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Operator: Analysts, investors, good morning. Welcome to Li Ning Company Limited's 2025 Interim Results Announcement. Let me introduce to you our management. They are Executive Chairman and Joint CEO, Mr. Li Ning; Executive Director and Joint CEO, Mr. Qian Wei; Group Vice President and CFO, Mr. Zhao Dong Sheng. In today's event, Mr. Zhao will first present the 2025 interim financial review, and then our CEO will go through strategic direction, and then Mr. Sheng will then talk about future developments and progress followed by Q&A. Mr. Zhao, please.
Dong Sheng Zhao: Thank you. Good morning, everyone. I am Zhao Dong Sheng. I will now review the company's financial performance for the first half of the year with you. In the first half of the year, we continued to focus on laying a solid foundation, pursuing pragmatic development and prioritizing stability, achieving the following operational results. Financially, our company's revenue grew by 3.3% to RMB 14.817 billion. Gross profit margin decreased by 0.4 percentage points to 50%. Under the premise of prudent control over expense allocation, the company focused our investments on core product categories and brand development, combined with a decrease in non-operating income and an increase in effective tax rate, ultimately achieving a net profit of RMB 1.737 billion. Net profit margin was 11.7%. Overall, financial condition remains healthy and robust with net operating cash inflow of RMB 24.11 billion. Average working capital as a percentage of revenue stands at 7.3%. Cash conversion cycle 31 days, unchanged from the same period last year. The Board of Directors recommended declaring an interim dividend of RMB 0.3359 per share with a dividend payout ratio of 50%, ensuring sustained shareholder returns. In terms of operations, LI Ning main brand retail sales recorded low single-digit growth across all channels. Offline new product retail sell-through accounted for 84% of total offline sell-through, maintaining reasonable level and healthy product efficiency. At the end of June, the total inventory value across all channels increased a low single-digit percentage year-on- year and all channel inventory to sales ratio was 4 months, maintaining a healthy level. Group revenue in the first half of the year grew 3.3% year-on-year. Among these, footwear revenue grew 5% year-on-year, accounting for 56% of the total revenue, an increase of 1 percentage point year-on-year. Apparel revenue decreased by 3% year-on-year. Accessories revenue grew 24%, mainly due to continuous penetration of professional awareness in the Badminton category and also sufficient production capacity. So revenue grew 38%. Badminton's share of the group's total revenue increased to 7%, driving the group's revenue growth. In the first half of the year, channel mix remained balanced and healthy. Among them, Online trend outperformed the offline trend with all indicators generally in line with expectations. E-commerce revenue increased by 1 percentage point to 31%. Direct retail revenue decreased by 2 percentage points in share to 23% due to optimization of store structure. Wholesale revenue share increased 1 percentage point to 46%. New products launched within the past 6 months accounted for 84% of total offline retail sell-through, maintaining a healthy and reasonable level. In terms of channel development, total number of POS in the first half of the year was 7,534, a decrease of 143 compared to same period last year. Among them, number of LI-NING Brand stores decreased 140. Number of LI-NING YOUNG POS decreased by 3. The LI-NING Core Brand actively optimized channel layout to consolidate the competitive advantage in high-end markets. At the same time, we actively explored emerging markets to further enhance brand image and market influence. During the period, overall sell-through grew a low single-digit percentage year-on-year with e-commerce retail sell-through achieving a high single-digit percentage increase. Offline sell-through saw a slight increase of less than 1 percentage point year-on-year with average offline price tag experiencing a slight year-on-year decline. Deeper discount applied offline by less than 1 percentage point and average unit price decrease of a low single-digit percentage. Sales volume grew growing by a low single-digit percentage year-on-year. LI-NING brand wholesale business, excluding international market and LI-NING YOUNG business saw revenue growth of 5% year-on-year in the first half with number of POS increasing by 77 year-on-year. During the period, we recently arranged the shipping schedule for distributors based on actual operating conditions at the point of sale. Excluding revenue from specialty stores focusing on Badminton, wholesale revenue decreased by low single-digit percentage. Wholesale sell-through grew a low single-digit percentage, ensuring healthy and sustainable development of the wholesale channel. Looking ahead, we'll continue to empower distributors, enhance retail and operational efficiency and drive healthy development and sustainable growth of the channels. Direct retail revenue decreased 4% year-on-year. Number of POS decreased by 217. The decrease in direct retail revenue was mainly due to adjustments in the number of stores resulting from store structure optimization. In a challenging environment, we'll continue to focus on retail operations, ensuring improvement of direct sales or retail channel efficiency by strengthening the renovation and expansion of high-quality stores and closing some inefficient stores. In the first half of the year, our gross margin was down 0.4 percentage points year-on-year to 50%, mainly due to following factors: one, intensification of promotional competition in our direct retail channels led to deeper discounts, causing our group's gross margin to decrease by 0.2 percentage points. Since Q2, discount pressure in direct retail channels has continued to worsen. Number two, the decline in the proportion of DTC channels reduced the group's gross margin by 0.1 percentage point. Three, channel structure adjustments in other business units reduced our group's gross margin by 0.1 percentage points. A 3.3% increase in revenue resulted in a RMB 179 million increase in gross profit. In terms of cost, we strategically planned resource allocation, focusing on investments related to core product categories and brand building to drive better long-term returns on investment. Due to lower-than-expected direct retail, variable direct retail-related expenses decreased by RMB 72 million. Meanwhile, with growth of e-commerce revenue, E-commerce related expenses increased RMB 61 million and logistics and new business-related expenses increased RMB 5 million. Advertising and marketing expenses increased RMB 87 million with expense ratio rising by 0.3 percentage points year-on-year to 9%. Increase in marketing expenses was mainly due to new Olympic sponsorship expenses due to differences in the timing of expense allocation. Olympic sponsorship expenses and other marketing and promotion expenses in the second half of the year will be more fully reflected, which will lead to a significant year-on-year and quarter-on-quarter increase in marketing expenses and expense ratio in the second half of this year. Other platform expenses down RMB [indiscernible] primarily due to failure to meet performance targets, resulting in the forfeiture of equity incentive originally planned to be allocated during the period, thereby reversing the expenses. Other income and interest decreased RMB 1.49 billion, including RMB 1.06 billion in impairment of investment properties and a decrease in interest income. Income tax expenses increased 2.8% or RMB 208 million, primarily due to comprehensive factors such as exchange rate fluctuations and changes in the yield on funds. The company has implemented more reasonable planning for domestic and overseas capital structure, resulting in the accrual of corresponding estimated income taxes, which led to increase in tax rate for the current period. Overall, our operating profit margin decreased by 0.2 percentage point from 16.7% in the same period last year to 16.5%. Net margin decreased 1.9 percentage points from 13.6% in the same period last year to 11.7%. Profit margin performance was basically in line with expectations. In terms of channel inventory, total channel inventory increased by a low single-digit percentage year-on-year in the first half and remained at a reasonable level. Total inventory turnover days was 4 months with inventory structure fluctuating slightly, but remaining healthy overall. Going forward, we will continue to implement rigorous inventory management measures to ensure that inventory turnover efficiency and inventory structure remain healthy in the long term. In terms of company inventory, the cost of inventory before provision increased 6% year-on-year in the first half of the year, which is a controllable increase compared to 3.3% growth in revenue. Overall inventory level and aging structure remained relatively stable and healthy. Good inventory indicators are an important foundation for supporting healthy and sustainable business growth. We believe that through continuous improvement in product efficiency and operational efficiency, there is room for further improvement in the future. Trade receivables. Our pre-provision trade receivables increased 11% compared to revenue growth of 3.3% Trade receivable turnover days was 14 days, a decrease of 1 day year-on-year. Receivables are at a reasonable and healthy level. As shown in the figure on the right, the proportion of receivables within 90 days increased from 85% in the same period last year to 93%. Based on our past support for strategic partners and our joint efforts, we have optimized channel efficiency management with our partners, resulting in healthier overall business performance. In the future, we'll continue to provide strategic support to our partners to promote mutually beneficial cooperation. In terms of working capital efficiency, our working capital remains at a healthy level with a working capital to annualized revenue ratio at 7%, providing us with sufficient resources to fuel business growth. Our operating cash flow remained stable and abundant with net operating cash inflow of RMB 2.411 billion. Our net cash increased by RMB 1.61 billion year-on-year to RMB 19.191 billion. Adequate cash reserves enable us to respond more calmly to challenging market conditions, effectively alleviate operational pressures, manage risks and provide strong support for flexibly capturing future business growth opportunities. In the first half of the year, the consumer market continued its moderate recovery trend overall. However, the year-on-year growth rate of retail sales slowed in June, consumer confidence fluctuated and consumer behavior became more rational. The challenges posed by weak consumer demand and expectations persisted. As we enter the second half of the year, challenges at the retail end and potential risk persist. Additionally, due to time-related factors, expenses in the second half of the year are typically higher than in the first half. Furthermore, the newly added Olympic-related expenses this year will be more fully realized in the second half, leading us to adopt a more cautious and pragmatic outlook for the second half. We will continue to maintain our full year revenue target of a flat number and a net profit margin of high single digits. Currently, we are committed to prudent management and pragmatic development, striving to overcome challenges in a difficult environment and making thorough preparations for long-term growth. We are confident about the future development of China's sports industry and the Li Ning brand. That concludes the financial presentation. Next, let's ask our Chairman to introduce the key strategic directions for the first half of the year. Thank you.
Ning Li: Thank you, Dong Sheng. Dear investors, good morning. In the first half of 2025, driven by the nationwide fitness trend and favorable policies, the sports industry demonstrated significant growth momentum. Although the overall macroeconomic environment and consumer confidence remain volatile, we remain optimistic about the industry long-term development potential. And in the circumstances, the group steadily strengthened its operational foundation and actively focused on business development. We successfully implement our strategic partnership with the Chinese Olympic Committee while steadily advancing our strategy in key areas such as product upgrades, brand marketing and channel optimization, continuously strengthening the Li Ning experience value. We are deeply committed to our single brand multiple categories and diversified channels strategic layout. We not only cover professional sports such as running basketball and badminton, but also actively expanding into emerging sectors. We are also integrating sports trend to launch professional sports products, combine technological performance with fashionable contribute to meet the diverse needs of consumers. At the same time, we are continuously building a multidimensional channel network. We are optimizing our offline store network, online, mainstream platforms such as Tmall, JD and Douyin striving to reach consumers in all directions. And in the first half of the year, we continue to focus on our 6 core categories, running basketball training, badminton, table tennis and sports casual. And during the period, omnichannel retail sales grew steadily by 2% with the professional categories continuing to perform well. The running and training categories each achieved 15%. And the basketball sell-through was down 20% and the whole basketball category is facing a downturn in the market environment. At the same time, we are also taking the initiative to regulate the basketball sell-through to ensure the terminal business is healthy and while consolidating the advantages of our core categories, while actively capturing marketing opportunities and the outdoor tennis and the pickleball segments show good development potential. Our running shoe business achieved significant breakthroughs in product portfolio, technological innovation and professional recognition. Regarding product innovation, we continue to upgrade and iterate our professional running shoes portfolio. The Rouge Rabbit 8 Pro the competition on platforms like Tmall, achieving sales of 2.3 million pairs across all channels. The Yueying 5 Pro, the first jogging shoes to feature Super BOOM technology, further enriched the technological landscape of Li Ning professional running shoes portfolio. This innovative achievement demonstrates our continued technological leadership in the running shoe sector. In the first half of the year, the total sales of all channel professional running shoes exceeded 14 million pairs of which the running shoes matrix centered on the 3 series of ULTRALIGHT, Rouge Rabbit and Feidian showed strong product competitiveness with the cumulative sales exceeded 5.26 million pairs in the first half of the year, fully demonstrating consumers' high recognition of LI-NING professional sports products. In the first half of the year, the cumulative sales exceeded 5.26 million pairs. In the field of professional races, we have helped our contracted athletes win 44 championships and 84 podium finishes. And meanwhile, we have successfully signed contracts for the Wuxi Marathon, Beijing Hub Marathon, providing professional equipment support for 55,000 runners and deepening our close ties with the professional running communities. In the Beijing Hub Marathon LI- NING running shoes were won by 61.35% of the runners who finished the race within 19 minutes, which was the top of the brand list. The basketball category has always been rooted in the technological innovation, leveraging the power of the [Star IP] to continuously strengthen the brand's professional sports image. During the period, we leveraged impressive performance of signed player Yang Hansen to create personalized logo of Eastern athletes and Eastern aesthetics. And we also launched our debut boot, Yushuai Ultra Low featuring a full-length through the food Super BOOM midsole and carbon Arch plate to enhance the players' performance on the court. Meanwhile, we leveraged the traffic generated by the NBA Star Russell's China tour to launch the Signature Shoe DL01, effectively converting product hype into retail sales and successfully establishing a new basketball [shoe IP]. In addition, leveraging the signing of a foreign player Lofton during the CBAO-Sar season, the new generation [Weight A085 voucher] has officially launched with its built-in Super BOOM midsole it brings a brand-new feel and practical experience to basketball enthusiasts enhancing the product competitiveness. And with the science and technology innovation, we have successfully constructed sports well with both technological empowerment and market advantages, preparation for the product matrix and with the application of aerospace quick drying and aerospace sun UV defense technology, we have launched instant [indiscernible] sole absorbent quick drying clothes and mirror sun UV defense clothes. And at the same time, we also have air cooling and this breathable garments and which can solidate our professional sports equipment sector. And through global IP collaboration and culture innovation, inning Sports and the casual category has built a unique product ecosystem, offering consumers a sports lifestyle experience. In terms of Global IP collaboration, we have deeply collaborated with Disney Pixel to launch the toy story co-branded series, which [collaborly] combines classic innovation and elements with ritual and trendy aesentics to create highly recognizable and popular products. And in response to the fast-growing female consumer market, we continue to optimize our product design language by incorporating tennis and other sports inspirations into fresh color schemes and simple pattern designs to actually capture the women's pursuit of self-confidence. In the area of culture empowerment, we have joined hands with the Palace Museum to integrate [indiscernible] traditional culture with modern sportsmanship, enriching the cultural connotation of our products and creating differentiated competitive advantage with oriental aesthetic features. And leveraging our long-standing technological expertise and brand momentum, we successfully signed a contract to become the official partner of the Chinese Olympic Committee and the Chinese national sports delegation from 2025 to 2028. And we focused on the marketing theme of China's glory and LI's journey to continuously strengthen LI-NING's professional image as a key supporter of China sports development. At the same time, we partnered with the aerospace technology innovation and application platform to establish an aerospace technology innovation applying advantage aerospace technology to LI-NING's professional sports equipment. This will strengthen consumers' understanding and of our products and to realize the both competitive values. And this concludes our introduction of the strategy development for the first half of the year. And I'd like to invite Mr. Qian Wei, Group CEO, to update us on the company's operational progress.
Takeshi Kosaka: Thank you, Chairman. Good morning, everyone. In the first half of the year, the group steadily consolidated its operating foundation and actively build momentum of business development by deepening its investment in Olympic marketing resources. consolidating its professional sports brand. And we ultimately achieved year-on-year revenue growth of 3.3% to RMB 14.817 billion. Net profit margin gross 11.7%, in line with operating expectations. And the promotion -- the professional product revenue continued to grow over 60% and professional running shoes were popular among consumers, and this increased by 15% year-on-year. And the total sales exceeded 14 million pairs and also exceeded the core running shoes exceeded 5.26 million pairs. And we also achieved a comprehensive training category increase. And the badminton category performed outstanding with the average growth. And amidst the pressure in the overall basketball market, the basketball category is primarily focusing on the [quantity] control while continue to increase resources. And the sell-through in the sports and lifestyle and casual category declined by 7%. We're actively adjusting and we will continue to strengthen our business structure. And by integrating our channels, our merchandise operation efficiency remained stable and new product sell-out rate is in the mid 70% to 80% and our new product discount rate for this current quarter improved by 1 percentage point. And inventory to sales ratio across all channels remains at 4 months. And the aging structure is increased by mid-single digits. And inventory management has always been a key operational priorities. And going forward, we will continue to monitor and ensure healthy and robust channel inventory. In the first half of the year, offline sales saw a slight increase and operating results were relatively stable. We also confirm that average daily customer traffic per store has improved compared with a significant decline last year. And offline operational challenges remain positive. And we will also improve the pop-up stores and to capture business opportunities. In the second half of the year, we will remain cautious in the face of the challenging market environment and to ensure that our full year offline sales targets are met. And during the period, we continue to optimize the channel structure and strengthen the layout of key channels. And the average area of LI-NING large-scale stores were 242 square meters and average monthly store efficiency was CNY 300,000 and high-end markets contribute nearly 60% of the sales revenue and the core retail entities have approximately 19% of our presence and demonstrating our competitive advantage in high-tier markets, and we have completed the first phase of development of our super outlets and the large outlet stores and all of our top 20 domestic projects will be expanded this year. We continue to promote the upgrade of store image. At present, we have 1,527 large stores with an average area of 409 square meters. And the store efficiency is about CNY 320,000. And we deepened our online and omnichannel retail strategy and increased investment in various online channels to effectively respond to platform changes. And the market competition overall e-commerce operating indicators were generally in line with expectation. In terms of e-commerce operational efficiency through e-commerce content operation and omnichannel O2O, the conversion rates and the linkage rates were ensured, driving the e-commerce customer traffic to loaded to 10% to 20%. The business conversation rate remained stable. At the same time, we are promoting the online and offline marketing integration and incubating new IP, new products like the Ultra Light 2025 and DLO 1 basketball shoes and the wind chasing Pro running shoes have become new sales drivers online. And the merchandise efficiency, we have incorporated our million IPS and SMU styles into the rolling stock pool and to enhance the sell-through and to maintain the healthy online inventory turnover. In Kids, we continue to focus on product optimization, increasing the proportion of the shoe of revenue to over 55%, an increase of over 6 percentage points year-on-year, driving breakthrough growth in our core kids wear category. At the same time, we enhanced both channel structure and quality, focusing on core markets, emerging markets and systematic outlets and also driving the year-on-year growth in Kids wear offline retail sales by low digits, 10% to 20%. And this concludes our review of the operational progress for the first half of 2025. In the second half of the year, we'll continue to prioritize steady operations and pragmatic development and to optimize channel efficiency to drive long-term healthy and sustainable growth. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.].