In June 2026, China's largest sportswear retailer, TOPSPORTS (06110.HK), navigated a harrowing crisis of confidence. On June 25, the company urgently issued an announcement clarifying that, as of that date, it had not received any formal notice from Nike (NKE.N) regarding the termination of its online distribution arrangements in mainland China. Concurrently, the company disclosed operational data for the first quarter of its 2026/27 fiscal year (March to May 2026), showing total retail and wholesale sales declined by a low double-digit percentage of 10% to 20% year-over-year.
Online Cutoff Speculation Sparks Extended Share Price Decline
The catalyst for this turmoil was a rapidly spreading market rumor. According to unverified online reports, Nike intended to terminate all its primary online distribution authorizations in mainland China effective January 1, 2027. The rumor further suggested that major distributors like TOPSPORTS, YYSPORTS, and REEBOK would consequently be barred from selling Nike products on e-commerce platforms, leaving only Nike's official flagship stores as the online purchase channel for consumers. This news triggered a continuous 11-session decline in TOPSPORTS' share price, with a cumulative drop exceeding 39%, hitting a record low.
In its announcement, TOPSPORTS acknowledged that Nike and the company have been "discussing various aspects of their business cooperation from time to time, including the status of its online sales arrangements." However, as of the announcement, Nike had not made any public response to the matter.
Nike's Online Revenue Constitutes 22% of TOPSPORTS' Total
The extreme market reaction to the rumor stems from Nike's critical importance to TOPSPORTS' business. For the fiscal year ended February 28, 2026, revenue from online sales of Nike products contributed approximately 22% of TOPSPORTS' total revenue. Furthermore, the 2025/26 fiscal year report showed that the combined revenue share from the two main brands, Nike and Adidas, increased further to 86.7% from 86.3% in the previous fiscal year. While TOPSPORTS has been introducing brands like SOAR in outdoor and running categories, this diversification strategy has yet to form an effective buffer.
Nike has faced challenges in the Chinese market in recent years, with Greater China revenue declining for seven consecutive quarters, including a 10% year-over-year drop in the third quarter of its 2026 fiscal year. Terminating online distribution authorizations could be a crucial step for Nike to reshape its pricing system in China. Nike CEO Elliott Hill candidly stated during an earnings call in December 2025, "In China, we have become a casual lifestyle brand competing on price."
Industry insiders suggest that the rumor of tightening online authorizations, building upon Nike's prior Direct-to-Consumer (DTC) strategy, may reflect a deeper intent by Nike to further consolidate channel control and re-establish its brand pricing logic in the Chinese market.
First Quarter Sales Slump Over 10%, Store Closures and Downsizing Continue
Released alongside the clarification announcement were TOPSPORTS' operational figures for Q1 of the 2026/27 fiscal year. During the quarter, the company's total retail and wholesale sales recorded a low double-digit percentage decline of 10% to 20% year-over-year. As of May 31, 2026, the gross sales area of directly operated stores decreased by 2.9% compared to the end of the previous quarter and by 11.2% compared to the same period last year.
By channel, online sales performance was better than offline, and retail business performance surpassed wholesale. The professional sports category outperformed the casual and mass sports categories. The discount rate continued to deepen year-over-year, though the magnitude narrowed slightly compared to the second half of the 2026 fiscal year. Total inventory decreased year-over-year, indicating the overall inventory situation remains manageable.
Notably, pressure on end-consumer retail intensified in June. Influenced by the timing shift of the Dragon Boat Festival holiday and heightened industry competition, June sales performance was weaker year-over-year compared to the first quarter. The company stated that pressure to meet its full-year guidance has increased.
TOPSPORTS has been persistently executing a "store closure and downsizing" strategy. In the 2025/26 fiscal year, it net closed 660 stores, reducing directly operated stores to 4,360 by year-end, down 13.1% year-over-year. Over the past four fiscal years from 2022/23 to 2025/26, TOPSPORTS has cumulatively net closed over 3,300 stores. Sales area per store increased by 3.9% year-over-year, indicating the company's attempt to counter declining foot traffic by improving store efficiency while reducing the number of outlets.
Analysts Lower Expectations, Investors Remain Cautious
Under the dual pressure of rumors and performance, several brokerages have lowered their expectations for TOPSPORTS. CICC maintained its "Outperform" rating but reduced its target price by 16% to HK$2.77. Soochow Securities revised down its forecasts for the company's net profit attributable to shareholders for the 2027 to 2029 fiscal years to RMB 1.211 billion, RMB 1.288 billion, and RMB 1.379 billion, respectively. Cinda Securities projected net profits attributable to shareholders for the 2027 to 2029 fiscal years at RMB 1.223 billion, RMB 1.400 billion, and RMB 1.526 billion, respectively.
Goldman Sachs pointed out that in the 2026 fiscal year, online sales revenue from Nike products accounted for about 22% of TOPSPORTS' total revenue, and it expects investors to remain cautious until Nike holds its earnings briefing on June 30.
An Unresolved Channel Power Struggle
The urgent clarification from TOPSPORTS has temporarily alleviated market panic but has not eliminated the fundamental uncertainty. The fact that Nike and TOPSPORTS are "discussing" online sales arrangements, coupled with the Nike CEO's candid assessment of "price wars" in China, suggests that channel adjustments are not without basis.
For TOPSPORTS, the real test lies ahead: if online authorization is indeed revoked, the company would not only lose the 22% of total revenue from Nike's online sales but also see its strategy of "using online to hedge offline" become ineffective. Furthermore, the "downsizing" process of net closing over 3,300 stores in the past four fiscal years may be insufficient to offset the potential impact from channel adjustments by its key brand. The power struggle over channel control remains unresolved ahead of Nike's earnings call on June 30.
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