Shares of Topsports drop as Nike plans to restrict online sales in China

China's leading sportswear retailer Topsports (6110) saw its shares slump 14.7 percent at the open on Wednesday after saying its existing online sales of Nike's products in mainland China will terminate completely with effect from January 1, 2027.

The company believed that the short-term negative impact of the termination on its business would be significant, as revenue from online sales of Nike’s products accounted for approximately 22 percent of total revenue for the financial year ended February 28, according to an exchange filing.

Notwithstanding the short-term negative impact, the firm remains committed to working closely with Nike on the offline sales arrangements on a mutually beneficial basis, Topsports said.

Nike is trying to lure back shoppers in China by controlling how its products are sold online, directing consumers to official Nike channels as the American sportswear giant continues to lose ground to domestic rivals.

By restricting wholesale distributors' online sales, the company aims to rebuild trust with Chinese shoppers and sell its products at full price, said Cathy Sparks, vice president and general manager of Greater China.

Starting in January, key sportswear retailers in China will stop selling Nike's clothing and shoes online and will instead pivot to in-store sales, Sparks told Reuters. Online, the company's products will be sold through new Nike-branded digital storefronts on the popular Chinese e-commerce platforms Tmall, JD.com (9618) and Douyin, along with Nike's website and app.

"Our marketplace has become so fragmented and cluttered," said Sparks, a 25-year company veteran who was appointed to oversee Chinese operations earlier this year. "What consumers want is an experience that's premium, true to the brand, trustworthy, and certainly connected between digital and physical."

CHINA SALES DECLINE PERSISTS

China, Nike's third-largest market, remains a key source of concern for the world's biggest sportswear brand. The e-commerce shift is part of a broader effort to revive growth.

Sales in Greater China fell 17 percent on a constant-currency basis in the fourth quarter, the company reported last month, steepening from a 10 percent decline in the previous quarter. Fast-rising domestic rivals Anta (2020) and Li Ning (2331) have chipped away at Nike's market share, while foreign brands like On and Hoka have also surged.

Nike's China woes have reinforced for investors that CEO Elliott Hill's turnaround strategy still faces significant obstacles. In his nearly two years at the helm of the company, Hill has pushed to refocus on sports, rebuild wholesale relationships in North America and introduce new products.

The majority of Nike's 16 store partners in China, which own and manage thousands of Nike stores, will stop selling online, a Nike spokesperson said.

Following local news reports about the potential e-commerce change in June, BNP Paribas senior analyst Laurent Vasilescu said the move would be a "strategic misstep" and would hand opportunities to competitors.

"Nike doesn't have a distribution problem in China and elsewhere. It has a product problem," Vasilescu said in a research note.

Releasing products that are more relevant to Chinese consumers is also among Nike's priorities, Sparks said. The company has appointed a vice president of local product creation in Greater China, she added.

Staff reporter and Reuters

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