How Long Can Guochao'S Dividend Be Eaten Behind Li Ning'S Financial Report

Recently, the head Guochao brand Li Ning announced its mid-term results for the six months ending June 30, 2022. Thanks to the rise of Yu Wen and Guochao in the Winter Olympic Games, Li Ning's performance seems close to that of Guochao, which gives full market confidence. Li Ning's share price rose 4.78% on the day of China Daily.

According to the financial report, in the first half of 2022, Li Ning achieved a revenue of 12.409 billion yuan, a year-on-year increase of 21.7%; The net profit attributable to the parent company was 2.189 billion yuan, with a year-on-year increase of 11.6%; Gross profit also increased by 8.8% to about 6.201 billion yuan. However, the overall gross profit rate of Li Ning group decreased from 55.9% in the same period of 2021 to 50%, and the net interest rate also decreased from 19.2% to 17.6%. Li Ning's business growth is slowing down.

Li Ning attributed the decline of some indicators in the first half of the year to the cause of the epidemic and the sharp rise in the cost of raw materials. Qian Wei, CO chief executive officer of Li Ning, said at the media communication meeting after the release of the China Daily News that July has entered the recovery period, and the performance in August is better than that in July, but the overall passenger flow has not yet fully recovered.

Since this year, Li Xining's brand has been increasingly competitive, but in order to maintain the brand's popularity, Li's brand has become increasingly popular?

　　01、 Is Guochao still fragrant

Li Ning did get the dividend from the prosperity of the national tide, but not much.

A few days ago, Kasper Rosted, Adidas chief executive officer, mentioned in an exclusive interview with Handelsblatt that Adidas's revenue in Greater China fell 35% in the first quarter, mainly due to the impact of the new epidemic, and Adidas itself "made mistakes". But he believes that the Chinese market will return and there is a lot of room for growth. In fact, since the second quarter of last year, the revenue of Adidas Greater China region has been declining for five consecutive quarters, and the second quarter of this year is a sharp drop of 35%. Nike's revenue in Greater China also fell in the last three quarters.

Contrary to the international brands represented by Adi, domestic sports brands are rising.

According to Euromonitor, the joint market share of Nike and Adidas in China will drop to 40% in 2021, breaking the pattern of 43% occupied by two international giants from 2018 to 2020. It is worth noting that Anta accounts for 16.2% of Guochao brands, surpassing 14.8% of Adidas, while Li Ning ranks fourth, accounting for 8.2%. Although it is 1.5% higher than that in 2020, it still lags behind Anta. Moreover, it has only 1.6% advantage from American brand skykey, which is still facing fierce market competition.

Zhao Dongsheng, the new president and financial officer of Li Ning group, said at the financial report meeting that affected by the epidemic situation, the whole consumption environment in the first half of the year was impacted and tested. The sharp increase in superimposed costs and the high base number in the same period last year have exerted certain pressure on the company's finance and operation.

From the perspective of income composition, the income categories of Li Ning Company are divided into sports related footwear, clothing, equipment and accessories, among which footwear is the main revenue of Li Ning company. In the first half of 2022, Li Ning's footwear revenue totaled 6.759 billion yuan, a year-on-year increase of 47.1%; Revenue from equipment and accessories increased by 37.4% to 743 million yuan; Clothing revenue fell 3.1% to 4.907 billion yuan.

However, in the first half of this year, the reason why Li Ning's gross profit rate fell from 55.9% to 50% means that Li Ning's business is not good. Contrary to the growth of high income, the proportion of high gross profit channel revenue brought by retail discount has been greatly reduced, as well as the rise of raw material cost and labor cost, resulting in obvious increase of procurement cost and pressure on channel inventory.

It is understood that the main driving force driving Li Ning's performance growth in the first half of the year comes from the boost of "retail discount". In addition, Li Ning's advertising and revenue increased by 234 million yuan in the first half of the year, and the increase in marketing investment was also obvious. The sales discount of Li Ning was about 15% in the first and second half of the year, and the growth of retail sales in the first and second half of the year was close to that in the second half of the year.

But the decline in gross margins is not a good sign.

　　02、 Channel revenue growth slows down

A trend that can not be ignored is that the growth rate of Li Ning's direct business and e-commerce business is slowing down.

According to the financial report, in the first half of this year, the operation of Li Ning's direct marketing channel, which mainly focuses on urban distribution, was "impacted", and its revenue increased by 10.8% year-on-year, accounting for 22.5% of the total revenue. In the same period of last year, the growth rate of direct marketing channel revenue was 88.5% year-on-year, and the growth rate of direct sales income slowed down significantly. Zhao Dongsheng explained in the financial report that the pressure of store closures in the first half of the year was concentrated in the second quarter, while the same store sales of the whole platform increased by more than 80% in the same period of last year, which also brought pressure on this year.

At present, the overall environment of the retail market is full of challenges, and Li Ning is also under pressure to a certain extent. According to the financial report, as of June 30, 2022, the flow of offline channels, including retail and wholesale, declined, and the specific number was not mentioned.

Affected by the epidemic situation in the first half of the year, to a certain extent, it disrupted the development rhythm of "opening big stores and closing small stores" in Li Ning. In the first half of the year, there were 7112 channels in Li Ning, an increase of 367 compared with the same period last year. Among them, there were 233 stores of Li Ning's main brand stores, with a year-on-year increase of about 5%. The total sales area and the average area of a single store increased by more than 20%. It is worth mentioning that in the first half of this year, Li Ning's revenue growth was mainly contributed by the sales growth of new stores and the same stores, of which the newly opened stores contributed 195 million yuan.

The proportion of Li Ning's dealer channels also increased year on year. Since last year, the number of distributors has increased from 4763 in 2020 to 4770 in 2021.

Another test facing Li Ning is the increase of inventory pressure. According to the financial report, in the first half of the year, Li Ning's average inventory turnover period rose from 53 days to 55 days in 2021, with an overall increase of 11.5% year-on-year. It is worth noting that Li Ning is constantly layout high-end, high-end means the price rise. In recent years, the news about Li Ning's price rise has been constantly fermenting on the Internet. Last year, Li Ning officially released a new independent high-level sports fashion product line li-ning1990, which once again set off a heated discussion with the price of 1000 yuan.

According to Li-Ning 1990, the retail price of a pair of classic socks is as high as 110 yuan. Previously, some netizens said that on the second-hand trading platform, an all-star of Li Ning Wade Road 7, whose original price was 1699 yuan, was fried to 29999 yuan, while the other silver and white color matching Li Ning Wade Road 4 All Star soared from 1499 yuan to nearly 50000 yuan, a premium of more than 30 times.

But behind the high price is its marketing strategy of Limited sales. At the beginning of 2016, this limited edition of "Wade's way" was sold only 100 pairs in the world.

In the past, Li Ning has no money to buy

From the perspective of R & D of the whole industry, according to Yiguan data, the R & D cost rate of Guochao head brands is far lower than that of international head brands, such as Nike and Adidas, which is generally around 10%.

Li Ning's R & D capability is not very strong. Taking the annual report data of each company in 2021 as an example, Li Ning spent 414 million yuan on R & D in 2021, with a year-on-year increase of 28.2%; However, R & D expenditure accounted for only 1.8% of total revenue, down 0.4% from 2020. Anta's R & D expenditure in 2021 is 1.13 billion yuan, accounting for 2.3% of the total revenue; Tebu 2021 R & D expenditure was 252 million yuan, accounting for 2.5% of the total revenue.

In contrast, Li Ning's R & D investment is obviously lagging behind.

　 　03、 Hard to please young people

In the financial report of the first half of the year, Li Ning said that it would continue to adhere to the strategy of "single brand, multi category and multi-channel" and develop in two directions of specialization and trend.

At its debut in New York Fashion Week in 2018, "China Li Ning" became a hit and became the most representative brand in young people's vision.

In marketing, Li Ning also continues to please young people. In March 2021, Li Ning official declared that Xiao Zhan became the global spokesperson of sports trend products, and began to try to cooperate with fashion trend media to narrow the distance with young people by means of artist street shooting, fashion event sponsorship and KOL promotion.

In terms of brand building, Li Ning has been trying to reshape its brand.

First, like Anta, it acquired the sports and leisure brand Bao Shilong through extraordinary China in 2020, and then in 2021, Feifan China, together with Lane capital, acquired the control of the British shoe brand Clarks; In November of the same year, extraordinary China also announced the acquisition of sitoy at and Italian luxury leather brand "iron lion Tony". But Li Ning's acquisition strategy for the brand, did not play a big role in integration.

Here is a comparison with Anta. When it comes to Anta's brand building, FILA is a must talk brand. Anta's main brand focuses on the mass line. FILA's positioning is sports fashion, which complements Anta's main brand. In addition, Anta's acquired * * are all complementary to each other and expand horizontally in the industry. For example, the brands of dishant, Kelong and yamafen group are in the forefront in the field of outdoor sports, skiing, ball games and sports equipment.

For Li Ning, it is still a long-term challenge to create another FILA.

For example, Li Ning's "cross-border" action comes from Li Ning in 2022. In April this year, Li Ning was exposed to apply for "Ning coffee". When Li Ning opened its first store in Xiamen, Ning coffee also officially appeared, but it was only "rationed". Consumers can get it free of charge after spending 499 yuan in the store.

After that, Ning coffee has successively appeared in several Li Ning stores in Xiamen, Guangdong, Beijing and other places, including nine types of raw coconut lattes, classic Ning American style, classic Ning lattes, and South African oat lattes. Li Ning publicly responded that the positioning of Ning coffee is an innovative attempt for the retail terminal consumption experience, and the main goal of providing coffee service in the store is to improve the comfort and experience of customers when shopping.

But in fact, this operation has led to more consumers puzzled. Recently, Li Ning was once again exposed to investment and launched "Twelve reading" rice wine.

According to the public information, twelve reading rice wine is the product of Zhejiang laoshaofang liquor industry Co., Ltd. The company was established on May 17, 2021. Its legal representative is Zhao Jianguo, the co-founder of Li Ning group, and the behind shareholders are Tianyang (* *) Co., Ltd. and Huzhou laoshaofang liquor industry Co., Ltd. From the perspective of ownership structure, twelve reading rice wine is the personal investment of the boss Li Ning, and has little to do with the listed company Li Ning company. But it is still regarded as Li Ning's layout in the industry.

In addition, Li Ning also carried out business to the meta universe.

In 2021, Li Ning designed NFT shoes and sold them at auction house for 1127000 yuan in September 2021. On April 24, 2022, China Li Ning micro blog official announced the establishment of "boring ape Club China Li Ning branch" and planned to launch the series of clothing.

Li Ning's column layout is difficult to understand. Whether it is cross-border coffee, wine sales or meta universe layout, it is more of a marketing action. In the long run, in order to enhance the status of Li Ning as a national tide sports brand, we still need to make continuous efforts in the core competitiveness of product research and development.