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Li-Ning forecasts 2020 profit increase with Chinese coronavirus lockdown nearing end

Chinese gymnastics champion and business supremo Li Ning is seen with the Olympic Torch in Beijing, China. (Photo by Ian MacNicol/Getty Images)

Chinese sportswear company Li-Ning revealed revenue in 2019 had grown double the pace of 2018, while net income tripled the previous year’s after a one time gain, with net profit attributable to shareholders rising 77 per cent to CN¥1.3bn, in an earnings call last Friday.

With these results beating estimates, the Beijing-based sports shoes and apparel company, says it is on track to increase its 2020 profit margin by 1.4 percentage points to 10.5 per cent despite the recent coronavirus outbreak, with the help of cost cuts and “focusing on online opportunities”, said Takeshi Kosaka, the company’s joint-chief executive officer.

Kosaka, a Chinese- Japanese known as Wei Qian in China said, according to the South China Morning Post: “Buyers in our bricks-and-mortar stores dropped dramatically in February and as most of our offline shops were forced to close, business have been hit heavily.

“By now 95 per cent of our offline stores have reopened. It is still difficult to see when business will fully recovered from the outbreak, and now we are focusing on exploring more online opportunities and cost control.”

Li-Ning’s shares jumped by 19 per cent on Friday, before earnings were announced to an intraday high of HK$23.85 on the Hong Kong Stock Exchange, with sentiment in the market looking at a quick recovery for Chinese consumer companies, with the lockdown at the original epicentre of the coronavirus – Wuhan- finally beginning to end.

The city partly reopened last Saturday after more than two months of near total isolation for its population of 11 million.

The city in Hubei province was placed under lockdown in January with roadblocks ring-fencing its outskirts and drastic restrictions on daily life.

Li-Ning is also the official apparel and footwear sponsor for the Chinese Basketball Association national league, which is scheduled to begin the 2020 season in April, since being postponed in late January due to the outbreak.

The outbreak has recently forced the postponement of the 2020 Tokyo Olympics to next year, but Kosaka is confident Li-Ning – which named for its founder, an Olympic gold-medalled Chinese gymnast-turned businessman-  will still be able to hit it’s ambitious 2020 profit margin, despite having signed sponsorship deals with China’s diving, shooting, table tennis and badminton teams.

“We have prepared many products and arrangements for the Tokyo Olympics, but we have swiftly adjust our input on that and the impact is under control,” said Kosaka.

“We see impact, more or less, on our business following the postponement or cancellation of major sports, as [event endorsements] has always been an important driver of our business, but it is not the sole driver.”

In comparison, Fujian-based competitor Anta Sports Products said during an earnings call last Tuesday that it will be a “very difficult year” for the industry, and deferred plans for a significant dividend hike, despite 2019 revenues of CN¥34b beating expectations by 4.1 per cent. Anta is China’s largest domestic sports brand with a market share of 15 per cent, while Li-Ning, in comparison, has 6.1 per cent.