Nike to End Online Authorization, TopSports Shares Slide to Penny Stock Territory

By Jiang Zheng, China Business Journal

Topway International Holdings Limited (06110.HK), widely recognized as the "king of channel distributors" in China's sportswear market, is facing a deepening market value crisis.

Valuation Crisis: Stock Falls to "Penny Stock" Territory

As of the close on September 23, Topway shares were trading at HKD 1.015 per share, giving the company a total market capitalization of approximately HKD 6.294 billion.

Since its listing on the Hong Kong Stock Exchange in 2019—following a spin-off from Belle International—Topway's market value has plummeted from an initial HKD 57 billion. The stock has been on a downward trajectory since roughly 2024. On September 11, the share price briefly fell below HKD 1.00, and from September 15 to September 18, it closed below that threshold for four consecutive trading days—a level commonly referred to as "penny stock" territory in Hong Kong markets.

Multiple financial institutions have downgraded their valuations of Topway. Daiwa Securities slashed its target price by 40.8%, from HKD 1.79 to HKD 1.06 per share, while maintaining a "hold" rating.

Core Trigger: Nike to Terminate Online Sales Authorization

According to Sun Wei, a top-level design expert and strategic marketing consultant at Tsinghua University, the primary driver of the recent stock volatility is Nike's decision to terminate its online cooperation with Topway.

Topway officially confirmed that its online platform sales of Nike products in mainland China will be fully terminated effective January 1, 2027. In the 2025/2026 fiscal year (March 1, 2025 to February 28, 2026), Nike product sales through online platforms contributed 22% of Topway's total revenue.

"This change will impact Topway's revenue and profit over the next several years. Overall, the company's revenue growth rate and profit margins are expected to trend downward. Since stock prices typically reflect the discounted value of a company's future net cash flows, logically the share price is also trending downward," Sun Wei said.

Topway is Nike's largest distributor in mainland China, and its business is heavily dependent on Nike's growth momentum. Together, sales of Nike and Adidas products have consistently accounted for over 85% of Topway's total revenue.

Broader Concerns: Business Model Under Scrutiny

SPDB International noted in a research report that while Topway's revenue decline in May–June was slightly narrower than in the first quarter of fiscal 2027, the overall trend remains weak. The termination of Nike's online authorization may also raise questions about Topway's—and fellow distributor Pou Sheng's—bargaining power with top-tier brands like Nike and Adidas.

"Given the significant uncertainty in medium- to long-term performance and the questioning of the long-term investment thesis, market sentiment toward Topway is unlikely to improve significantly for some time, and valuations may remain under pressure," the report stated.

Yang Dajun, president of UTA International Brand Investment Management Co., Ltd., argued that Nike's move is merely a trigger. "Capital markets focus on long-term value, and Topway's business model is not favored by investors."

"Topway is a brand distributor. In the Chinese market, many brands are moving toward a DTC (direct-to-consumer) model. Brands are gradually reclaiming distribution and franchise rights in key cities. Distributors like Topway are inevitably affected," Yang said.

Notably, Pou Sheng Sports, another major Nike and Adidas distributor, now has a market capitalization of less than HKD 2 billion and has traded below HKD 1 per share for over four years.

China Business Journal sent an interview request to Topway regarding these issues but received no response by press time.

Brand "De-feudalization" Creates Distributor Dilemma

Topway has been distributing sports products for nearly 30 years. Its predecessor entered the business in 1999 and established a partnership with Nike. By 2004, it had partnered with Adidas and became Nike's largest retail partner in China. It later added Puma and other brands, and in 2012 became Adidas' largest global retail partner.

Today, Topway represents nearly 20 brands, including core brands Nike and Adidas, as well as Puma, Converse, VF Corporation brands (Vans, The North Face, Timberland), ASICS, Onitsuka Tiger, Skechers, NBA, Li-Ning, HOKA ONE ONE, Kailas, and norda®.

However, Nike and Adidas remain Topway's revenue backbone. Their combined sales accounted for 85.8%, 86.3%, and 86.7% of total revenue in fiscal 2024, 2025, and 2026, respectively. The other dozen-plus brands have consistently contributed only about 15%.

Both Nike and Adidas are now adjusting their operational strategies in China, most notably by strengthening their direct-to-consumer (DTC) models.

In late 2025, Nike executives acknowledged during an earnings call: "Our brand, especially in digital channels, has been engaging in frequent discounting, which has weakened our brand influence across the market. This has led to wider discount rates and higher return rates, significantly impacting profitability in Greater China."

Nike Group Vice President and Greater China General Manager Shen Kaixi also admitted that Nike's market presence in China had become "too fragmented," and that some previous initiatives had failed to deliver consistent, credible consumer experiences or expected growth.

Yang Dajun noted that top sportswear brands in China work with multiple distributors, leading to stores in the same mall being managed by different agents. This creates confusion in pricing, service, and brand identity. As customer acquisition costs rise, such fragmented competition cannot support the refined service models brands now require.

For Adidas, the company is exploring partnerships beyond traditional sportswear distributors. In 2023, Heilan Home (HLA) secured an exclusive retail distribution agreement for Adidas' FCC series in mainland China.

"HLA's resources in casual wear can help Adidas tap into the lower-tier market and find new growth," Yang said.

Cheng Weixiong, founder of Shanghai Liangqi Brand Management Co., Ltd. and a brand strategy consultant in the footwear and apparel sector, said: "When brand owners fail to adapt to domestic market changes, sales naturally decline. Channel distributors like Topway cannot influence brand promotion, product development, or localization, making them vulnerable to restructuring."

Sun Wei added: "Strong brands handle their own brand operations. Partners are merely distributors, not exclusive operators. Essentially, it's outsourced labor."

Transitioning to Brand Operator?

Topway has long sought to move beyond its role as a distributor. In partnerships with brands such as norda®, Norrøna, and Sierra Designs, Topway has adopted an exclusive operating model, managing brand communication, marketing, omnichannel sales, and consumer operations end-to-end.

Cheng Weixiong sees this as a shift from channel distributor to brand operator. "This requires Topway to build an operations team, reposition brands, and integrate R&D and supply chains. But this takes time—at least two to three years before results show."

Data shows that in fiscal 2026, core brands (Nike and Adidas) still contributed 86.7% of total revenue, little changed from 87.3% five years ago. This suggests that the brands Topway operates exclusively have yet to achieve explosive growth or become major revenue drivers.

Sun Wei believes Topway's core strength lies in channel operations—distribution density, depth, and breadth, as well as sales efficiency. Brand operations, by contrast, focus on winning customer trust and loyalty through positioning, strategy, and communication.

"Topway is trying to upgrade from brand distribution to exclusive brand operations and even incubating its own brands. In my view, it could be more aggressive. Acquiring exclusive rights to overseas sports brands in China could significantly improve its business model and enhance its valuation and brand value," Sun said.

He cited the example of Jiaman Garments, which started as a footwear and apparel distributor before acquiring the Hush Puppies trademark and IP in Greater China, transforming from a channel agent into a brand operator with owned brand assets.

"To successfully transition into a brand operator, Topway needs to restructure its organizational system and product portfolio. This requires determination and sustained investment," Cheng Weixiong concluded.