The first half of 2026 presented a genuine stress test for China's consumer market. According to data from the National Bureau of Statistics, total retail sales of consumer goods reached 24.87 trillion yuan in the first six months, a year-on-year increase of just 1.3%. Growth in the clothing, footwear, hats, and textiles category slowed from 9.3% in the first quarter to 6.7% in the first half, while retail sales of sports and entertainment goods fell 2.2% year-on-year in the second quarter. This 1.3% headline growth rate served as a pressure test for all brands — so how did LI NING (02331) perform?
On August 20, sportswear giant LI NING released its interim results for the first half of 2026. The company generated revenue of 15.24 billion yuan, up 2.8% year-on-year; gross profit reached 7.75 billion yuan, up 4.5%; and net profit came in at 1.82 billion yuan, a 4.5% increase. Against a backdrop of industry-wide pressure, this steady growth from LI NING is particularly commendable.
In the second quarter, declining sales became a sector-wide issue for sportswear brands, with major labels like Xtep and FILA all seeing falling turnover. LI NING's wholesale channel turnover declined by a low single-digit percentage, while including kids' apparel it was roughly flat. Despite this, the company still achieved 2% year-on-year growth in full-channel turnover for the first half, demonstrating solid operational resilience.
Speaking at the results briefing, LI NING's Vice President and CFO Zhao Dongsheng acknowledged the challenges: "Overall, our key indicators for the first half largely met expectations. However, the retail environment presented numerous headwinds. After a steady start in Q1, the second quarter saw frequent weather disruptions, weakening demand, and deepening discounting at the terminal, which impacted turnover from Q2 onward. Nevertheless, we remain committed to a steady, pragmatic development path, actively positioning ourselves amid complexity and continuing to strengthen our fundamentals."
As the broader retail consumption environment fluctuates, the logic of the sportswear industry is undergoing a profound shift. The market is no longer simply chasing rapid revenue scale; instead, operational quality, anti-cyclical resilience, and professional brand moats are becoming the core yardsticks for evaluating sportswear companies. This means that to truly understand LI NING's interim performance, one cannot focus solely on short-term revenue growth. It requires looking through the cyclical surface to assess the solidity of the company's operational foundation, the risk-resistance of its multi-category portfolio, and the long-term value reserve built through sports resources and R&D investment.
Cash flow, inventory, and channels: Three 'health' indicators matter most
In the cooling sportswear consumption environment of H1 2026, LI NING experienced some fluctuation in Q2 turnover. However, beneath the surface-level data, the company's core operational pillars — cash reserves, inventory, and channels — remained robust. As of June 30, 2026, net cash increased by 200 million yuan year-on-year to 19.39 billion yuan. This ample cash buffer gives LI NING a thicker "winter coat" than peers at a time when the market faces the greatest liquidity constraints. This financial safety cushion is not merely about warding off risk; it preserves strategic optionality — enabling the company to both absorb potential pressure from terminal demand volatility and continue investing in long-term initiatives such as sports resource signings, product R&D, and store format innovation.
Turning to inventory — a critical "lifeline" for apparel companies, especially when demand weakens — inventory management directly impacts profitability and brand pricing power. As of June 30, LI NING's full-channel inventory-to-sales ratio remained at 4 months, with inventory turnover days at 65. Both inventory levels and age structure continued the company's track record of meticulous, healthy management. This healthy state reflects deliberate choices by LI NING. In Q2, the company deepened offline discounts by a mid-single-digit percentage and online by a low-single-digit percentage, trading discounts for transactions and inventory safety. SPDB International noted in its analysis that the Q2 discount deepening was a strategic adjustment to maintain channel inventory health, not a passive clearance of unsold products.
On the channel front, LI NING proactively optimized and upgraded its network during the period, embedding long-term positioning within the adjustments. As of June 30, 2026, the company's total points of sale (including LI NING brand and LI NING YOUNG) stood at 7,579, a net decrease of 30 stores compared with December 31, 2025. This reflects proactive structural optimization — retail stores decreased by a net 66, aimed at clearing inefficient capacity and improving per-store efficiency in the direct-operated channel, while franchisee stores increased by a net 38 to expand coverage in lower-tier markets. Notably, the direct-operated business achieved 3.4% revenue growth year-on-year despite a 106-store reduction in store count. "In a challenging environment, we continue to focus on retail operations, strengthening the renovation and expansion of quality stores while closing underperforming ones, further consolidating direct-operated channel efficiency and driving direct-operated same-store sales back to positive contribution," Zhao stated.
This decrease-in-one-area, increase-in-another approach reveals a clear strategic intent: not chasing simple store count expansion, but pursuing dual improvement in per-store efficiency and channel quality. While short-term market uncertainty means turnover will fluctuate with the consumption cycle, the operational foundation built on cash flow, inventory, and channels will not easily waver with market conditions. For LI NING, overall healthy and ample capital, sound inventory, and stable channels have already proven the robustness of its operational base and the foresight of its strategic choices.
Sustained investment in resources and R&D: Building long-term brand mindshare for professional sports
In the first half, amid cyclical market volatility, while many industry brands focused on short-term traffic and discount competition, LI NING continued its commitment to investing in sports resources and hardcore R&D capabilities — a decision closely tied to the company's long-term strategic resolve. First, in terms of sports resources, LI NING persisted with its multi-tiered strategy of securing scarce sports assets. Although this entails near-term expense pressure, it builds an irreplaceable mindshare anchor for the brand. Specifically, during the 2026 Milan Winter Olympics, LI NING executed an integrated marketing campaign from the release of podium apparel to full-event coverage, accompanying the Chinese sports delegation to its best-ever results at an overseas Winter Games in the first major event of the new Olympic cycle. In June, the company announced a long-term, comprehensive partnership with NBA superstar Stephen Curry, covering basketball and golf as starting points, with potential expansion into sports-lifestyle scenarios.
From the Chinese Olympic Committee to Curry, from national teams to top-tier athletes, LI NING has assembled a multi-layered, three-dimensional sports resource matrix. While these investments create near-term cost pressure, scarce sports resources are a slow variable — their returns do not appear in the current financial report but in consumers' perception of "professional sportswear." Once mindshare is secured, it creates a brand moat that competitors will find difficult to breach. Second, in R&D investment, LI NING continues to deepen its technological research, converting technical accumulation into tangible product strength. Over the past decade, the company has invested more than 4 billion yuan cumulatively in R&D. In the first half, LI NING maintained its commitment to channeling funds into underlying technology innovation, advancing the value chain from technology to competition validation to mass-market product application. For example, at the Milan Winter Olympics, aerospace insulation cotton, basalt far-infrared technology, and the Super BOOM midsole technology powered the delegation's campaigns. The upcoming Asian Games podium apparel features aerospace temperature-control fibers and the new BOOM-ARC visualized cushioning structure, with numerous innovative technologies undergoing rigorous validation at the highest competitive levels.
Beyond professional arenas, LI NING is translating same-source technology downward, extending competition-proven innovations to mass-market product lines such as Gold Label, running, and training — allowing everyday consumers to access the same technology used by national teams, extending professional capability into mainstream consumption scenarios. The company has also jointly established an aerospace technology innovation and application laboratory, opening cross-disciplinary technology transfer channels and continuously expanding its technology reservoir. In this regard, Haitong International emphasized in its research report that LI NING's long-term strategic investments will not be adjusted due to short-term difficulties — "Product strength will maintain R&D technology investment; R&D spending will not be reduced due to near-term challenges." This resolve is precisely the key metric distinguishing cyclical players from long-termists.
Deep moats plus broad elasticity: Multi-category portfolio enhances anti-cyclical capability
Facing the consumption slowdown in H1 2026, the value of LI NING's multi-category product matrix became even more apparent. On one hand, in terms of category depth, LI NING continued to deepen its advantageous tracks, further consolidating its operational foundation. Running, basketball, badminton, and table tennis are core competitive categories formed through long-term accumulation. Backed by event resources, athlete matrices, and proprietary technology, these categories have established strong market recognition and share, serving as the ballast of the company's business. In running, LI NING completed coverage of five top-tier marathons — Beijing Half, Wuxi, Hangzhou, Shenzhen, and Chengdu. Its "Dragon Sparrow Plan" signed top domestic marathoners who have successively broken national records. On the technology front, "Super BOOM Capsule" technology has been fully deployed across the Feidian and Cheetah core running shoes, BOOM-ARC technology completed the iteration of the ARC running shoe series, and "Dragon Sparrow" racing apparel featuring carbon yarn fabric has become a competitive bestseller — product strength continues to evolve. The basketball track, anchored by the long-term Curry partnership, fills the gap in brand globalization and younger consumer engagement. In badminton, the company newly signed the Hong Kong, China team, further cementing its professional circle status.
By category, in the first half, training and sports-lifestyle delivered steady improvement driven by functional apparel and women's business, with training category retail turnover growing 5% year-on-year. The three core sports categories — running, basketball, and training — accounted for 63% of turnover, and LI NING's professional running shoes sold over 14.8 million pairs in six months, maintaining growth from an already high base. On the other hand, in terms of category breadth, LI NING continued nurturing emerging tracks to unlock growth elasticity. While mature categories guard the core business, emerging categories carry the mission of opening growth space. During the reporting period, emerging categories such as outdoor and Gold Label demonstrated promising growth potential, though their scale remains modest — outdoor accounts for a mid-single-digit percentage of turnover and is still in the climbing phase of its potential curve.
It is evident that under LI NING's "single brand, multi-category, multi-channel" strategy, the product matrix is not simply about spreading across multiple points, but using business breadth and depth to hedge against cyclical uncertainty. A single track may rise and fall with the industry cycle, but a comprehensive multi-category portfolio and product matrix can advance in tandem, complementing one another.
Conclusion
Consumer markets are always subject to alternating cycles of heat and cold. A temporary revenue growth rate is merely a snapshot of the cycle. What truly determines the ceiling of a sportswear brand is not the exuberance of a boom period, but the self-discipline exercised during headwinds and the strategic resolve to persistently invest in long-term value. LI NING's choice to safeguard its foundation and build moats in a turbulent environment is undoubtedly forward-looking. This view has gained recognition from multiple brokerage firms. Huatai Securities is bullish on the company's operational resilience amid adversity and the enhancement of its mid-to-long-term professional brand momentum; Shenwan Hongyuan noted that short-term retail fluctuations do not alter long-term strategy. Thus, while LI NING currently faces a path of "near-term pressure," it may well be a path that leads in the right direction for the medium-to-long term. Time will ultimately reward this long-termism.