Nike's China Overhaul to Boost Margins at a $1 Billion Revenue Cost, Bernstein Says

Nike Inc.'s strategic overhaul of its digital sales channels in China is projected to boost the region's operating margins by 200 basis points to 24% by fiscal 2027, though it will come at a significant cost to its top line. The move could erase roughly $1 billion in revenue, according to a recent analyst note from Bernstein.

A Shift to Premium Digital

Nike and its two largest Chinese wholesale partners, Topsports and Pou Sheng, confirmed that partner-operated online storefronts will stop selling Nike products starting in January 2027. After this date, Nike's official digital presence in China will be consolidated to its direct-to-consumer app and website, along with flagship stores on major platforms like Tmall, JD.com, and Douyin.

The company's goal is to curb the deep discounting and gray-market reselling that management believes has eroded its brand equity. The strategy aims to create "a more premium digital marketplace," as described by Nike's Greater China General Manager Cathy Sparks in an open letter cited by Bernstein.

The Financial Trade-Off

Bernstein analysts estimate the wholesale online channel accounts for a high-teens percentage of Nike’s China business. Winding it down is expected to create a 2-percentage-point drag on the company's total growth, with the broker forecasting a low-teens constant-currency revenue decline for the China segment in fiscal 2027.

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However, Bernstein cautions that most of these lost sales are unlikely to be recaptured through Nike's direct channels. The note suggests that customers accustomed to buying discounted products online are more likely to switch to a competitor than to pay full price. Reflecting this impact, Bernstein lowered its price target on Nike stock to $68 from $72 and reduced its fiscal 2027 earnings-per-share (EPS) estimate to $1.96 from a prior $2.10.

Competitive Landscape

Nike's market share in China has steadily declined since its 2020 peak of 27%, falling to 16% by 2025. Bernstein identified several competitors poised to benefit from Nike's strategic shift:

• Adidas is seen as the biggest near-term beneficiary, as wholesale partners will likely increase their focus on the brand to replace lost Nike volume.
• Domestic brands Anta and Li Ning are expected to gain customers at lower price points previously served by Nike's online discounts.
• Premium Western brands like On and Hoka are predicted to be largely unaffected due to their limited wholesale distribution in the country.