Nike is reorganizing its structure, marking the end of the era of independence for the Greater China region.

Starting from fiscal year 2028, Nike's organizational chart will no longer include a separate Greater China region.

On October 1, Nike released its first-quarter results for fiscal year 2027, ending August 30. During the period, the company achieved revenue of $11.213 billion, a 4% decrease year-over-year (a 5% decrease excluding currency effects); net income was $712 million, a 2% decrease year-over-year, while gross margin increased by 0.6 percentage points year-over-year to 42.8%.

In this quarter, Nike's revenue in Greater China was $1.18 billion, a 22% year-over-year decrease, or a 26% decrease excluding currency effects; wholesale revenue decreased by 28%, and Nike Direct revenue decreased by 13%. EBIT in Greater China further decreased by 34% to $248 million.

In contrast, North American revenue has recovered to 2% growth, while revenue in the Asia-Pacific and Latin America regions has remained essentially flat at constant exchange rates.

Alongside this financial report, a new initiative called "Pace" was also announced.

Nike defines Pace as a "business model transformation" rather than a new growth strategy. CEO Elliott Hill stated that Sport Offense has proven effective in professional sports businesses such as running and football over the past year, and Pace aims to expand this model across the entire company.

The first level of change occurs in costs and the supply chain.

Nike plans to shift its supply chain from a relatively fixed cost structure to a more flexible model, improving its responsiveness to changes in demand. The company expects Pace to achieve cumulative savings of approximately $2.5 billion by fiscal year 2031, while incurring approximately $1 billion in pre-tax implementation costs, with the savings expected to materialize primarily in fiscal years 2029 and 2030.

The second layer involves a global capability restructuring. Nike will build a new capability center in Bangalore, India, to further centralize some of its scalable and shareable corporate functions and capabilities.

The third layer directly addresses the organizational structure. Nike will reduce management levels and allocate more resources to countries, regions, and cities, empowering local teams with greater operational responsibility.

Starting in fiscal year 2028, Nike's existing four regions will be reduced to three: North America and Latin America will be merged into Americas; Europe, the Middle East and Africa will remain unchanged; and Greater China will be merged with Asia Pacific into APGC, with the regional leadership team located in Singapore.

This means that, at the organizational level, the "Greater China Region," which has existed independently for many years, has been downgraded.

When Consumer Direct Offense was launched in 2017, Nike also significantly reduced its global regions, but still maintained the independent status of the Greater China region; subsequently, Consumer Direct Acceleration further strengthened digital channels, direct sales and global unification.

Over the past few years, the side effects of this system have gradually become apparent: the distribution channels have shifted towards direct sales, wholesale partnerships have been weakened, and products have become increasingly reliant on a few global lifestyle blockbusters.

Hill's Win Now and Sport Offense initiatives, which he spearheaded after taking office, have begun to reverse this trend. Nike is reorganizing its products, marketing, and channels around specific sports such as running, basketball, and football, and restoring relationships with wholesalers.

In the latest quarter, Nike's Performance business still achieved high single-digit growth, and several professional sports categories such as running and football achieved double-digit growth, but the scale was not enough to offset the decline in Sportswear, Jordan and the Chinese market.

In a sense, Pace is correcting the organizational aftereffects left by the previous round of globalization and DTC reforms. And China is precisely one of the markets where these problems have been most fully exposed.

According to Nike's plan, Greater China will remain an independent market unit under the APGC framework, and its operating approach centered on Chinese consumers and the local market will remain unchanged.

In the Chinese market, Nike is withdrawing from some online distribution channels that are "unprofitable and damaging to the brand." In the future, its digital business will focus more on Tmall, JD.com, the official flagship store on Douyin, as well as Nike.com and the Nike App, in order to reduce deep discounts and allow products to return to a more complete brand expression and full-price sales.

Regarding offline channels, Hill revealed that most of the physical stores of its partners in Greater China had not been updated in the past seven years. House of Innovation in Shanghai, after re-emphasizing sports, products, and the consumer experience, has achieved growth for ten consecutive months, which Nike sees as a model for channel recovery.

Nike is also increasing its local product development capabilities in China. This quarter, the company appointed its first Vice President of Local Product Innovation in Greater China and doubled the size of its local product innovation team, hoping to bring insights from the Chinese market more directly into the product development process.

Running has become one of the few businesses that have validated this strategy: China's running business has grown for six consecutive quarters, and continued to achieve double-digit growth in the latest quarter.

From channel cleanup and store renovation to local product development, Nike China's current focus is no longer simply on restoring scale, but on rebuilding the relationship between products, prices, and channels.

CFO Dave Denton stated at the earnings call that proactive channel cleanup will put further pressure on Greater China's revenue performance for the remainder of the fiscal year compared to the first quarter.

Nike also anticipates that proactive adjustments, including those in China, Sportswear, and Jordan Brand, will continue to impact fiscal year 2027 and partially extend into fiscal year 2028.

The integration of Greater China into the Asia Pacific region is not merely a regional merger. Nike is simultaneously eliminating independent regional levels while requiring its China team to be closer to the products and consumers.

Nike has been demoted one organizational level in the Chinese market, but it hopes to gain faster operating speed in return.

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