased by 16%. It can be seen that capital efficiency has been significantly improved; and the cash cycle cycle has been shortened by 35% to 26 days. The same store sales accelerated 10%-20% growth, while the new products sold rate increased by 4 percentage points (6 months) and 2 percentage points (3 months) respectively. These data have reached the leading level in the industry.

But for Lining, improvements in financial data are good news, but they have higher goals. "We need to focus on the establishment of a" muscle type "enterprise system, and resolutely avoid becoming a" fat enterprise "that only pursues only the size of the body but ignores the profit efficiency. Qian Wei said.

Qian Wei's work will focus on group operation, while Lining himself is responsible for the overall planning of the company.

Before joining Lining, Qian Wei worked in Japan's clothing retail giant UNIQLO for 23 years. He has worked in UNIQLO China COO, Taiwan area CEO, UNIQLO Korea CEO and so on.

Qian Wei owns the management experience of many links in the whole industry chain of clothing brand, including supply chain, commodity, production, operation, market and so on. More experience in developing mainland China and Taiwan market in China. In addition, as a long-term Chinese manager in Greater China, he has a deep understanding of the whole China and the East Asian market.

In recent years, the same store sales is one of the most important data in the sporting goods industry. Compared with the growth of the number of stores, single store sales promotion is more valued. These are the advantages of UNIQLO as the top fast selling brands in the world, and also an important point for Qian Wei to join Lining.

According to the earnings report, Lining's 24% revenue in 2019 came from online e-commerce channels. Offline channels are still the main source of revenue, and the number of stores and average single store efficiency are the direct factors determining the revenue of offline channels. Unlike many other brands, Lining's strategy of raising revenue under the line is not to increase the number of stores, but to concentrate on improving the efficiency of individual stores.

In Lining's briefing to the media PPT, there are several cases of Lining benchmarking stores. Among them, Lining Guangzhou good Plaza flagship store in the fourth quarter of 2019, the average monthly flow of more than 4 million yuan, while Lining, Tianjin, Binjiang Road modern city store in 2019, the average monthly runoff of more than 1 million 550 thousand yuan. In addition, China Lining Chengdu Taigi Li store has more than 3 million 200 thousand yuan monthly sales, and Chinese Lining and Guangzhou Tai Koo Hui store has more than 3 million yuan monthly store effect. Lining tries to use these "benchmarking" stores to demonstrate the revenue potential that can be achieved through upgrading store efficiency.

According to the financial report, in the second half of 2019, the growth rate of same store sales of Lining's overall platform was significantly higher than that of the first half of the year. Especially in the fourth quarter, the same store sales recorded a low 20%-30% growth. This is one of the changes that Qian Wei has taken after joining Lining.

After obtaining successful experience from benchmarking stores in key cities, Lining also hopes to make this a replicable standard store operation mode and apply it to other stores in other parts of the country. This is one of the important goals of Qian Wei after taking office.

According to the information of earnings, in the past 2019, Lining focused on improving the retail capacity, focusing on the following three aspects: improving the retail operation capacity, optimizing the logistics system and closing inefficient shops.

Improving retail operation capability

In the single store retailing, Lining's practice is more "intensive farming".

In 2019, Lining initially established a commodity sales plan management system based on single product store, and set up sales plan and sales strategy in a single commodity unit, and managed product efficiency in color and size. This helps to make quick decisions and effective addition and subtraction in stores, so as to enhance the planning and operation efficiency of commodities.

In addition, Lining has improved the single store ordering management tool, enabling each individual store to order independently and distribute goods directly to stores. In order to improve the efficiency of single shop ordering, Lining also developed a store replenishment allocation system, which can predict consumer demand to a certain extent, thereby accelerating turnover of goods.

Optimize logistics system

In 2019, Lining realized the overall speed increase in the links of positive, reverse logistics and allocation and transfer, and realized the direct distribution of goods from the main warehouse to various stores in the country and the quick replenishment.

On the basis of clear store types for each store, Lining focused on strengthening the logistics support cooperation plan for efficient stores, helping efficient and large stores to enhance the efficiency of logistics operation.

Thanks to the above measures, Lining's asset efficiency has been comprehensively upgraded. Among them, the average stock turnover days decreased by 10 days to 68 days, the average receivable turnover days decreased 15 days to 36 days, and the average accounts payable turnover days decreased 11 days to 63 days. The three main indicators reached the excellent level of the industry.

Closing inefficient stores

During the year, the Li Ning Co continued to accelerate the closing of the loss shop, upgraded the inefficient shops, and set up flagship stores and Lining fashion shops in shopping centers throughout the country.

From the number of stores, as of December 31, 2019, the sales volume of Lining brand (including Lining core brand and Lining YOUNG) regular store, flagship store, Chinese Lining fashion shop, factory shop and multi brand store was 7550, a 413 increase over 2018. But it should be noted that Lining closed 214 direct retail stores last year, and there are 1292 direct outlets. But dealers' stores increased by 319 to 5157, and Lining YOUNG stores increased 308 to 1101.

Since 2015, Lining's direct store has been reduced for 4 consecutive years. Close down inefficient Direct stores and pay more attention to efficient shops, Lining is trying to improve operational efficiency on the one hand, and at the same time implies a direct cost reduction of the company.

In today's global sports shoes and clothing brands are overweight in direct DTC business, the number of Lining outlets continues to decline, which is somewhat counter trend. But it also brings another problem: when the number of Direct stores is reduced and the number of distributors is increasing, Lining wants to increase the store's store efficiency at the same time, and whether it can be as efficient as a direct store.

"This is exactly why we want to build a replicable single store operation mode." In answering the above questions of lazy bear sports, Qian Wei replied, "we need to help our distributors continuously improve the efficiency of store operation. Whether it's a direct camp or a distributor, every Lining store is our source of business. "

Thanks to Lining's attention to the efficiency of single store, Lining's direct sales revenue gained 15% growth in 2019. Lining attributed this to the "healthy growth of the same store business growth and new store efficiency improvement" in the earnings report, while Qian Wei added that "the improvement of single store efficiency is closely related to the increasing consumer awareness of Lining brand in the past few years, and the continuous improvement of Lining's product strength."

However, in the view of Lining management, although in 2019, Lining has improved in terms of efficiency indicators such as net profit and same store growth, but it is still at a low level, and there is still much room for improvement.

"Through our current adjustment measures, we hope to maintain the growth rate of profit in 2020, and the target is between 10% and 10.5%." Qian Wei said at a conference call.

Lining has taken the single store business model as the core position of the store operation strategy.

Speaking of the outlook for 2020's performance, Ceng Huafeng, chief financial officer of Lining group, said that the impact of the new crown epidemic needs to be fully considered. "Although Lining stores have resumed business at 95%, it is not yet possible to predict the annual revenue in 2020." Ceng Huafeng said, "the impact of the epidemic on the channel will be affected in the first quarter, but we can not talk about the actual figures. Two to three weeks later, we will announce the first quarter's operating performance, and then we will know the impact on our retail flow."

While several other major domestic sports brands are moving towards the direction of multi brand, open shop and direct operation, Lining still insists on the guiding strategy of "single brand, multi category and multi-channel". Perhaps, just like Qian Wei's analogy, it is Lining's survival way to build "muscle type" enterprises by improving the profitability of single stores.