The stock market's opening bell had barely faded on July 22, 2026, when shares of TOPSPORTS (06110.HK) plunged. The stock plummeted nearly 30% intraday, ultimately closing down 24.08% at HK$1.45 per share, wiping out approximately HK$2.85 billion in market value and pushing its total market cap below the HK$10 billion mark.

This dramatic sell-off was triggered by a pre-market announcement confirming that Nike had formally notified the company it would terminate all online sales of Nike products on Topsports' platforms in mainland China, effective January 1, 2027.

The Sudden Loss of a Major Revenue Stream

The most alarming figure in the announcement was 22%. For the fiscal year ended February 28, 2026, revenue from online sales of Nike products contributed approximately 22% of Topsports' total revenue. Based on the company's total revenue of 25.74 billion yuan for that fiscal year, this equates to a loss of about 5.6 billion yuan.

Topsports stated frankly in its announcement that the termination "will have a significant adverse impact on the Group's business in the short term." Such a statement from a listed company's board carries considerable weight. This is not merely about losing a segment of business; for a distributor, online sales serve multiple functions, including clearing inventory, boosting cash flow, and unlocking brand sales rebates. The revocation of online rights will ripple through inventory turnover efficiency, supply chain bargaining power, and overall profitability.

Nike, in contrast, appeared composed. Nike Group Vice President and Greater China General Manager Shen Kaixi responded with a signed statement that day, outlining that starting in January 2027, Nike would rebuild its digital ecosystem in China around its official flagship stores on Tmall, JD.com, and Douyin, as well as the Nike official website and app. With the exception of some authorized partners, online stores operated by partners selling Nike products would gradually cease sales. She emphasized that the purpose of this adjustment was "not to reduce shopping access points, but to reduce the fragmentation of online channels."

From Partnership to Parting Ways

The relationship between Topsports and Nike dates back to 1999, when Topsports was the sports division of Belle International and signed a cooperation agreement with Nike shortly after its establishment. By 2004, Topsports had grown into Nike's largest distributor in China. That same year, it began cooperating with Adidas, becoming Adidas's largest global purchaser by 2012.

In that era where "channels were king," this deep integration was mutually beneficial. Nike leveraged Topsports' network to expand its retail footprint across Chinese cities, while Topsports rapidly scaled up by aligning itself with these two international giants. At its IPO in 2019, Topsports operated over 8,300 directly managed stores across more than 300 cities. Its prospectus showed it was the largest retail partner in China for both Nike and Adidas by purchase volume. Its market capitalization exceeded HK$57 billion on its first trading day.

However, times have changed. By the end of February 2026, Topsports' directly managed stores had dwindled to 4,360, nearly halving in four years. For the 2026 fiscal year, revenue fell 4.7% year-on-year to 25.74 billion yuan, while net profit attributable to shareholders dropped 1.5% to 1.267 billion yuan. Combined revenue from the two "core brands," Nike and Adidas, totaled 22.33 billion yuan, accounting for 86.7% of total revenue—highlighting that Topsports' heavy reliance on these two pillars had never truly diminished.

Nike's Strategic Calculus: Regaining Control

Why would Nike make such a decisive move against a partner of 27 years? The most immediate reason is loss of price control. In June of this year, a topic titled "Nike shoes originally priced at 899 yuan drop to 429 yuan, yet consumers still aren't buying" trended on Weibo. Taking the annual key product Nike Pegasus 42 as an example, launched in February at a price of 949 yuan, its actual selling price on official flagship stores had dropped to 770 yuan just five months later, with extreme promotional prices even dipping into the 500-yuan range.

The root of the problem can be traced back to 2017 when Nike initiated its DTC (Direct-to-Consumer) strategy, gradually reducing its wholesale channels. However, when Nike's own product innovation stalled and sales faltered, the resulting surge in inventory pressure forced the brand itself to frequently discount, leading the charge in eroding the price system. Distributors, in turn, were compelled to competitively slash prices on e-commerce platforms to meet sales targets and recoup capital. Price wars across thousands of stores dragged down the brand's overall price positioning—precisely the "market presentation becoming overly fragmented" that Shen Kaixi referenced.

Nike's global revenue for the 2026 fiscal year was $46.4 billion, essentially flat compared to the previous year. However, revenue in Greater China fell 11% year-on-year to $5.847 billion, marking eight consecutive quarters of year-on-year revenue decline. Greater China remained Nike's only core global market experiencing persistent negative growth.

In this context, reclaiming online distribution rights, unifying official channels, and regaining pricing control and consumer data became Nike's most direct strategic choice. Nike Global CEO John Donahoe emphasized during the 2026 fiscal year earnings release that the company had "taken decisive action" to reshape the business—terminating the online partnership with Topsports is arguably the most impactful step in that "decisive action."

What Path Lies Ahead for Topsports?

Losing 5.6 billion yuan in online revenue leaves Topsports facing a difficult road. A silver lining is that offline cooperation will continue. Topsports stated it "understands and respects Nike's channel adjustment decision based on its long-term brand development strategy" and will continue to maintain close offline cooperation with Nike based on the principle of mutual benefit.

However, the offline channel also faces challenges. For the first quarter of the 2026/27 fiscal year, Topsports' total retail and wholesale sales value declined by approximately 10% to 20% in the low range year-on-year. Pressure on offline foot traffic has not eased.

In reality, Topsports has long been aware of the risks of over-reliance on the two giants. In recent years, it has successively secured exclusive operating rights in China for premium outdoor brand Norrøna, as well as running brands norda, Soar, and Ciele Athletic. In May 2025, Topsports entered into an exclusive China market operation agreement with Norrøna. It also opened its first running lifestyle concept store, ektos, in Shanghai. However, market reception for these new brands still requires time to validate—Topsports merely stated that "current sales of Norrøna are in line with our expectations." Whether these new brands can fill the significant void left by Nike remains uncertain.

It's important to note that Nike's move is not solely targeting Topsports. Another distributor, Pou Sheng International, issued an announcement on the same day confirming receipt of a similar termination notice. Revenue from Nike's online platform contributes about 15% of Pou Sheng's total revenue. While RuiLi Sports has not yet received a notification, anxiety within the entire distributor system is palpable.

Some retail industry insiders point out that the DTC transformation pace for apparel brands is relatively late compared to other retail sectors. Nike prioritized consolidating online channels because the landscape of mainstream e-commerce platforms is concentrated, making it easier and more cost-effective for brands to establish direct-operated stores online. Operating physical offline stores in China is considered "among the most challenging in the world globally"—factors like commercial district shifts, customer traffic diversion, and even storefront orientation can impact single-store efficiency. From this perspective, Nike's choice to start with online channels is grounded in practical considerations.

Some industry analysts believe that Nike's proactive contraction of online channels is expected to result in some sales loss and may potentially create market space for local competitors. However, relying solely on channel control to escape the discount "involution" does not solve Nike's fundamental problem. "For Nike to truly regain its status as a trendsetter, whether it can capture Chinese consumers through product innovation is the ultimate question."

Twenty-seven years ago, Topsports helped Nike open the door to China. Twenty-seven years later, Nike has decided to walk through that door on its own. The loud crash as that door closes not only shattered tens of billions in market value for Topsports but may also signal the end of an era—an era where simply expanding distribution channels guaranteed easy profits, a time that may now be gone for good.