Li Ning Shares Fall on Lower-Than-Expected Retail Sales

The Beijing-based company said Wednesday after the market closed that its third-quarter retail sales registered a mid-single-digit percentage increase. That is lower than market expectations of growth in the teens, Citi analysts Xiaopo Wei and Vincent Yang said in a research note.

Li Ning’s third-quarter e-commerce retail sales declined by a low single-digit percentage on year, which Citi attributed to unauthorized sales on some online discounting platforms. Jefferies analysts reckon Li Ning has largely eliminated the unauthorized merchants on TikTok and is ready for traffic growth on new e-commerce platforms.

Management said Li Ning’s inventory-to-retail sales ratio rose both on year and on quarter to around five times at end-September, compared with 3.8 times by the end of the second quarter, Citi analysts said after attending a call with the company’s management.

The quick rise has prompted it to aggressively destock channels in the fourth quarter and the first quarter of next year. Li Ning has also cut 2023 guidance to high single-digit percentage for topline growth and low-teen percentage growth for net profit margin from its original forecast of mid-teen growth for both topline and NPM, the Citi analysts said.

However, Citi keeps its buy rating on Li Ning at this stage, as the sportswear maker has in recent years been fast in destocking through heavy discounting or scaling back sales to distributors when channel inventory pressure mounts, they said.

Compared to its domestic competitors such as Anta and Topsports, which operate multiple brands, Li Ning has mainly used its core Li Ning brand, Citi said. As a result, they expect Li Ning’s 2024 topline growth to be lower than that of Anta and Topsports.

Write to Sherry Qin at [email protected]