Top Nike Distributor Sounds Profit Alarm As BNP Says China Remains "Red Flag"
Nike has reported declining quarterly sales in China, where demand remains under pressure from mounting macroeconomic headwinds, and the brand continues to lose market share to newer competitors. This weakness has dented the shoemaker's broader turnaround efforts and suggests a much-needed reset in the Chinese market.
The stock is down 65% from its 2021 peak and is now trading at 2017 levels, as investors hope management will accelerate a turnaround plan to reverse this devastating multi-year bear market. However, a profit warning from a major distribution channel and commentary from BNP Paribas analyst Laurent Vasilescu only suggest more trouble ahead.
On Friday, Pou Sheng, a major distribution and retail channel for Nike in Greater China, warned that its 2025 attributable profit will likely plunge 57% year over year to RMB 211 million, while revenue is expected to decline 7.2% to RMB 17.1 billion.
Management blamed "operational deleverage, due to intense discount pressures and a decline in sales, which significantly constrained the Group's profitability."
"The mainland China market encountered subdued consumer confidence and elevated industry inventory levels, leading to aggressive promotional activities and impacting the Group's top-line performance," the supplier wrote in a profit warning update on Friday.
The supplier continued, "Its retail stores experienced a further slowdown in sales momentum, driven by sustained weakness in foot traffic and a mid-teens percentage decline in same-store sales. Lower-tier cities also saw sluggish foot traffic, substantially undermining the performance of its sub-distributor channels."
BNP Paribas analyst Vasilescu said Pou Sheng and Top Sports are the two main operators of Nike's roughly 5,000 mono-branded stores in China and noted that Top Sports also faces mounting structural pressure.
He noted this reinforces his long-term bearish view on Nike, saying his top concerns, overreliance on classic franchises, a flawed DTC strategy, and China weakness, are all continuing to unfold.
The BNP Paribas analyst downgraded Nike three years ago on the premise that China is a "red flag" for two major reasons: overdependence on classic franchises and a DTC strategy that is not working.
Vasilescu now sees a chance that Nike could announce a major China restructuring when it reports fiscal 3Q results on April 2.
He rates Nike as underperform with a $35 price target. Bloomberg data show Nike still has mostly bullish Wall Street coverage overall, with 28 buys, 14 holds, and 2 sells, and an average price target of $76.
Vasilescu expects Adidas earnings next week to show "strong" China trends, implying "Nike weakness."
Tyler Durden
Fri, 02/27/2026 – 15:45