In mid-2025, Li-Ning Company's revenue increased by 3.3%, the gross profit margin decreased slightly by 0.4 percentage points, and the net profit margin was 11.7%. The company focused on the development of core product categories, optimized channel layout, consolidated its high-level market advantage, and made progress in exploring emerging markets. Online channels outperformed offline channels, with e-commerce revenue accounting for 30%. Revenue from badminton products showed significant growth, driving overall revenue growth for the group. Despite a decrease in channel inventory, revenue increased year-on-year, and the brand image and market influence further improved.

In the first half of the year, Li Ning's wholesale business revenue increased by 5%, while direct sales revenue decreased by 4%. The gross profit margin decreased by 0.4 percentage points to 50%, and the net profit margin decreased from 13.6% to 11.7%. Channel inventory is reasonable, with inventory turnover of four months. In the second half of the year, the company will prudently respond to market challenges, maintain the goal of flat annual revenue, and keep operating profit margin at a high single-digit level.

In the first half of 2025, the sports industry showed development momentum under the fitness boom and favorable policies. Li-Ning Group solidified its operational foundation, actively deployed product upgrades, brand marketing, and channel optimization, deepened its presence in the professional sports field, with significant growth in running and training categories. The basketball category faces challenges but is seeking breakthroughs through technological innovation and the IP effect of star players. Emerging tracks such as outdoor tennis and Pickleball show potential. The Group signed a partnership agreement with the Chinese Olympic Committee, deepened its connection with the professional running community, and built a unique product ecosystem through global IP collaborations and cultural innovations, strengthening Li-Ning's image as a key supporter of the development of China's sports industry.

In the first half of 2025, revenue of Li-Ning Group increased by 3.3% year-on-year. Professional products accounted for over 60% of the revenue, with running shoe sales exceeding 14 million pairs. The badminton category performed well, and the basketball category increased marketing investment while controlling quantity. Adjustments were made in the sports lifestyle category. Offline sales saw a slight increase, while direct sales through e-commerce showed high single-digit growth. The revenue share of children's clothing and shoes increased. The channel structure was optimized, store images were upgraded, and the first phase of the Super Outlet construction was completed. Online and offline integration improved product turnover and inventory efficiency.

Looking back at the first half of 2025, the company's professional sports category accounted for over 60%, with the share of shoes rising to 55%. The sales of running shoes reached 14 million pairs, and the badminton category accounted for nearly 7%. In the second half of the year, the company will continue to focus on professional products and categories, optimize channel efficiency, and promote long-term healthy and sustainable growth. In response to industry challenges and opportunities, the company will further increase resources in basketball, aiming for accelerated revenue growth in 2026. Regarding tax rates, the impact of fund allocation has already been reflected, and it is necessary to continue monitoring the impact throughout the year and in the future.

The dialogue revolves around the current development and future plans of the sports brand Li-Ning in the professional sports and sports lifestyle categories. Li-Ning emphasized the importance of the continuous growth and stable operation of the professional sports category, while also pointing out the shortcomings and improvement space in the sports lifestyle category. The company has adjusted its organizational structure, with a focus on category management, deepening its vertical market layout, and enhancing its core competitiveness. In addition, Li-Ning has established a strategic partnership with COC, increasing investment in sports resources to enhance brand awareness, build a comprehensive sports resource matrix, gain more consumer recognition, and promote the long-term sustainable development of the company. Faced with severe challenges, Li-Ning insists on practical development, consolidating its foundation, seeking to maximize business opportunities, and ensuring the steady growth of the company.

The conversation revolves around the growth space of the running category, balancing marketing resources, and the impact on profit margins. Although the running category has grown rapidly, there is still room for improvement in market share and it has not reached its ceiling. In terms of marketing resources, there is a need to balance consumer reach opportunities with financial control, while expecting a return on investment. In terms of channel optimization, online sales continue to grow, while offline channels have a medium to long-term impact on profit margins, and there is still room for cost optimization.

The conversation discussed Li-Ning's strategic adjustment in the running category, including expanding the core runner and female consumer groups, and establishing more connections through product matrix and running sports. At the same time, it mentioned investment in sports resources, especially Olympic resources and event sponsorship, aiming to enhance brand and product competitiveness. Regarding the proportion of online and offline business, Li-Ning will maintain a stable ratio of 30% online and 70% offline, with no significant adjustments in the future. The company's goal is to maintain a double-digit profit margin through improving operational efficiency and return on investment.

Discussed the effectiveness of marketing initiatives in the first half of the year, focusing particularly on the business strategy and resource allocation for the basketball category. Emphasized the importance of basketball as an S-class category, despite facing short-term performance pressures, the brand will continue to deepen its efforts and increase market share. Mentioned the long-term binding plan with NBA rising star Yang Hansen and the strategic adjustment of cross-category utilization of sports resources, aimed at improving resource conversion efficiency and brand influence.

In the context of intensified market competition and increased macroeconomic uncertainty, major shareholders are increasing their holdings in order to convey confidence and stability to the market, emphasizing the company's need to continue investing in research, product development, and other areas to support the development of sports in China and youth sports. At the same time, they indicate that the company will operate prudently and steadily in the short term to ensure steady progress. In response to inventory levels in the basketball category, the company is adopting a strategy of controlling quantity to maintain a healthy and stable inventory status.

In response to the challenges of the consumption environment in the second half of the year, the company shared the operating trends since the third quarter, pointing out that offline customer traffic and revenue performance were lower than expected. It was suggested that strengthening basic skills and improving operational efficiency are needed to cope with the tough operating environment. Additionally, the importance of product planning and investment in sports resources was emphasized. The layout of core products such as running, basketball, lifestyle shoes and clothing, as well as the launch of future technology platforms, were detailed. The aim is to enhance business space and efficiency through product iteration and innovation, expressing confidence in the future growth of sports consumption, especially driven by the Olympic cycle.

The management discussed the specific projects of discount changes and profit balance, cost growth in the second half of the year, future trends, as well as adjustment strategies for distribution relationships and incentive mechanisms. In the face of industry challenges, deepening discounts have led to a decrease in gross profit margin. It is expected that the gross profit margin for the whole year will increase year-on-year but decrease quarter-on-quarter in Q3. The pressure on costs in the second half of the year has increased, mainly due to marketing, labor costs, and one-time impairment effects. In response to distributors, the assessment and incentive mechanisms will be optimized to improve cooperation efficiency.

Discussed adjustments to the organizational structure based on business needs, especially focusing on a new business model centered around product categories. Emphasized the importance of establishing a healthy and stable business relationship with distributors, by addressing inventory issues and improving business capabilities in advance, rather than simply evaluating order quantities. Goal is to achieve a stable and healthy business throughout the year.

Discussed how the COC project can enhance athletes' competitive ability and product competitiveness, promote the long-term development of the Li-Ning brand, and how Li-Ning can achieve high-quality growth through optimizing adjustments in products, brands, and channels in the face of fierce market competition.