Chinese sportswear brand Li-Ning Co. Ltd. (OTC: LNNGF) could be the hottest stock in the athletic apparel market in 2019.
The company is a top performer in the MSCI Asia Pacific Index, with the stock up more than 197% year-to-date, according to Bloomberg.
Li-Ning initially made a splash in the NBA years ago when it signed superstar Dwyane Wade to an endorsement deal. The company’s biggest NBA endorser today is CJ McCollum, who signed with the brand in 2017.
Footwear expert Matt Powell of the NPD Group often argues that athletic endorsements from NBA players do not drive sales in the U.S., as basketball footwear has been in freefall mode since 2015.
In China, NBA players still drive sales, he said.
“From what I’m seeing, endorsed NBA players still drive sales in China, while they do not in the U.S,” Powell said in an October blog post.
Why Is Li-Ning Stock Surging?
For one, the popularity of sportswear continues to surge in China, and continues to be one of the most important growth markets for industry giants Nike Inc (NYSE: NKE), Adidas AG (ADR) (OTC: ADDYY) and Under Armour Inc (NYSE: UAA).
Nike’s first-quarter sales in Greater China grew nearly 22% year-over-year.
Following the NBA’s highly publicized spat with China in October, Powell said if the situation between China and the NBA worsens, “we could potentially see a move by Chinese consumers back to the native brands.”
It appears too early to tell whether this has been the case; Li-Ning shares have fallen since the controversy first became public in October.
Although the NBA season has kicked off without much further damage between the league and China, Powell said Chinese footwear companies have ramped up efforts to take market share back from the western brands.
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Photo by PanShiBo via Wikimedia.
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