Nike China Strategy to Lift Margins Despite $1 Billion Sales Hit, Bernstein Says

Nike Inc. is expected to significantly improve its China operating margins in fiscal 2027, even as the sportswear giant sacrifices about $1 billion in revenue by overhauling its sales strategy, according to Bernstein analysts.

The brokerage forecasts Nike’s China operating margin will rise by 200 basis points to 24% in fiscal 2027, outperforming Wall Street’s expectation of largely unchanged margins. The improvement is expected to come from the company’s decision to eliminate partner-operated online storefronts and reduce its presence in discounted wholesale channels, reinforcing its premium brand positioning.

Bernstein estimates that Nike’s wholesale online business accounts for a high-teens percentage of its China revenue. As this channel is phased out over the coming quarters, the broker expects a revenue decline of roughly $1 billion. The move is projected to contribute to a low-teens constant-currency sales decline in China during fiscal 2027, reducing Nike’s overall company growth by approximately two percentage points.

Nike recently confirmed with its major wholesale partners, Topsports and Pou Sheng, that partner-operated online stores will stop selling Nike products beginning in January 2027. After the transition, the company’s digital presence in China will be limited to its official website, mobile app, and flagship stores on leading e-commerce platforms, including Tmall, JD.com, and Douyin.

The strategy is designed to curb gray-market sales and excessive discounting, which Nike believes have weakened its brand image. Bernstein noted that while the initiative supports a more premium digital marketplace, many customers who previously purchased discounted Nike products are likely to switch to competing brands instead of paying full price through Nike’s direct channels.

Nike has steadily lost market share in China since 2020, with its share falling from 27% to 16% by 2025. Bernstein expects Adidas to be the biggest near-term winner as retailers replace lost Nike online sales with Adidas products, which continue to post double-digit growth in China. Domestic brands such as Anta and Li Ning are also expected to benefit in lower-priced segments, while premium brands like On and Hoka are likely to see minimal impact.

Despite lowering its Nike price target to $68 from $72 and cutting its fiscal 2027 earnings-per-share estimate to $1.96, Bernstein maintained an Outperform rating, citing an estimated 58% upside from Nike’s July 28 closing price of $43.05 and forecasting a return to mid-single-digit China growth in fiscal 2028.