Revenue growth without profit increase is only temporary growing pains. Can Li-Ning regain market recognition through professional sports tracks?

Listing | Zhongfang.com

Audit | Li Xiaoyan

In the context of the global sportswear industry entering a stock-to-stock competition and the overall pressure on the domestic apparel industry, the domestic sports giant Li Ning delivered a resilient and growth-oriented annual performance report. On March 19, Li Ning announced its 2025 full-year results, achieving revenue of 29.598 billion yuan, a year-on-year increase of 3.2%, setting a new record for revenue scale; operating cash flow reached 4.852 billion yuan, with a net cash flow of 19.97 billion yuan, maintaining a solid financial foundation. Despite facing short-term challenges of rising revenue without profit growth, the company’s strategic focus on professional sports has shown results, channel structure continues to optimize, and feedback from capital markets remains positive, laying a solid foundation for high-quality development in the new Olympic cycle.

In 2025, the overall performance of the domestic textile and apparel industry was sluggish. According to the National Bureau of Statistics, retail sales of clothing products by enterprises above designated size increased by only 2.8% year-on-year, while revenue and profit of large-scale clothing companies declined by 12.67% and 27.34%, respectively. During this downward industry cycle, Li Ning achieved positive revenue growth against the trend and hit a record high, highlighting the brand’s strong operational resilience. Financial reports show that the company’s net profit attributable to parent company was 2.936 billion yuan, with a gross profit margin maintained at a high level of 49%, only slightly down by 0.4 percentage points; in the second half of the year, net profit increased by 13% year-on-year, marking the first positive half-year net profit growth since the second half of 2022, signaling a clear profit recovery.

Following this performance release, the capital market did not respond negatively to the phase of increased revenue without profit growth. On March 20, Li Ning’s Hong Kong stock price opened high and rose further during the day, with an intraday increase of over 13%, closing up 8.56%, and the market capitalization rose to HKD 55.4 billion. The market’s recognition of the company’s strategic layout and long-term value was evident. Several international investment banks also issued positive research reports. Daiwa Capital Markets pointed out that Li Ning’s 2025 performance significantly exceeded market expectations and gave a “Buy” rating; Credit Suisse believed that the company’s sales and net profit in the second half of the year both surpassed market expectations, with a faster-than-expected profit recovery pace.

The phenomenon of increased revenue without profit growth at Li Ning is a phased result of industry cycles combined with strategic adjustments. During 2020-2022, under the wave of Chinese潮 (Guochao) fashion, Li Ning rapidly expanded its offline stores. Subsequently, changes in the market environment led to inventory pressure. Starting in 2024, the company proactively began channel optimization, rationally reducing inefficient stores and adjusting the store matrix, while moderately clearing inventory. Coupled with the return of the潮 (Guochao) trend to rationality, product premiumization faced short-term challenges. However, management坚持 (insists) on maintaining operational bottom lines, clearly stating that they will not pursue scale growth through excessive discounts, fully ensuring gross profit margin stability. This prudent strategy has safeguarded the company’s profit base for long-term development.

In response to changes in the industry competition landscape, Li Ning is坚定 (firmly) shifting from潮 (Guochao) marketing to a professional sports track, using top-tier event resources to strengthen the brand’s professional image. In 2025, the company secured a major partnership with the Chinese Olympic Committee as an official partner and became the official strategic partner of the Beijing Half Marathon, continuously increasing resource investment in core professional categories such as basketball, running, table tennis, and badminton. Management stated that top-tier event sponsorships focus on medium- and long-term brand building rather than short-term sales conversion. Although this may bring temporary financial pressure, it can be absorbed through improved operational efficiency. This strategy has already shown initial results, with professional products becoming the core engine of performance growth. Categories like running and badminton performed well, and the brand’s professional image continued to deepen.

The dual drive of channels and products has provided a solid foundation for Li Ning’s revenue growth. On the channel side, franchise distributors play a core role, with revenue increasing by 6.3% year-on-year and their proportion rising to 46.6%; e-commerce channels seized new traffic opportunities, with revenue up 5.3%, and core IP products like “Chasing Wind” and “Sharp Blade” maintaining top positions in their respective segments. By the end of 2025, Li Ning’s retail outlets reached 7,609 stores, a net increase of 24 stores year-on-year. The outdoor independent store “COUNTERFLOW” was successfully launched, and store formats continued to diversify. On the product side, footwear revenue reached 14.65 billion yuan, apparel revenue was 12.33 billion yuan, both showing slight increases, while equipment and accessories revenue was 2.62 billion yuan, achieving balanced development across categories.

Cash flow and dividend policies further confirm Li Ning’s sound financial health. In 2025, the company’s net cash flow from operating activities was 4.852 billion yuan, with inventory turnover only 64 days, indicating high asset operation efficiency and strong financial security. Despite a temporary decline in net profit, Li Ning maintained a high dividend payout policy, distributing 56.95 cents RMB per share for the year, with a payout ratio of 50%, returning real value to investors and demonstrating management’s confidence in the company’s long-term growth.

Looking ahead to 2026, Li Ning has issued an optimistic performance outlook, with management aiming for high single-digit growth in both revenue and net profit margin, potentially reversing the current scenario of increased revenue without profit growth. The new Olympic cycle from 2026 to 2028 will officially begin, and as an official partner of the Chinese Olympic Committee, Li Ning will provide equipment support for the Chinese delegation. The brand exposure from the Milan Winter Olympics has already begun to show effects and is expected to continue translating into increased market share and brand value. Meanwhile, the domestic textile and apparel sector is entering a low-positioned layout window, with domestic demand recovery exceeding expectations, providing a favorable external environment for Li Ning’s performance recovery.

From the潮 (Guochao) trend to professional deep cultivation, Li Ning has completed a strategic transformation amid industry cycle fluctuations. In 2025, revenue hit a new high, cash flow remained healthy, and the professional strategy showed results, proving that the company has emerged from the inventory adjustment pain period. In the new pattern of industry competition based on stock-to-stock competition, Li Ning is gradually releasing long-term growth momentum by focusing on professionalism, leveraging events, and strengthening channels. With consumer market recovery and Olympic dividends, this domestic sports giant is expected to achieve synchronized growth in profits and scale in the new cycle, returning to the fast track of high-quality development.