Citi says Nike's China DTC shift to benefit Li Ning, Anta Sports

Citi said Nike's shift to a direct-to-consumer model in China will erode its market share, benefiting domestic rivals Li Ning and Anta Sports.

"The change in Nike's distribution strategy will result in a loss of its future market share in China," Citi wrote in a research report, "generating positive impacts on Chinese domestic brands and other competing international brands."

Nike will terminate most online distribution partnerships with Chinese retailers from January 2027, moving to a DTC model on Tmall, JD.com and Douyin. The move follows a 17% decline in Greater China sales in the fourth quarter on a constant-currency basis, steepening from a 10% drop in the prior period. The company's 16 store partners in China, which own and manage thousands of Nike stores, will be affected.

Topsports, which generates 22% of its revenue from Nike online sales, saw its shares tumble 22.5%, wiping about HK$3 billion from its market capitalization. Pou Sheng shares fell 10%. Topsports said in an exchange filing it expects a "significant" short-term negative impact but remains committed to working with Nike on offline sales.

Among Chinese domestic brands, Li Ning is expected to become the biggest beneficiary because its product pricing is closer to Nike compared with other local peers, Citi said. Anta Sports was named the broker's top pick in the Chinese sportswear sector, followed by Li Ning and then Topsports.

The implications for investors are clear: Nike's strategic pivot creates a structural tailwind for Chinese sportswear brands as consumers shift to alternatives. The next catalyst will be Nike's fiscal first-quarter earnings, due in September, which will show whether the DTC transition is stabilizing or accelerating the sales decline in China.

This article is for informational purposes only and does not constitute investment advice.