Nike urgently needs to cut back on bloated inventory.

Can AI · Cathy Sparks turn around the channel dilemma with retail experience?

Produced by | Huxiu Business Consumer Group

Author | Liu Shuhan

Editor | Miao Zhengqing

Cover Image | Visual China

Nike wants to find its former self, but its transformation pace still needs to accelerate.

Recently, Nike released its financial report for the third quarter ending February 28, 2026. During this period, revenue was $11.3 billion, flat compared to the same period last year; North American sales grew by 3% showing improvement, but continued weakness in Greater China dragged down overall performance. In the third quarter, Nike’s revenue in Greater China was $1.61B, down 10% year-over-year (fixed exchange rate). Company executives pointed out that the Chinese market, along with its Converse brand and sports leisure product lines, remains the main weak points.

Under the leadership of Nike Group CEO Elliott Hill, Nike has been continuously pushing channel restructuring in recent years, correcting previous over-reliance on direct-operated strategies, attempting to reverse the impact and drag caused by years of excess inventory. However, during this quarter’s earnings call, the veteran who returned to Nike admitted, “The transformation process is slower than I expected.”

In the highly anticipated Greater China region, Nike’s recovery has always been sluggish. Since 2021, Nike China has been under continuous pressure, with multiple quarters of negative growth. CFO Matthew Friend also warned that starting from March, in the fourth fiscal quarter, sales in Greater China are expected to continue to decline sharply by about 20% year-over-year.

This weak performance has triggered a strong reaction in the capital markets, with Nike’s stock price plunging over 15%, hitting a new low since 2015.

In contrast, Nike’s other core competitors in China are on a steady growth trajectory. By the end of 2025, Adidas had achieved positive growth for eleven consecutive quarters in China, while brands like Lululemon, On Running, and HOKA have maintained high growth rates in the Chinese market. Nike’s moat is now under strong attack from rivals.

Under heavy pressure, Nike Greater China is adjusting its senior leadership. Cathy Sparks will succeed Dong Wei, the former Chairman and CEO of Greater China. Sparks will serve as Vice President and General Manager of Greater China. Huxiu learned that Cathy Sparks has 25 years of Nike experience, starting as a clerk at the NikeTown store in Portland.

She faces a China market unlike any Nike has encountered before: new entrants are catching up rapidly, while established giants remain formidable. Under this double pressure, Nike’s effort to regain its voice in China faces significant challenges.

Continuing to open “capillaries”

Since 2017, Nike has launched an aggressive “DTC” (Direct-to-Consumer) revolution worldwide, aiming to bypass traditional retail and wholesale channels, establishing direct contact with consumers through online and offline stores to improve gross margins.

In theory, this is a good way to increase profits. However, footwear and apparel are highly inventory turnover-sensitive markets that rely heavily on distribution networks. Over-reliance on DTC alone increases Nike’s inventory handling costs, which historically fell on wholesale retailers scattered across regions. To clear inventory, Nike has been forced to promote discounts on its official website, disrupting the stable market pricing system, reducing profits, and damaging its brand image in consumers’ minds.

The channel crisis saw a turning point in October 2024. Elliott Hill returned to Nike, succeeding John Donahoe as the new CEO. In the first half of 2024, Nike had already begun to “bow” to distributors, seeking a balanced distribution strategy between wholesale and DTC. In China, it continued to adjust its cooperation with Baosheng Sports and Tabor Sports.

Within a year, Nike’s inventory management showed initial signs of effectiveness. Management stated that in the third quarter, Nike expanded store pilot programs to 100 stores worldwide, including the Shanghai House of Innovation, by optimizing product selection, displays, and replenishment, resulting in improved foot traffic and same-store sales compared to last year. Meanwhile, SKU counts in Greater China decreased by over 20% year-over-year, and partner inventories also declined by double digits.

By clearing some stale stock within channels, Nike’s irrational promotions in the past were temporarily halted, and the sales and profitability of full-price products improved. Not relying on discounts to boost sales also contributed to profit growth. In the third quarter, pre-tax profit in Greater China increased by 11% year-over-year to $467 million.

However, this improvement came at a cost. In the third quarter, revenue in Greater China declined by 7% year-over-year, with Nike Direct down 5%, digital sales down 21%, and wholesale business down 13%.

More critically, the company believes this adjustment will not end quickly. CFO said Nike will continue to reduce near-term shipments to match the true full-price demand in China and will further cut promotions and old stock in digital channels. These actions are expected to continue weighing on revenue growth into fiscal 2027. In the fourth quarter, revenue in Greater China is projected to decline by about 20%.

This aligns with industry development patterns. A senior apparel industry insider told Huxiu, “The development cycle of footwear and apparel industries determines that for a company of Nike’s size, after a new CEO reorients the company, the fastest results usually take about a year.” But to fully optimize the brand or make significant progress, it often takes two or three years or even longer.

The problem is, China’s fast-changing market won’t give Nike much time for transformation. Local brands, emerging brands, and traditional giants are eating away at Nike’s market share at a faster pace, and its defensive position has already become passive.

For multinational brands, the core of localization strategy depends on decision-making efficiency and flexible execution at the local level. Several Nike China employees told Reuters that Nike’s top-down decision-making approach weakens its responsiveness to local market needs.

“Top-down” decision-making refers to a management model where headquarters formulates strategies centrally and enforces them on lower levels. This approach causes Nike to respond slowly in China, with local teams struggling to quickly adjust strategies. It is reported that despite several quarters of revenue decline in Greater China, some slow-moving products are still “pushed” to retail partners, increasing inventory pressure. Moreover, compared to other sports brands that boost sales through localized designs, Nike’s local influence in China still needs strengthening.

This situation may improve with the new China head, Cathy Sparks. Nike management explicitly stated during the earnings call that her core mission is “to solve shelf logic, clear up bloated inventories, and repair channels.” With 25 years of frontline retail experience, she is expected to break through local execution bottlenecks and restore channel ecology. Whether she can leverage the flexibility of local operations to overcome the constraints of headquarters’ centralization will be key to Nike’s self-rescue in China.

Return to sports, focus on products

The inventory crisis is not the root cause of Nike’s difficulties in China but a late warning. Even before the slowdown in reports, Nike’s brand appeal in China was already declining, with the rise of local brands and emerging international streetwear brands challenging Nike’s market position.

95-born sneaker enthusiast Yang Tao has long “lost love” for Nike. In 2017, while still in high school, Yang loved playing basketball and watching NBA, and thus fell in love with Nike basketball shoes like AJ1. During that time, Yang saved almost all his money to buy Nike’s AJ1 sneakers.

At that time, a pair of basketball shoes costing around a thousand yuan could be resold for over 7,000 yuan on the secondary market. At its peak, rare colorways of AJ1 even became a “financial product,” Yang told Huxiu, with buyers using them as hard currency to settle debts.

By around 2021, Yang no longer bought Nike products. He felt Nike’s designs had become increasingly homogenized, with little innovation beyond reissues of classic models, and issues like high prices, low quality, and poor quality control frequently occurred. Many consumers shared similar views.

More critically, Nike’s blurred brand positioning caused it to miss the most explosive emerging opportunities in China’s sports market.

The current hot trend is outdoor sports, which is experiencing rapid growth. According to the “2026 Outdoor Sports Footwear and Apparel Consumption Trend Report,” by 2025, China’s outdoor footwear and apparel market will surpass 100 billion yuan, with domestic brands accounting for 45%, overtaking European and American brands. Urban light outdoor, trail running, camping, and other activities are becoming nationwide consumer trends. The landscape of brands within this sector is rapidly reshuffling. In 2025, Anta’s outdoor brands like Arc’teryx, Descente, and KOLON all saw growth in Greater China, with Descente surpassing 10 billion yuan in annual revenue and KOLON’s growth approaching 70%. Local brands like JiaoXia and Camel are also expanding steadily, covering mainstream consumer scenarios.

In stark contrast to this sector’s explosion, Nike has been absent for a long time.

However, Nike is adjusting its strategy.

Huxiu learned that Nike is focusing on niche and filling gaps. For example, the ACG brand, established in the 1980s, has been rebranded as an independent brand, now focusing more on hardcore outdoor scenes like trail running, hiking, and all-terrain exploration. Meanwhile, Nike is also making efforts to fill gaps in the outdoor sector. The third-quarter financial report shows that Nike’s running business in Greater China achieved double-digit growth.

But this “return to sports” self-rescue is still in its early stages. The ACG layout has just been implemented, the growth of the running category has yet to reach scale, and the depth and breadth of local storytelling are still insufficient. More critically, Nike’s “local market discourse power” remains a constraint, continuing to slow product innovation and brand localization.

Elliott Hill has already recognized Nike’s awkward position in China. During the earnings call, he said, “We believe future growth will come from athletic performance, but the reality is, in China, we have become a casual lifestyle brand competing mainly on price.”

2026 will be a year of global sports events, with the Milan-Cortina Winter Olympics, the US-Canada-Mexico World Cup, and domestic events like the Beijing Marathon, WTT China Grand Slam, and local trail races all happening. The enthusiasm for sports among the public remains high, providing a window for Nike’s “return to sports” strategy.

Nike has accelerated its investment in sports resources. It launched new national team jerseys during the World Cup cycle, increased equipment collaborations with the Chinese Super League, activating core football categories, and also hosted events like the After Dark Tour night runs…

But the benefits of a sports boom are ultimately external support. To truly escape difficulties, Nike needs not only to leverage sports events to tell compelling sports stories but also to improve responsiveness to the Chinese market, ensuring product innovation and brand narratives keep pace with local demands.

However, time is running out for Nike. If by the end of fiscal 2026 it cannot produce breakout hit products, Nike Greater China may enter a long-term “slow growth” phase as a late-stage giant.