Wells Fargo convened a call Thursday featuring James Wong, the chief executive of a Chinese distribution and retail business with roughly $900 million in sales, who painted a grim near-term picture for Western athletic and athleisure brands operating in China. Wong attributed the deterioration to a combination of weak end-demand, mounting competition from domestic brands and heavy promotional activity compressing margins and sales momentum.
Wong described a market where local competitors are undercutting global players on value and speed to market, while sizeable fixed-cost investments in expansion have become burdensome as sales decline. Citing his own channel-level experience, he said the environment is creating elevated inventory risk for brands that have missed their sales targets.
Wells Fargo analysts concluded from Wong’s remarks that Nike and Lululemon are likely to continue facing headwinds in China, and that Deckers faces additional downside risk in the region, particularly around its HOKA franchise.
Promotional activity and channel disruption
According to Wong, retailers have accelerated discounting, with heavy promotions beginning in October ahead of the 11.11 and 12.12 shopping festivals. He said the closure of a China online channel in July that accounted for 20% to 25% of his Nike sales triggered steep clearance pricing - discounts in the range of 70% to 80% - and widespread inventory dumping across other retail partners.
Those clearance dynamics, Wong suggested, have worsened Nike’s trajectory in his business: Nike sales were down about 20% in the third quarter, a deeper decline versus roughly a 10% drop in the second quarter, and he anticipates the fourth quarter will deteriorate further.
Brand-level performance and competitive shifts
Wong reported mixed outcomes across brands and categories. Deckers’ HOKA was tracking modestly positive in the third quarter, up 2% to 3%, but that growth has decelerated from 4% in the second quarter and compares with more than 20% growth a year earlier. Wong attributed the slowing HOKA trend to intensified competition in trail running, where KAILAS now holds greater than 50% share and competes on value. He also flagged competitors such as Salomon, On, Nike ACG, Brooks, Anta, and Li-Ning as increasingly active in trail and outdoor segments.
Lululemon, Wong said, is showing signs of weakening driven by a crowded athleisure market and an apparent lack of product innovation. He characterized the brand as moving toward promotional activity and outlet channels, with growth constrained by saturation in tier-one cities and weak foot traffic in tier-two cities.
Other brands cited by Wong had relatively stronger momentum: On grew 15% in the third quarter versus 13% in the second quarter with inventory described as stable; Arc’teryx continued to report high double-digit growth as distribution shifted toward premium retail doors; Adidas expanded about 16% in the third quarter on a China-for-China strategy; and Salomon’s quarter was up roughly 21%, helped by successful fashion collaborations.
Consumer backdrop and operational headwinds
Wong described little sign of macro improvement, saying consumer sentiment remained weak amid job scarcity, high unemployment, and a drawdown in household savings. He also noted that extreme weather disrupted the third quarter and pointed to the prospect of another short winter season, elements that further complicate inventory planning and seasonal sell-through for winter and outdoor categories.
Wells Fargo’s takeaway from the call is that promotional intensity, channel closures, and a tougher competitive landscape have combined to create a challenging operating environment for Western brands across China. The bank expects headwinds to persist for Nike and Lululemon, and sees incremental risk to Deckers’ performance in the market.
Implications for stakeholders
For multinational brand owners and retailers, Wong’s observations underscore the risks associated with high fixed-cost expansion, the importance of channel management in a disrupted online-offline mix, and the consequences of aggressive discounting on pricing power and inventory health. For investors and supply-chain partners, elevated inventory and continued promotional pressure translate into uncertain near-term margins and sales trajectories across the athletic and outdoor apparel categories.
Wong’s commentary provides a ground-level perspective from a significant distributor and retailer active in multiple brand channels, and it signals that competitive dynamics and consumer weakness in China may continue to reshape market outcomes for global athletic and athleisure names in the near term.