Chinese sporting goods giant Li Ning is hoping to ride the wave of the Paris Olympics to attract more customers after reporting an 8 percent drop in profit amid uncertain economic prospects.
The Beijing-based company posted a profit of 1.95 billion yuan ($217.7 million) in the six months through June, according to a filing with the Hong Kong stock exchange on Friday. Revenue rose 2.3 percent year-on-year to 14.3 billion yuan.
The country’s largest sporting goods maker lowered its full-year forecast to low-single-digit revenue growth and low-double-digit profit growth.
“We expect the overall market environment to pose significant challenges to the sales of our offline stores. Therefore, our main goal this year is not scale growth, but steady action and pragmatic development,” Qian Wei, co-CEO of Li Ning, said at a press conference.
“Although the Olympics may not lead to significant short-term business growth, it will increase consumer interest in sports and strengthen the perception of Li Ning as a professional brand,” Qian said. “I believe this represents a valuable opportunity and a defining moment for brand development.”
While retail sales in China grew 2.7 percent in July, which was better than expected, and consumer prices rose 0.5 percent year-on-year, as expected, macroeconomic headwinds remain. Home prices fell for the 14th consecutive month in July and the unemployment rate continued to rise.
In the first half of this year, Li Ning opened 229 new stores, bringing the total to 7,677. However, due to falling consumer spending, the company’s offline sales fell by a “mid-single-digit percentage” year-on-year.
In contrast, sales from online retail have increased: their share of total sales increased by three percentage points to 30 percent.
Despite a sales decline of around 1 percent across all retail channels, sales of shoes increased by 25 percent and sales of fitness products increased by 7 percent.
“The group will continue to focus on functional technology as its core and produce high-quality fitness equipment for various sports,” said Li Ning, who is also the company’s executive chairman and former Olympic gold medalist.
“The group will continue to develop the sports market in China and ride the wave of the Olympic Games, upholding the spirit of ‘anything is possible’ and catapulting the Chinese sports industry onto the international stage.”
He added that the group will also strengthen its communication and connection with female consumers by launching products that combine functionality and fashion.
The company announced an interim dividend of 0.3775 yuan per share, including shares issued upon conversion of convertible bonds, representing a year-on-year increase of 5 percentage points in the dividend payout ratio to 50 percent.
Li Ning shares rose as much as 8.9 percent, but ended the day 0.8 percent lower at HK$13.10.
