Topsports International Holdings Limited, which is Nike’s largest distributor in Mainland China (PRC), reported that its Board of Directors (Board), together with its subsidiaries (Group), provided an operational update on the Group’s business for the second quarter of fiscal 2027 and a full financial report for the first half ended August 31, 2026.
The company also reiterated its prior warning to its shareholders and investors that the Group received official notice from Nike on July 21, 2026 that informed the the Group that its existing online sales of Nike’s products in Mainland China would terminate completely, effective January 1, 2027, but with an additional note that indicated expectations that the impact to the Group would last longer than expected.
In its July note, the Board said it believed that the short term negative impact of the termination on the Group’s business would be significant, as the revenue contribution from the online sales of Nike’s products accounted for approximately 22 percent of the total revenue of the Group for the financial year ended February 28, 2026.
“Notwithstanding the short term negative impact, the Company remains committed to working closely with Nike on the offline sales arrangements on a mutually beneficial basis,” the company said in its July note.
Now, the Board is suggesting that the impact of the Nike pull-back will be compounded by the ongoing subdued consumption environment, leading to the the Group facing considerable business challenges for “some time in the future.”
The Board said it will continue to assess the corresponding impact.
“As Nike’s largest distributor in Mainland China, Topsports’ partnership with Nike spans over decades, and we always uphold the principle of mutual benefit, win-win collaboration and shared growth,” the Board said in its report this week. “The Group remains committed to working closely with Nike on the offline sales arrangements on a mutually beneficial basis.”
Market Assessment
From an industry perspective, the Board indicated that while the underlying consumer demand for sports and a healthy lifestyle remained solid, the growth logic of China’s sportswear industry has undergone a profound transformation.
“The Group is currently not only under the cyclical pressure of a slower demand recovery, but also facing the structural challenges arising from channel transformation and business model iteration,” the Board wrote in its first half report. “Offline retail no longer relies solely on foot traffic, shifting towards user operation, which is centered on scenario-based experiences, community engagement and professional services. Online channels, likewise, have evolved from monetizing purchased traffic to deep content cultivation and long-cycle management of user assets. Overall, the industry has moved beyond broad-based growth into a new stage, where specialized products, refined operations and omni-channel synergy stand at the core of competition.”
The Board said consumers have placed greater emphasis on specialization and functionality of products, weighing both “value for money” and “emotional value” in their purchasing decisions.
“Therefore, competition in mass-market and casual categories has intensified, while premium, specialized and scenario-based segments have maintained sound growth momentum,” the Board report indicated. “The channel structure continues to evolve, traditional offline channels remain under pressure, while online formats have become increasingly diversified. Emerging models, such as local lifestyle services and instant retail, have connected online and offline transaction and fulfillment pathways. The long-term value of private domain user operation has become increasingly prominent, and channel collaboration has also evolved from broad coverage to deep synergy and ecosystem co-construction.”
Against this backdrop, the Group said it has adhered to efficiency as its top priority, continuously optimizing its omni-channel layout and resource allocation.
2027 Fiscal Second Quarter Summary
Looking to the overall business for the fiscal second quarter, the Board reported that total sales of retail and wholesale operations registered a low-teens decline on a year-over-year basis.
As at August 31, 2026, the gross selling area of directly-operated stores declined by 5.2 percent since the end of 2027 first quarter, and declined by 12.9 percent on a year-over-year basis.
Total sales of retail operations refers to the sales (including but not limited to value added tax) from transactions with consumer made in directly-operated stores (offline channel) and on e-commerce platforms (online channel). Total sales of wholesale operations refers to the sales (including but not limited to value added tax) from transactions with downstream retailers.
2027 Fiscal First Half Summary
Group revenue for the fiscal first half (H1) decreased 11.3 percent year-over-year to RMB 10.9 billion. The gross profit margin decreased by 90 basis points year-over-year to 40.1 percent of revenue, with a deeper discount rate indicated as the primary driver affecting the gross margin.
The Group said it consistently maintained its disciplined approach to expenses management, with the selling and distribution expenses ratio maintained at 29.1 percent of revenue and the general and administrative expenses ratio remained at 4.1 percent, with both said to be in line with the corresponding period last year.
Profit attributable to the company’s equity holders decreased 16.0 percent year-over-year to RMB 662.6 million, with the profit margin attributable to the company’s equity holders decreasing by 30 basis points year-over-year to 6.1 percent.
Inventory
As at August 31, inventory decreased by 15.7 percent compared with August 31, 2025, and declined by 10.4 percent compared with February 28, 2026. Inventory turnover days stood at 146.4 days, down 3.6 days year-over-year, with inventory levels maintained within a healthy range.
Cash Flows
A steady cash flow provides the foundation for long-term shareholder returns. During the period, the Group’s net cash generated from operating activities amounted to RMB 1.84 billion.
As at August 31, 2026, the Group’s bank balances and cash stood at RMB 3.09 billion.
The Board said it has resolved to declare an interim dividend of RMB11.00 cents per ordinary share for the financial year ending February 28, 2027, with a dividend payout ratio of 102.9 percent.
Image courtesy Topsports International Holdings Limited
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