TOPSPORTS, which is accelerating its decoupling from Nike, wants to take control of its own destiny

In a downward cycle, agents often have a harder time than brands.

As of February 2025, for the fiscal year 2025, sports retail operator TOPSPORTS (6110.HK) reported an annual profit of only 1.29 billion yuan, a year-on-year decline of 42%, marking a new low since its listing.

The main brands represented, Nike and Adidas, have not fully emerged from their difficulties.

From December last year to February this year, Nike's sales in the Chinese market fell by 17% year-on-year. Although Adidas shows signs of recovery, it still faces fierce competition from domestic brands.

Under significant pressure, TOPSPORTS increased its online promotional clearance efforts last year, resulting in a 4.5% year-on-year decline in inventory, while gross profit margin dropped by 3.4 percentage points to 38.4%, falling below 40% for the first time since its listing.

However, this is seen as a signal of its efforts to shed burdens and accelerate transformation.

In the past month, TOPSPORTS has secured exclusive operating rights in Greater China for the Norwegian high-end outdoor brand Norrøna and the British professional running gear brand soar.

Whether this investment for the future can yield the desired returns will require longer observation.

The Dilemma of Intermediaries

TOPSPORTS originated from the sports division of footwear giant Belle International.

As one of the earliest international sports brand distributors to obtain a franchise in China, TOPSPORTS had a very high starting point.

Founded in 1999, it signed a cooperation agreement with Nike and became Nike's largest distributor in China in 2004, also establishing a partnership with Adidas in the same year.

For many years, the contributions of these two major brands to TOPSPORTS' performance have consistently exceeded 85%.

In its early years, TOPSPORTS, as an intermediary, fully enjoyed the penetration dividends of giants in the Chinese market, growing into an industry leader in the domestic footwear and apparel retail market.

However, the overly concentrated revenue structure has buried risks.

Around 2017, Nike focused on increasing the proportion of direct-to-consumer (DTC) sales. This left intermediaries like TOPSPORTS with fewer popular and limited-edition products, and the price advantage was no longer present.

At the same time, TOPSPORTS, under the leadership of Hillhouse Capital, was aggressively opening stores.

During the two years from the privatization of Belle International to the listing of TOPSPORTS, it opened more than 1,300 stores, averaging 1.8 new stores per day, while inventory turnover days increased by one month.

By February 2020, TOPSPORTS had over 8,000 stores, with annual revenue reaching a historical peak of 36 billion yuan, but a downward trend in the number of stores had already begun.

The outbreak of external crises accelerated the changes.

Nike and Adidas successively encountered brand controversies in China, while domestic brands like Anta and Li Ning rose and captured market share.

With internal and external pressures intertwining, TOPSPORTS' situation became increasingly passive.

In the fiscal years 2022 and 2023, TOPSPORTS' revenue declined by 11.5% and 15.1% year-on-year, respectively, with the number of stores decreasing each year, while inventory turnover days remained as high as four and a half months.

Currently, TOPSPORTS is accelerating the pace of channel cleanup.

As of February 2025, TOPSPORTS had 5,020 offline stores, a year-on-year decrease of 18.3%.

While shedding inefficient tail-end stores, it is opening more large stores that emphasize social interaction and experience, with single-store sales area increasing by 7.2% year-on-year At the same time, it captures online traffic through a combination of platform e-commerce, content e-commerce, and private domain operations.

Currently, TOPSPORTS has 2,300 mini-program stores, 500 Douyin and WeChat video accounts, and 100,000 private domain communities.

In the fiscal year 2025, TOPSPORTS' direct online business is expected to grow by double digits year-on-year, accounting for more than 30% of its total.

Transformation Determination

While refining channel operations, TOPSPORTS is committed to expanding its brand matrix in the outdoor and off-road verticals.

Based on Puma, Converse, The North Face, and ASICS, in 2023, TOPSPORTS partnered with the rising star HOKA ONE ONE and Kailas.

However, the contribution of these brands to performance is still less than one-fifth of that of Nike and Adidas.

New sports brands generally favor the DTC model, and the resources allocated to agents and distributors are limited.

The price advantage of shoe and apparel distributors' wholesale business has almost been erased under the dual impact of e-commerce channels and brand direct sales.

These factors collectively constitute TOPSPORTS' determination to transform.

In 2024, TOPSPORTS reached a partnership with the Canadian high-end trail running brand norda. A year later, it signed exclusive agency agreements with Norrøna and soar.

TOPSPORTS has stated that there are two basic judgment dimensions when selecting brands: first, whether the opportunity in this niche market exists; second, whether the brand represents a "top presence" in that field.

In terms of price, the mainstream jackets under Norrøna are slightly higher than similar products from Arc'teryx; soar's iconic graphene racing vest is typically priced above 1,000 yuan.

Cultivating the market for high-end brands requires considerable time and investment.

Benefiting from accelerated destocking, TOPSPORTS has relatively sufficient cash on hand.

As of February 2025, TOPSPORTS had cash and cash equivalents of 2.59 billion yuan, an increase of over 30% year-on-year.

However, some opinions suggest that TOPSPORTS lacks experience in independently operating international brands, and the decision to operate multiple brands seems overly aggressive.

The "exclusive operating rights in the Chinese market" obtained by TOPSPORTS include brand positioning, local content systems, community building, online and offline channel construction, and even product education and communication context setting.

However, simply relying on channel penetration to sell jackets at prices comparable to Arc'teryx is clearly far from sufficient.

The company stated, "We will not blindly expand during operations just because we have advantages in offline channels, but rather enable online and offline to empower each other for organic business growth."

Norrøna plans to open offline specialty stores, intending to establish shops in major cities like Beijing and Shanghai.

Norda and soar may also present themselves in the form of collective stores offline, and the online sales channels for several brands are also being planned.

TOPSPORTS will not completely eliminate its dependence on shoe and apparel giants.

Although sales in China are still in a difficult period, the national influence of Nike and Adidas in the Chinese market cannot be underestimated.

A significant number of TOPSPORTS stores are located in lower-tier cities, where the fit for niche outdoor new brands may not be high enough.

Nike and Adidas also cannot do without TOPSPORTS They have repeatedly emphasized after the new management took office that they will strengthen support for key wholesale and retail partners.

Currently, TOPSPORTS is still the largest retail partner of Adidas globally and the second largest retail partner of Nike. The highest-end retail store HALO launched by Adidas last year in Wuhan still relies on the support of TOPSPORTS.

At this stage, the value of TOPSPORTS as an international brand agent remains irreplaceable.

However, to maintain an advantage in the era of outdoor sports, TOPSPORTS still has to make a strong effort