TOPSPORTS rebounds 7.5% as Nike commits to China retail partners

TOPSPORTS (06110.HK) surged 7.47% to HKD 1.87 at midday on Thursday, snapping a 10-day losing streak after Nike management pledged to "reshape" its China business alongside local retail partners, easing fears that the distributor could lose online distribution rights.

"Nike's emphasis on its commitment to Chinese retail partners appears to rule out previous pessimistic market expectations that TOPSPORTS would completely lose its online distribution rights," Citi analysts said in a note, launching a 30-day positive catalyst watch on the stock.

The stock opened 2.3% higher and touched an intraday high of HKD 1.91, with 13.6 million shares changing hands for HKD 25.5 million in turnover. Short selling accounted for 23.5% of trading volume. The rebound followed a 10-session decline that had erased roughly a quarter of the stock's value amid concerns over Nike's direct-to-consumer push in China.

Citi maintained its Buy rating on TOPSPORTS with a price target of HKD 3.8, implying more than 100% upside from the current level. The target is based on 16 times calendar 2026 forecast price-to-earnings, representing a 45% discount to Nike's historical trading multiple to reflect lower earnings visibility in the sportswear sector.

Nike's China strategy takes center stage

Nike reported fiscal fourth-quarter revenue of £8.3 billion ($10.5 billion) on Tuesday, beating the £8.2 billion consensus estimate, though sales fell 1% from a year earlier. The beat was overshadowed by a 17% decline in Greater China revenue on a constant-currency basis, deepening from a 10% drop in the prior quarter as local rivals Anta and Li Ning continued to gain market share.

During the post-earnings call, Nike CEO Elliott Hill outlined a three-pillar "reshaping" strategy for China: returning to sports and innovation, enhancing premium positioning through closer collaboration with retail partners, and deepening connections with local culture. CFO Matthew Friend said the company is working with retail partners to clear excess inventory in the market.

The commitment comes as offline channels still account for more than 50% of Nike's China retail sales and face significant headwinds from weak foot traffic. Citi noted that Chinese retailers such as TOPSPORTS operate multiple competing brands simultaneously, including Adidas, and are non-exclusive — meaning losing online distribution rights could have led retailers to shift resources to competitors and accelerate offline store closures.

The Hang Seng Index was trading 0.3% higher at 21,850 points during the session, while the Hang Seng Tech Index added 0.6%. The offshore yuan held near 7.25 per dollar, and China's 10-year government bond yield stood at 2.15%.

This article is for informational purposes only and does not constitute investment advice.