Li Ning Company Limited · HKEX:2331
Li Ning — H1 2020 Earnings Presentation
44 slides from Li Ning's earnings presentation, August 2020
Slide 1: Interim Results
INTERIM RESU LTS (Incorporated in the Cayman Islands with limited liability) (Stock Code:2331)
Slide 2: Disclaimer
Disclaimer This presentation incorporates information contained in the interim results announcement (the “Results Announcement”) for the six months period ended 30 June 2020 of Li Ning Company Limited (the “Company”). This presentation should be read in conjunction with the Results Announcement and
Slide 3: Contents
CONTENTS 1 Results Highlights 2 Financial Review 3 Strategic Direction 4 Operational Progress 5 Appendix 3
Slide 4: Results Highlights
Results Highlights
Slide 5: 2020H1 Financial Highlights
2020H1 Financial Highlights Financial Highlights : • On a comparative basis, the net profit* attributable to equity holders increased by 22% to RMB683 million, and the net profit margin raised from 9.0% to 11.1%; Including the one-off profit and loss not related to operation for the corresponding
Slide 6: 2020H1 Operational Highlights
2020H1 Operational Highlights Operational Highlights: • Amid the COVID-19 impact, operation performance negatively influenced • The retail sell-through for the overall platform recorded low-teens decrease, including online and offline channels • Channel inventory recorded low-teens increase • Offlin
Slide 7: Financial Review
Financial Review
Slide 8: Revenue
Revenue Group Total Group:YoY Change, GROUP: 1% Footwear Apparel Equipment&Accessories 7,615 402 -RMB million- 6,255 6,181 5,798 273 315 372 4,713 222 4,050 3,060 2,941 3,016 2,300 2,922 3,163 2,925 2,191 2,410 H1 H2 H1 H2 H1 2018 2018 2019 2019 2020 COVID-19 impacted revenues growth momentum 8
Slide 9: Revenue and Sell-through Mix
Revenue and Sell-through Mix LN Brand, excl. International Markets and LN YOUNG Sell-Through Mix Company Revenue Mix (Incl. Retail, Wholesale and E-commerce) E-commerce Retail Wholesale Old Product New Product (Current and Last Season) 100% 100% 44% 48% 49% 50% 50% 81% 78% 79% 77% 82% 34% 28% 29% 25
Slide 10: Same Store Sales Growth (SSSG) Rate
Same Store Sales Growth (SSSG) Rate LN Brand Retail High-teens SSSG (2020 Q2 vs 2019 Q2) Low-teens Overall Mid-single-digit N/A Retail High-teens 0% Q3 Q4 Q1 Q2 Wholesale Low-teens 2019 2019 2020 2020 E-commerce Mid-twenties High-teens Wholesale Overall Platform Low-teens Mid-teens Overall Off
Slide 11: Online and Offline Expansion
Online and Offline Expansion LN Brand, excl. International Market Sales POS number (Period end) Sell-through growth, YoY % LN Brand LN Young Excl. LN YOUNG 7,550 7,294 Offline Channel Online and Offline Channels 7,137 6,898 6,983 35% 1,101 32% 872 793 631 22% 1,010 20% 14% 16% 13% 9% 6,267 6,344 6,4
Slide 12: Wholesale Business
Wholesale Business^ LN Brand, excl. International Market Sales and LN YOUNG Business Performance Impact of COVID-19 on Sell-through, YoY% ST Change Revenue No. of POS (Period End) (RMB million) 0.0% 5,043 5,157 4,765 4,838 4,734 3% , YoY ↓ High-single-digit -10.0% 3,600 2,682 2,898 2,985 ↓ High-teen
Slide 13: Retail Business
Retail Business^ LN Brand Impact of COVID-19 on Sell-through and Business Performance # Average Daily Footfall, YoY % Revenue No. of POS (Period End) ST Change (RMB million) Average daily footfall change at high-tier cities 1,502 1,506 Average daily footfall change at low-tier cities 1,379 1,292 1,2
Slide 14: GP Margin Analysis
GP Margin Analysis Net Change in Major Items 2019 H1 Wholesale Direct Retail Channel 2020 H1 Inventory Reported Gross Gross Revenue Reported Provision GP Margin Margin Margin Mix GP Margin +1.4p.p. -0.6p.p -0.6p.p. 49.7% -0.4p.p. 49.5% Increase in IMU (initial mark up) helped mitigate gross margin e
Slide 15: Profitability Analysis
Profitability Analysis Net Change of Major P&L Items （RMB Million） 2019H1▲ Other 2020H1 Gross Sales Related Platform Operation # Reported income & Tax Reported Profit Variable Costs Costs Net Profit Interest Net Profit Logistics Advertising Other Retail & EC & New & Expenses Business business Promot
Slide 16: Channel Inventory
Channel Inventory Incl. Online and Offline Inventory Level* (Tag Price) Turnover Months* (By average 12mths ST) Turnover Months* 6 months or less 7 - 12 months Over 12 Months (By average 6mths ST) (New Product) 5.6 100% 5.4 13% 12% 12% 9% 12% 4.9 4.8 4.2 4.7 15% 14% 15% 5.0 17% 17% 4.7 4.6 4.0 72% 7
Slide 17: Company Inventory
Company Inventory At cost, before provision 6 months or less 7 - 12 months over 12 months (RMB Million) （New Product） 14%, YoY 1,681 100% 11% 13% 14% 15% 15% 1,540 1,477 20% 20% 14% 14% 16% 1,364 1,294 69% 67% 72% 71% 69% Jun Dec Jun Dec Jun Jun Dec Jun Dec Jun 2018 2018 2019 2019 2020 2018 2018 201
Slide 18: Trade Receivables
Trade Receivables At gross amount, before provision (RMB Million) Below 90 days 91 - 180 days over 180 days 100% 19% 23% 22% 26% 27% 1,441 7% 5% 4% 3%, YoY 13% 12% 1,213 1,073 1,040 74% 73% 73% 945 61% 61% Jun Dec Jun Dec Jun Jun Dec Jun Dec Jun 2018 2018 2019 2019 2020 2018 2018 2019 2019 2020 Trad
Slide 19: Working Capital Efficiency
Working Capital Efficiency Payables^ Trade Receivables^ Inventory^ Working Capital~ Working Capital~ as % of Revenue* 4000 3000 2000 1,629 1,537 1,375 1,290 1,274 1000 17% 15% 11% 10% 9% 0 -1000 H1 H2 H1 H2 H1 -2000 2018 2018 2019 2019 2020 Healthy working capital efficiency well-geared to capitaliz
Slide 20: Balance Sheet Summary and Cash Position
Balance Sheet Summary and Cash Position 5,963 5,762 Net Cash Position^ 4,725 （RMB Million） 3,672 3,052 Jun Dec Jun Dec Jun 2018 2018 2019 2019 2020 -For the Six Months Period- Cash Conversion Cycle (Days) 45 40 32 26 30 Operating Cash Flow 660 1,012 1,366 3,503 479 ^Net Cash = Cash and Cash Equivale
Slide 21: Retail Operation “Closed Loop”
Channel and Retail Capability: Strengthen the Retail Operation “Closed Loop” Offline Channel Sales Efficiency Offline Channel Sales Performance Q2 SSSG: mid-teens decline Sell-through: mid-teens decrease 3 Sales volume: mid-teens decrease Product 4 Sales Mix In-store Retail Over 12 Months Inventory
Slide 22: Strategic Direction
Bes Strategic Direction
Slide 23: Seize Industry and Market Trends to Consolidate LI-NING’s Experience Value
Seize Industry and Market Trends to Consolidate LI-NING’s Experience Value National Policies Promulgated to Promote the Continuous Recovery of Sports Industry In order to cope with the impact of the COVID-19 on the sports industry and promote the rebound in sports consumption and unleash the poten
Slide 24: Adhere to the Strategy of “Single Brand, Multi-categories, Diversified Channels”
Adhere to the Strategy of “Single Brand, Multi- categories, Diversified Channels” Multi- Categories Sports & Fashion Diversified Channels 24
Slide 25: Core Categories Enhance Brand Resilience
Core Categories Enhance Brand Resilience Retail Sell-through – YoY Change (2020H1) Total Value 11% Retail Sell-through – Mix Running 18% 2% Training 26% Running Basketball 18% 19% Training 37% Sports Casual 12% Basketball 17% Non-core 13% 25% Sports Casual Sell-in – YoY Change (2020H1) Non-core Badm
Slide 26: Basketball – Focus on Functional Technology, Leading the Basketball Culture
Basketball – Focus on Functional Technology, Leading the Basketball Culture Diversified marketing / Shine WADE series— on the Court Signed NBA player Russell Combine trend elements with Chinese culture Discover Culture/ BADFIVE — Lead the Street Basketball Limited edition Professional basketball— un
Slide 27: Running – Strengthen Professional Running Shoes, Enhance Product Matrix
Running – Strengthen Professional Running Shoes, Enhance Product Matrix Shadow Upgrade product competitiveness Solidify position in mass market with professional technology Reach Young Consumers Multi-product lines create diversified Top technological R&D to enhance professional lifestyles functiona
Slide 28: Training – Technological Innovation-Driven, Refined Training Scenarios
Training – Technological Innovation-Driven, Refined Training Scenarios Focus on Female Market GYM Refined Female Fitness Training Needs Active Training Refine Sports Segments Cope with Active Training Essentials Support of “No Boundaries” Training Technological Shoes Equipped with Multifunctional In
Slide 29: Sports Casual – Leverage on Sports DNA to Grasp Fashion Trends
Sports Casual – Leverage on Sports DNA to Grasp Fashion Trends Diversified Product Themes, Follow Major Events and Hot Topics Entertainment Marketing, Collaboration with Artists, Further Build Up Fan Economy Officially announced the spokesperson for sports causal products— Hua Chenyu Spring Festival
Slide 30: Brand Marketing – Strengthen the Layout of Professional Resources
Brand Marketing – Strengthen the Layout of Professional Resources R u n n i n g B a d m i n t o n B a s k e t b a l l 30 跑步
Slide 31: Brand Marketing – Crossover
Brand Marketing – Crossover Dunhuang Museum Explore the beauty of Dunhuang Traditional festival: Dragon Boat Festival Launch “Wave BOOT·Duanwu” edition Incorporate traditions of the Dragon Boat Festival DISNEY Add some ”worldly-wise” flavor to the cute Mickey Mouse QQ Dance Create “New Retro-Futuris
Slide 32: Brand Marketing – Fashion Week: To Be Continued
Brand Marketing – Fashion Week: To Be Continued Digital Paris Men’s Fashion Week ｜ Game Starts, Click to Join On the 30th anniversary of the brand‘s founding, the short film “Game Starts”, which Gymnast Li Ning spans the past and the future, was released at the 2021 Spring/Summer “Digital Paris Barc
Slide 33: Operational Progress
Operational Progress
Slide 34: Business Core Competitiveness
Business Core Competitiveness Store Operation Efficiency Consumers Effective Inventory Management Focus Enhance Omni-channel Business Core Competitiveness Fitness & Efficiency-driven Corporate Culture Channel Products and Efficiency Point of Sale Merchandising Discipline Cost Control Optimize Mercha
Slide 35: Product Strategy Initiatives
Product Strategy Initiatives Product planning and development To improve the efficiency of product operation as the goal: Rationalize product Optimize pricing structure strategy Integrate product functions Adjust product architecture • Integrate product architecture in Effective Manage go-to-mar
Slide 36: Channel Expansion Strategy Initiatives
Channel Expansion Strategy Initiatives Channel upgrade Channel layout based on the profitability and optimization Strengthen and efficiency of single store: flagship store Ensure the unity and continuity of Channel development channel management plan Wholesale and direct-retail business are plan
Slide 37: Omni-channel Strategy Initiatives
Omni-channel Strategy Initiatives Online Offline Continue to develop e-commerce Service channel to integrate online and Product Marketing offline: Unify e-commerce business system Membership Improve resource sharing efficiency Price Channel 37
Slide 38: Store Operation Strategy Initiatives
Store Operation Strategy Initiatives Business model of single store operation Establish single store operating model with high efficiency and high productivity : Adjust operational architecture of sales system • Separation of wholesale and direct retail Standardization of store operation business
Slide 39: Supply Chain Strategy Initiatives
Supply Chain Strategy Initiatives Achieving the transition from passive to proactive production: Integrate architecture of supply chain system Build a strong supplier matrix Strengthen Newly established footwear and apparel R&D innovation center to focus planning and collaboration on product r
Slide 40: Open Forum
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Slide 41: Appendix 1 — Summary of Income Statement and Balance Sheet
Appendix 1 — Summary of Income Statement and Balance Sheet 2020 2019 Better/ 30 June 31 Dec Better/ (RMB million) (RMB million) (Worse) 2020 2019 (Worse) Period ended 30 June Revenue 6,181 6,255 (1.2%) Cash and Cash Equivalents 5,561 5,961 (6.7%) Gross Profit 3,057 3,108 (1.6%) Borrowings 0 0 N/A Di
Slide 42: Appendix 2 — Profit Margins and Key Operating Indicators
Appendix 2 — Profit Margins and Key Operating Indicators 2020 2019 2020 2019 Better/ Better/ (Worse) (Worse) Period ended Period ended 30 June 30 June Gross Profit Margin 49.5% 49.7% (0.2p.p.) Inventory Turnover (Days) 84 74 (10) Operating Profit Margin 14.5% 10.8% 3.7p.p. Trade Receivables Turnover
Slide 43: Appendix 3 — Wholesale Business
Appendix 3 — Wholesale Business^ LN Brand, excl. International market sales and LN YOUNG Impact of COVID-19 on Sell-through, YoY% ST Change 0.0% ↓ Mid-single-digit ↓ High-single-digit -10.0% ↓ High-teens -20.0% Q1 Q2 Q3TD* 2020 2020 2020 ^ Including product sales of badminton and football categories
Slide 44: Appendix 4 — Retail Business
Appendix 4 — Retail Business^ LN Brand # Impact of COVID-19 on Sell-through and Average Daily Footfall, YoY % ST Change Average daily footfall change at high-tier cities Average daily footfall change at low-tier cities 0% ↓ High-single-digit -10% ↓ Low-teens ↓ Mid-teens -20% ↓ High-teens -30% ↓ Mid-