Ge Long Hui·2026-01-17 06:27Core Viewpoint - Li Ning's retail sales for Q4 2025 showed a slight year-on-year decline, but the rate of decline has narrowed compared to previous quarters. The company is managing inventory and risks effectively in a challenging retail environment, with confidence in revenue and profit margin guidance for 2025 [1][2]. Sales Performance - Overall retail sales (excluding Li Ning YOUNG) experienced a low single-digit year-on-year decline, with expectations for better performance in October due to the National Day and Mid-Autumn Festival, but a weakening outlook for November and December due to consumer environment and warm winter [1]. - Offline sales in Q4 2025 saw a mid single-digit year-on-year decline, with direct sales channels declining in low single digits and wholesale channels declining in mid single digits [2]. Channel Analysis - Direct sales outperformed wholesale, largely due to outlet promotions contributing nearly half of the direct sales business, allowing for better optimization of autumn and winter apparel [2]. - Online sales remained flat year-on-year, with expectations of double-digit growth on Douyin, single-digit growth on JD, while Tmall and official website faced downward pressure [2]. Store Expansion and Channel Structure - As of Q4 2025, Li Ning had 6,091 stores (excluding Li Ning YOUNG), with a net closure of 41 stores in the quarter and 26 for the year. The company continues to expand its children's clothing stores, with 1,518 stores and a net increase of 38 in the quarter [2]. - The company is actively opening new store formats, including dragon stores and outdoor stores, with plans to open over ten pop-up stores in the next 1-2 months [2]. Discount and Inventory Management - Overall discounts in Q4 2025 deepened in low single digits year-on-year and quarter-on-quarter, with offline discounts slightly deeper than 65% due to warm winter temperatures prompting increased clearance of winter apparel [2]. - Despite deeper discounts, the company has managed to maintain a healthy inventory turnover ratio, with the inventory turnover period returning to a healthy range of 4-5 months [2]. Profit Forecast and Valuation - The company expects improved profitability due to refined management, although marketing expenditures may increase in 2026 due to the Olympic year, potentially suppressing short-term profits. Adjusted net profit forecasts for 2025, 2026, and 2027 are 2.7 billion, 2.77 billion, and 3.17 billion yuan respectively [3]. - The target price is maintained at 22.76 HKD, with a PE ratio of 19.0x for 2026, reflecting confidence in the company's strategic investments for long-term growth [3].