In-Depth Analysis of Li Ning (2331.HK)'s Operational Challenges and Competitive Strategy

Based on the obtained data and market information, I have prepared an in-depth operational analysis report for Li Ning Company.

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Li Ning’s retail turnover in the fourth quarter of fiscal 2024 declined by a low single-digit percentage year-over-year [0], which reflects multiple operational challenges:

Core Indicator	2024 Performance	YoY Change	Industry Background
Full-Year Retail Turnover	Flat Overall	0%	Industry Growth Slowdown
Q4 Retail Turnover	Low Single-Digit Decline	-1%~5%	Weak Consumer Demand
Channel Inventory	High Single-Digit Increase	+5%~9%	Inventory Turnover Pressure
Gross Profit Margin	49.4%	+1.0ppt	Product Structure Optimization

• Weak Consumer Demand
  : The Chinese sportswear market showed obvious differentiation in 2024, with sports casual wear accounting for 35.7% of sales, a year-over-year decrease of 2.2 percentage points [3]
• Channel Inventory Overstock
  : The omnichannel inventory-to-sales ratio remained at 4.0 months, and the cost of channel inventory increased [2]
• Intensified Price Competition
  : Leading brands cleared inventory through discount promotions, putting pressure on brand premium [3]

As of December 31, 2024, the number of Li Ning sales outlets decreased by a net 41 to

(excluding Li Ning YOUNG), which reflects the strategic intention of channel optimization:

├── Traditional Street Stores: Continuous optimization, closing underperforming stores
├── High-End Mall Stores: Focused expansion, enhancing brand image  
└── Factory Outlets/Discount Stores: Moderate expansion, inventory clearance

Li Ning, Executive Chairman of Li Ning Group, clearly stated: “We attack where we should attack, control where we should control, and adjust where we should adjust” [6], showing that the management has a clear understanding of channel optimization.

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The competitive landscape of the Chinese sports footwear and apparel market changed significantly in 2024:

Brand	Market Share	2024 Revenue	YoY Growth Rate
ANTA Group	23%	RMB 70.826 billion	+13.6%
Nike China	~18%	~RMB 50 billion	-8%(Q4)
Li Ning	9%	RMB 28.676 billion	+3.9%
Adidas	8%	~RMB 35 billion	+10.3%

1. ANTA’s Leading Position Expands
   : The revenue ratio of ANTA to Li Ning expanded from 1.2x in 2021 to 2.5x in 2024 [1][4]
2. Differentiation of International Brands
   : Nike Greater China continued to decline, while Adidas achieved double-digit recovery [4]
3. Overall Breakthrough of Domestic Brands
   : The combined revenue of ANTA and Li Ning has surpassed the sum of Nike and Adidas in China by a 1.2x margin [4]

ANTA achieves differentiated competition through a “pyramid-shaped” multi-brand strategy [4]:

Tier	Brand Positioning	Revenue Contribution	Strategic Intention
Base Tier	ANTA Main Brand (Mass Market)	RMB 33.522 billion	Scale foundation
Mid Tier	FILA (Fashion Sports)	RMB 26.626 billion	Profit driver
Top Tier	Descente, Kolon Sports (High-End Professional)	+53.7% Growth	Growth breakthrough

Li Ning adheres to the “single brand” strategy, and faces disadvantages in the coverage breadth of niche markets and the flexibility of channel resource allocation when competing with ANTA’s multi-brand matrix.

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Facing competitive pressure, Li Ning clearly focuses on three strategic pillars [5][6]:

• Continuous Increase in R&D Investment
  : R&D investment increased by 8.7% in the first half of 2025, with a cumulative investment of over RMB 3.8 billion in the past decade [6]
• Breakthrough in Core Technology Platforms
  : Launched the “Super Beng” midsole technology, completing the platform construction from “single technology” to “four core technologies”
• Six Innovative Technology Matrices
  : Carbon Core, Fastest Curve System, Super Jiang, GCU, Super Beng, Extreme Beng Fiber

Li Ning Footwear Technology Platform
├── Midsole: Super Beng, Super Jiang
├── Outsole: GCU Wear-Resistant Technology
├── Upper: Extreme Beng Fiber
└── Structure: Carbon Core, Fastest Curve System

• Deep Cultivation of High-Tier Markets
  : Build a high-tier market operation model, strengthen the operation of flagship stores in core business districts
• Clearance of Underperforming Stores
  : Close sales outlets with insufficient profitability, improve single-store efficiency
• Online-Offline Collaboration
  : Upgrade the new retail business system, digital-driven omnichannel operations [5]

• Olympic Strategic Cooperation
  : Became the official partner of the Chinese Olympic Committee and sports delegation for 2025-2028 [5][6]
• Strengthening Professional Sports Mindshare
  : Focus on six core categories: running, basketball, badminton, table tennis, comprehensive training, and outdoor
• Brand Spirit Remodeling
  : Launched the “Name It After Me” themed marketing campaign to strengthen emotional connection with young consumers

Competitive Dimension	Li Ning’s Strategy	Target Market
vs ANTA	Specialization, Differentiation	Mid-to-High-End Professional Sports Consumers
vs Nike	Chinese Chic Culture, Localization	Young Generation Consumers
vs Adidas	Technology Cost-Effectiveness	Consumers with Functional Demands

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Financial Indicator	2024	2023	Trend
Revenue	RMB 28.676 billion	RMB 27.598 billion	+3.9%
Gross Profit Margin	49.4%	48.4%	+1.0ppt
Net Profit	RMB 3.013 billion	RMB 3.187 billion	-5.5%
Net Profit Margin	10.5%	11.5%	-1.0ppt
Operating Cash Flow	RMB 5.268 billion	RMB 4.687 billion	+12.4%
ROE	10.51%	-	Stable

• ✅
  Adequate Cash Flow
  : Operating cash flow increased by 12.4% to RMB 5.268 billion, and the cash conversion cycle remained at 35 days
• ✅
  Controllable Inventory
  : Channel inventory turnover and age structure remain at a healthy level
• ✅
  Low Debt Ratio
  : Total liabilities accounted for 26.9% of total assets, with a stable financial structure [2]
• ⚠️
  Profitability Under Pressure
  : Net profit declined by 5.5%, and net profit margin decreased by 1 percentage point

Indicator	Value
Market Capitalization	HK$50.47 billion
Price-to-Earnings Ratio (P/E)	16.18x
Price-to-Book Ratio (P/B)	1.67x
52-Week Price Change	+30.67%

The stock price rose 30.67% in the past year, but fell 71.59% cumulatively in three years, indicating that the market still has divergences on its long-term value [0].

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1. Olympic Cycle Dividend
   : The 2025-2028 Olympic cooperation will bring brand exposure and product sales opportunities
2. Consumption Recovery Expectation
   : Policy support for resident consumption growth in 2025 is expected to benefit sports consumption
3. Technology Conversion Effectiveness
   : The conversion of R&D investment into product strength will continue to be released in core categories such as running shoes

Risk Type	Specific Performance	Response Strategy
Competition Risk	ANTA’s market share continues to expand	Differentiated professional positioning
Inventory Risk	Channel inventory increases	Refined inventory management
Consumption Risk	Weak demand persists	Product structure optimization
Cost Risk	Raw material price fluctuations	Supply chain collaboration

Li Ning Strategic Optimization Directions
├── Product Segment: Strengthen professional category mindshare, expand core IP product matrix
│   └── Target: Annual running shoe sales exceed 10 million pairs
├── Channel Segment: Increase high-tier market share, accelerate new retail transformation
│   └── Target: Improve online-offline collaboration efficiency
├── Brand Segment: Leverage Olympic marketing, strengthen Chinese chic cultural attributes
│   └── Target: Restore brand premium capability
└── Operation Segment: Digital upgrading, flexible supply chain
    └── Target: Optimize inventory turnover efficiency

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The declining retail turnover and reduction of sales outlets faced by Li Ning essentially reflect the phased challenges of intensified competition, weak consumer demand, and channel structure adjustment in the Chinese sportswear industry. Amid the scale pressure from ANTA’s multi-brand matrix and the brand strength competition from international brands such as Nike, Li Ning adopts the “single brand, multi-category, multi-channel” strategy, focuses on differentiated positioning in the professional sports sector, and strives to establish competitive advantages in the high-end market by leveraging R&D and Olympic cooperation.

In the short term, Li Ning will continue to face pressure in channel optimization and inventory management; in the medium to long term, the effectiveness of its R&D investment conversion, Olympic cycle dividends, and consumption recovery potential will be the key variables determining whether it can achieve a breakthrough. Investors need to closely monitor the progress of its product structure optimization, the improvement of channel efficiency, and the pace of profitability recovery.

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[0] Jinling API - Li Ning (2331.HK) Company Profile and Real-Time Data
[1] Li Ning 2024 Annual Results Report (https://ir.lining.com/tc/ir/presentations/pre250328.pdf)
[2] Li Ning 2024 Results Press Release (https://ir.lining.com/sc/media/press_popup.php?file=inside-3_1_118.html)
[3] Securities Times - It’s Getting Harder for ANTA to Make Money After Reaching 100 Billion Revenue (https://www.stcn.com/article/detail/1598815.html)
[4] Sina Finance - ANTA | Global Advance of a Chinese Challenger (https://finance.sina.cn/2025-06-05/detail-ineyyrfk3671283.d.html)
[5] Li Ning 2024 Annual Report (https://doc.irasia.com/listco/hk/lining/annual/2024/crespress.pdf)
[6] Xinhua News Agency - Building a Foundation with Stability, Growing for the Long Term: Looking at the “Resilient Power” of Chinese Brands from Li Ning (http://www.news.cn/fashion/20250822/6b5c766b74f841b5a8c38d74c329c18d/c.html)