Under the leadership of its famed gymnast founder, LI NING (02331.HK) has seen its operating revenue climb year after year, reaching a historic high of nearly RMB 30 billion in 2025. However, the company's net profit attributable to shareholders declined for the third consecutive year, highlighting an awkward situation of increasing revenue without corresponding profit growth.
This trend is largely attributed to a misjudged decision made at the end of 2023.
Net profit attributable to shareholders has now fallen for three straight years. On April 22, LI NING released its annual report for 2025.
In terms of operating revenue, LI NING is making a clear push towards the RMB 30 billion milestone. Revenue reached RMB 29.6 billion in 2025, a 3.22% increase from RMB 28.68 billion in 2024. This also marks the highest revenue figure since the company's listing 22 years ago in 2004.
Gross profit also continued its upward trend, reaching RMB 14.49 billion in 2025, a 2.35% rise from RMB 14.16 billion in 2024. However, the gross profit margin saw a slight decrease, dropping from 49.4% in 2024 to 49% in 2025.
In contrast, the net profit attributable to shareholders presents a more challenging picture. It stood at RMB 2.936 billion in 2025, a 2.56% decrease from RMB 3.013 billion in 2024, clearly illustrating the "revenue growth without profit growth" dynamic.
Since 2023, LI NING's net profit attributable to shareholders has been on a continuous downward trajectory, with year-on-year declines of 21.58%, 5.46%, and 2.56% recorded through 2025.
Furthermore, although operating revenue and gross profit have increased annually, a longer-term view reveals that the growth rate has been slowing for several consecutive years.
Data indicates that the year-on-year growth rate of LI NING's operating revenue has decelerated for three consecutive years starting in 2023. The growth rate for gross profit has slowed for two consecutive years beginning in 2024. Therefore, the overall outlook still warrants caution.
Directly-operated stores are facing pressure, leading to a decrease in revenue from this segment. Breaking down the operating revenue, footwear remains LI NING's primary revenue source, accounting for 49.5% of total revenue, nearly half. Apparel follows closely, contributing 41.6% of total revenue. Combined, these two major product categories represent over 91% of total revenue.
Regarding sales channels, LI NING noted that the franchised distributor channel continues to serve as a core pillar, with revenue growing steadily by 6.3% year-on-year, and its proportion of total revenue further increasing to 46.6%. Revenue from the e-commerce channel increased by 5.3% year-on-year.
However, the company acknowledged that adjustments to its directly-operated store network and shifts in consumer spending patterns have put pressure on the retail channel performance, resulting in a 3.3% year-on-year decline in revenue from this segment.
Additionally, intensified promotional competition among directly-operated stores led LI NING to increase discounting, which contributed to the slight decline in the gross profit margin.
Overall, however, LI NING's operations remain relatively healthy. Inventory turnover efficiency is high, with inventory turnover days at 64 and an inventory-to-sales ratio of 4 months. The company has ample available funds, with cash and cash equivalents at the period-end reaching RMB 16.71 billion, an increase of RMB 1.83 billion.
Furthermore, Viva China Holdings, the largest shareholder controlled by the LI NING family, increased its stake in the company four times in 2025, with cumulative purchases amounting to approximately HKD 1.561 billion, demonstrating strong confidence.
The primary reason for the consecutive decline in LI NING's net profit over the past three years remains the property purchase at the end of 2023, which in hindsight appears to have been a mistimed acquisition.
On December 10 of that year, LI NING announced it would acquire a property from Hong Kong property tycoon Lee Shau Kee's Henderson Land Development for HKD 2.2 billion (approximately RMB 1.98 billion), with plans to use part of it for its Hong Kong headquarters.
The property is the commercial building "Harbour East" at 218 Electric Road, North Point, Hong Kong. Formerly the Newton Hotel Hong Kong, it was redeveloped into a Grade A office building comprising 22 floors of commercial and office space plus two retail levels.
This move was widely interpreted as preparation for overseas market expansion, with the company aiming to establish a standardized system applicable overseas by exploring the Hong Kong market.
However, as is well known, following LI NING's purchase, the Hong Kong office market did not see a significant recovery. In recent years, property price indices and rental indices have continued to decline. Official data shows that Grade A office prices fell by over 24% year-on-year in 2024, accumulating a drop of more than 40% from the 2019 peak. Office rents declined by 5% year-on-year in 2024 and saw a slight decrease of 1.5% in 2025. LI NING's attempt to "buy the dip" effectively caught the market on its way down.
In this market environment, LI NING was compelled to recognize substantial impairment losses on this investment property: an impairment loss of RMB 333 million was booked in 2024, followed by another impairment loss of RMB 269 million in 2025.
In other words, these impairment charges on the building totaled RMB 602 million over the two years, directly contributing to the year-on-year decline in net profit.
On a positive note, Hong Kong office prices and rents showed signs of stabilization in 2026, suggesting that the impairment charge related to this asset should decrease significantly this year.
LI NING also faced challenges in two other areas impacting its bottom line. The first was a sharp decline in finance income.
The annual report shows that LI NING's finance income was only RMB 33.12 million in 2025, compared to RMB 175 million in 2024, a drastic decrease of 80%, representing a loss of approximately RMB 142 million in this category.
The second area of pressure was a significant increase in income tax expense.
The report indicates that LI NING's income tax expense was RMB 1.253 billion in 2025, up from RMB 1.097 billion in 2024, an increase of RMB 156 million.
In summary, in 2025 alone, the combined impact of investment property impairment, reduced finance income, and higher income tax expenses amounted to a total of RMB 565 million, directly pulling down the net profit attributable to shareholders.
In the annual report, the Executive Chairman and Co-CEO stated that in 2026 the company will "deepen the 'single-brand, multi-category, multi-channel' strategy, optimize and upgrade the core product category matrix, explore opportunities in emerging sub-segments, and continuously strengthen the core advantages of product performance, technological capability, and sports experience."
However, addressing the twin challenges of asset impairment from the property acquisition and the逐年slowing revenue growth rate are the key realities that LI NING must confront in 2026.
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