List of high-quality authors
Reporter 丨 Wang Jieren Xi 丨 Xia Lu
Produced by丨Aotou Finance (thesankei).
On the evening of December 10, Li Ning (02331HK) announced that it intends to take 22HK$800 million acquisition of a property investment company under Henderson Land. The property is the main asset of the target company, and in the future, Li Ning will use part of the property as the headquarters of Li Ning Group in Hong Kong.
As soon as the news of buying a house came out, Li Ning's stock price appeared. On December 11, Li Ning's share price showed a significant increase**, and it once fell to 17HK$88, a new low in the past 3 years. At present, Li Ning's share price has fallen by nearly 80% this year.
This year, a number of brokerages have also downgraded their ratings and targets**. In order to boost market confidence, on December 12, Li Ning announced on the Hong Kong Stock Exchange that the board of directors decided to use no more than HK$3 billion to repurchase shares in the open market from time to time in accordance with the repurchase authorization for a period of 6 months from the date of the announcement.
Spent HK$2.2 billion to buy a house
On the evening of December 10, Li Ning announced on the Hong Kong Stock Exchange that it would take 22HK$0.8 billion purchased property from Henderson Land. It is reported that the property is a whole building, with a total area of about 9,600 square feet (1066.).66 sq m) and a gross floor area of approximately 144,000 sq ft (16,000 sq m), comprising 22 floors of commercial office space and two floors of retail space.
At the moment, the target company is in the red. In 2021 and 2022, the revenue of the target company, i.e., the property, was 0HK$3.5 billion and 0HK$500 million, with a loss of 0HK$1.7 billion and 0HK$800 million, with a net asset value of 28.8 billionHK$1.3 billion and HK$27HK$3.3 billion. This means that the net asset value of the property in 2022 decreased by 0HK$800 million.
Li Ning said in the announcement that the group's business in Hong Kong has development potential, and the expansion of the group's business operations in Hong Kong, China will help expand international business.
Li Ning began to actively enter the Hong Kong market last year. At the end of 2022, Li Ning opened its first store in Tsim Sha Tsui at a monthly rent of $2 million, and opened a second branch in Tuen Mun Town Plaza in July 2023, and another store in Tseung Kwan O in October.
However, the capital market is not optimistic about Li Ning's buying behavior, and the company's operating performance is not optimistic. Li Ning's share price increased from about 81HK$79 shares continued**, with a cumulative decline of nearly 80%, and the total market value shrank by about HK$166.2 billion. As of the 12th, the ** share price was 19HK$100, the latest total market capitalization is about 501HK$4.4 billion.
Since 2022, Li Ning's overseas expansion has been put forward in the Group's business plan, and it is expected to start Li Ning's overseas business expansion in 2024, and hopes to establish the brand awareness of overseas consumers and establish an overseas brand business model through brand operation, so as to lay the foundation for future overseas market expansion and make it one of the growth engines of Li Ning Group.
The company's management also put forward a new five-year goal - in the next five years, Li Ning Group will achieve double-digit compound growth and reach a revenue scale of 50 billion yuan in 2028. In 2022, the annual turnover of Li Ning Group will only be 2580.3 billion yuan, so from this point of view, the follow-up growth pressure is not small. Against this backdrop, Hong Kong, China and overseas business is undoubtedly a new increment that Li Ning has high hopes for.
Premiumization failed
In the past, high-end supported the rapid growth of Li Ning, but now it is unsustainable.
In 2018, "China Li Ning" became the first sports brand in China to appear at New York Fashion Week, and in the same year, the "China Li Ning" series of clothing sales exceeded 5.5 million pieces, and the sales of shoes exceeded 50,000, setting off a "national trend".
Since then, Li Ning has begun to promote the transformation and upgrading of the brand to the mid-to-high-end, obtain more brand premiums, and improve the company's profit structure.
From 2018 to 2021, its performance doubled, from 10.5 billion yuan to 22.5 billion700 million yuan.
The unit price of Li Ning's products is getting higher and higher. Positioned as a high-end light luxury lining1990, the product has jumped to about 800 yuan to 5000 yuan, and the unit price of the product line is several times that of Li Ning's main brand.
With the gradual segmentation of domestic user demand and the fading of the popularity of "national tide", consumers are unwilling to pay for the high-end of Li Ning. "I treat Li Ning as a domestic product, and Li Ning treats me as a wronged leader" and other complaints frequently appear on social platforms.
With the failure of high-end, Li Ning's inventory turnover period has become longer, and the gross profit margin has also declined.
In the first half of 2023, Li Ning's revenue will be 1401.9 billion yuan, a year-on-year increase of 13%;Net profit attributable to the parent company 212.1 billion yuan, down 311%。
Behind the slowdown in net profit, the gross profit margin continued to decline. In the first half of 2023, the company's gross profit margin changed from 50% in the previous year to 488%。In the same period of 2021, when the revenue growth rate was relatively high, Li Ning's gross profit margin was 559%。
As for the reasons for the decline in gross profit margin, Li Ning explained that in order to promote consumption, discounts on online channels and retail terminals have been increased. At the same time, the proportion of DTC (direct-to-consumer) channel revenue with higher gross margin decreased slightly year-on-year, and inventory provisions and R&D expenses increased year-on-year.
In the third quarter of 2023, Li-Ning's sales fell to single-digit growth from a mid-range growth of 10%-20% in the second quarter.
From the perspective of sales channels, in terms of offline channels, the retail (direct) channel achieved a low-level growth of 20%-30%, but the dealer growth fell from double-digit growth to low-single-digit growthThe online business also saw a low-single-digit decline, which continued to deteriorate from the low growth of 10% to 20% in the second quarter of this year, and was already a low-single-digit decline in the third quarter.
R&D expenses are also lower than peers. According to public data, from 2020 to 2022, Li Ning's R&D expenses were 32.3 billion yuan, 42.5 billion yuan, 53.4 billion yuan, accounting for the proportion of revenue. 1%。According to the data of the 2023 semi-annual report, Li Ning's R&D expenses account for 21%。Nike and Adi usually account for about 10% of R&D.
In the first half of this year, Li Ning's inventory amounted to 2.1 billion yuan, but the average inventory turnover days increased from 55 days in 2022 to 57 days. As of the end of June, Li Ning's inventory provision was 14.3 billion yuan, more than 22 million yuan more than the same period last year.
In order to digest the memory, Li Ning from time to time launched a price reduction propaganda of "4% off" and "more than 3% off". However, Li Ning's large-scale price reduction** has caused consumer dissatisfaction due to the large price difference between online and offline.
On social platforms, many consumers collectively complained that "Li Ning does not have a first-class guarantee mechanism". On the black cat complaint platform, there are also many complaints about Li Ning's lack of price insurance.