Li Ning Company Limited Announces 2025 Annual Results: Steady Growth Amidst Market Challenges

Key Financial Highlights

• Revenue: Increased by 3.2% to RMB29.60 billion (2024: RMB28.68 billion).
• Gross Profit Margin: Slight decline by 0.4 percentage points to 49.0%.
• Net Operating Cash Inflow: RMB4.85 billion, with strong liquidity maintained.
• Net Profit Attributable to Equity Holders: RMB2.94 billion, down 2.6% year-on-year.
• EBITDA: RMB6.16 billion, a decrease of 3.4% from the previous year.
• Earnings Per Share (Basic): RMB113.91 cents (2024: RMB116.98 cents).
• Final Dividend: Proposed RMB23.36 cents per share, total annual dividend of RMB56.95 cents per share; payout ratio 50%.
• Healthy Working Capital: Gross average working capital to revenue at 7.7%. Cash conversion cycle slightly lengthened to 37 days.

Operational and Strategic Highlights

• Retail Sell-through: Remained flat overall. Offline new product sell-through accounted for 83% of offline sales, indicating strong consumer response to new launches.
• Channel Inventory: Turnover stayed healthy at 4 months; inventory structure and level remain robust.
• Sales Channels:
  • Franchised distributors revenue grew 6.3% and now contribute 46.6% of total revenue.
  • E-commerce revenue grew 5.3%, driven by enhanced online marketing and partnerships with major platforms.
  • Direct retail channel revenue declined by 3.3% due to store layout adjustments and changing consumer behavior.
• Product Segment Performance:
  • Footwear: RMB14.65 billion (up from RMB14.30 billion).
  • Apparel: RMB12.33 billion (up from RMB12.05 billion).
  • Equipment & Accessories: RMB2.62 billion (up from RMB2.33 billion).
• Cost and Margin Pressure: Gross margin declined due to channel structure changes and increased promotional discounts. Selling and distribution expenses tightly controlled, down 0.1% y-o-y, despite higher marketing spend for Olympic and brand-building campaigns.
• Administrative Expenses: Rose to RMB1.63 billion (5.5% of revenue) due to higher staff costs, R&D investment, and one-off goodwill impairment (RMB72.39 million on Kason Sports acquisition).

Balance Sheet and Liquidity

• Strong Cash Position: Cash and cash equivalents of RMB16.72 billion (up RMB9.22 billion from 2024); total cash including time deposits at RMB19.97 billion.
• No Outstanding Bank Borrowings: As at year end, the company had banking facilities of RMB13.92 billion but no outstanding borrowings.
• Debt-to-Equity Ratio: Stable at 36.5%.
• Net Asset Value Per Share: RMB1,072.16 cents.
• Efficient Asset Management:
  • Average inventory turnover: 64 days.
  • Average trade receivables turnover: 15 days.
  • Average trade payables turnover: 42 days.
• Provision for Inventories: Decreased to RMB158.68 million, reflecting improved inventory management.
• Expected Credit Loss Allowance: Lowered to RMB43.93 million, with trade receivables allowance at RMB37.91 million.

Significant Corporate Developments and Investments

• Property Acquisition in Hong Kong: Completed acquisition of Vansittart Investment Limited for HK\$2.22 billion (RMB2.01 billion), primarily a 22-storey commercial/office and 2-storey retail property. This property now serves as Li Ning’s HK headquarters and is 4.7% of total group assets.
• Guangxi Supply Chain Base: Ongoing investment in a high-end intelligent manufacturing and R&D center; RMB3.3 billion total project, with RMB2.06 billion invested to date.
• Utilization of Top-up Placement Proceeds: RMB570.6 million used in 2025, RMB341 million unutilized, mainly reserved for supply chain and infrastructure upgrades (to be fully utilized by end 2026).

Contingent Liabilities and Legal Risks

• Litigation Exposure (Potentially Price Sensitive):
  • In March 2025, Li Ning Communications (HK) Ltd (an indirect subsidiary) received a HK\$1.96 billion claim (including principal, interest, and default interest) relating to an alleged short-term loan from 2018.
  • Upon legal advice, Li Ning believes there is no obligation to repay and is vigorously defending the case. The company was unaware of any such loan prior to the statutory demand in March 2025.
  • If the court rules against Li Ning, it could have a material impact on the company’s financial position and share price. This is a key risk factor for investors to monitor.

Business and Strategic Review

Despite a challenging macro-environment in 2025, Li Ning capitalized on resilient domestic demand in China. The company advanced its “Single Brand, Multi-categories, Diversified Channels” strategy, focusing on innovation and the Olympic cycle to boost product competitiveness and brand equity.

• Product Innovation: Launched “Super BOOM Capsule” midsole technology, applied to flagship running products (Feidian 6 ULTRA, Feidian 6 ELITE, Red Hare 9 ULTRA), receiving positive consumer feedback.
• Brand and Channel Expansion: Opened flagship “Loong Store” and standalone outdoor stores; expanded into tennis and pickleball segments; and achieved high sales in running shoe IPs (“Feidian”, “Red Hare”, “Yueying”, “Super Light”).
• Marketing and Olympic Sponsorship: Continued collaboration with the Chinese Olympic Committee, leveraging sports marketing and athlete endorsements to strengthen brand positioning and consumer engagement.
• Operational Efficiency: Enhanced store productivity, closed underperforming outlets, and improved digitalization and logistics. Inventory and receivables were tightly managed; logistics saw automation and digital upgrades, including RFID warehouse management.
• Subsidiary LI-NING YOUNG: Upgraded its positioning to a “professional youth sports brand,” rolled out children-specific technologies, and achieved channel and operational optimization.
• Human Resources: Increased headcount to 5,152; focused on talent attraction, performance incentives, and culture-building. Awarded Great Place to Work™ certification.

2026 Outlook and Strategic Initiatives

• Technology-Driven Product Upgrades: Deepen R&D investment, accelerate product iteration, and expand into new sports segments (e.g. outdoor, tennis, pickleball).
• Olympic Marketing: Leverage the Olympic cycle for brand value creation and differentiation; further strengthen cooperation with the Chinese Olympic Committee.
• Operational Excellence: Improve store and channel efficiency, optimize supply chain, and accelerate inventory turnover. Encourage online-offline synergy.
• Organizational Strengthening: Enhance talent management, financial discipline, and digital transformation (AI/big data) to support sustainable growth.

Corporate Governance and Shareholder Information

• Dividend: Proposed final dividend of RMB23.36 cents per share, total for the year RMB56.95 cents per share (50% payout ratio). Subject to AGM approval on 11 June 2026; record date 18 June 2026, payment on 29 June 2026.
• Board Leadership: No separation between Chairman and CEO (both roles held by Mr. Li Ning, with joint CEO support from Mr. Kosaka Takeshi). The Board believes this ensures consistent and effective leadership.
• No Share Repurchases: Other than purchases for restricted share awards, the company did not buy back or cancel any shares in 2025.
• Audit and Compliance: Annual results reviewed by the Audit Committee and agreed to the financial statements by external auditor Ernst & Young.

Potential Price-Sensitive Factors

• Litigation Risk: The ongoing HK\$1.96 billion legal claim is a significant contingent liability. An adverse outcome could materially impact Li Ning’s financials and share price.
• Gross Margin and Profitability: Slight erosion in gross margin and net profit highlights competitive and cost pressures. Continued margin compression or unexpected costs could affect future earnings and market sentiment.
• Dividend Policy: The 50% payout ratio and robust cash position support the company’s attractiveness to income investors, but future sustainability will depend on profit growth and cash flows.
• Strategic Investments: Large-scale property and supply chain investments reflect long-term vision but may increase asset risk and capital requirements in a weaker market.
• Market Dynamics: Management’s ability to navigate channel shifts, e-commerce competition, and changing consumer trends will be critical for share price performance.

Disclaimer

This article is for informational purposes only and does not constitute investment advice or an offer to sell or the solicitation of an offer to buy any securities. Investors are advised to conduct their own due diligence and consult professional advisors before making investment decisions. The author and publisher are not responsible for any losses arising from reliance on the information provided above.

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