Nike's channel reset has triggered a lose-lose risk for Taobao, putting pressure on profits and dividends, downgrading it to equal weight (Morgan Stanley)

Street Signal | Nike's channel reset has triggered a lose-lose risk for Taobao, putting pressure on profits and dividends, downgrading it to equal weight (Morgan Stanley)

The core reason is that Nike took back its online distribution channels in Greater China, causing Topbo to lose online Nike sales that accounted for 22% of its original revenue. This is not only a loss of revenue, but also means a reduction in store area and number.

The improvement in gross profit margin is offset by an increase in expense leverage, and the risk of dividend payment has increased significantly. The market may have been too optimistic about the stability of the relationship between Taobao and Nike. This channel reset has exceeded market expectations and is a typical "lose-lose" situation.

One-sentence conclusion: Nike's channel reset has directly shaken the foundation of Taobao's business model. Both short-term profits and mid-term prospects are facing major uncertainties, and the valuation center is facing a downward shift. Positive/negative: negative for Taobo International (6110.HK).

Although the current stock price has fallen, the downward revision of profit forecasts may not have been fully digested by the market, and the negative impact is still being released. Catalysts:

1) Topbo's management's performance guidance for FY27, especially the specific plan for revenue decline and store shrinkage; 2) whether Nike will provide additional support to mitigate the impact of channel reset; 3) specific progress in Topbo's deepening of cooperation with other brands (such as Adidas) to hedge risks.