Starting in fiscal 2028, Nike's organizational chart will no longer include a standalone Greater China region.

On October 1, Nike (NYSE: NKE) reported first-quarter fiscal 2027 results for the period ending in late August. Revenue reached $11.213 billion, down 4% year over year, or down 5% excluding currency effects; net income was $712 million, down 2% year over year, while gross margin rose 0.6 percentage points to 42.8%.

In the quarter, Nike's Greater China revenue was $1.18 billion, down 22% year over year, or down 26% excluding currency effects; wholesale revenue fell 28%, and Nike Direct dropped 13%. Greater China EBIT declined a further 34% to $248 million.

By comparison, North America has returned to 2% growth, while Asia Pacific and Latin America were essentially flat on a constant-currency basis.

Released alongside these results was a new plan called "Pace."

Nike defines Pace as an "operating model transformation" rather than a new growth strategy. CEO Elliott Hill said Sport Offense has already proven effective over the past year in running, soccer and other specialist sports, and what Pace aims to solve is how to extend that model across the entire company.

The first layer of change involves 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 ability to respond to changes in demand. The company expects Pace to generate cumulative savings of about $2.5 billion by fiscal 2031, while incurring roughly $1 billion in pre-tax implementation costs, with the savings concentrated in fiscal 2029 and 2030.

The second layer is a reallocation of global capabilities. Nike will build a new capability center in Bangalore, India, further concentrating some corporate functions and capabilities that can be shared at scale.

The third layer directly touches the organizational structure. Nike will reduce management layers and push more resources to countries, regions and cities, giving local teams more operational responsibility.

Beginning in fiscal 2028, Nike's current four regions will also be compressed into three: North America and Latin America will merge into Americas; Europe, the Middle East and Africa will remain unchanged; and Greater China will merge with Asia Pacific into APGC, with the regional leadership team based in Singapore.

This means that at the organizational level, Greater China, which has existed independently for many years, is being downgraded.

When the Consumer Direct Offense was launched in 2017, Nike also sharply compressed its global regions but still retained Greater China as an independent unit; the subsequent Consumer Direct Acceleration further strengthened digital channels, direct-to-consumer operations and global standardization.

Over the past few years, the side effects of that system gradually emerged: channels tilted toward direct-to-consumer, wholesale partnerships were weakened, and products became increasingly dependent on a handful of global Lifestyle blockbusters.

The Win Now and Sport Offense initiatives pushed by Hill after he took office have already begun to reverse this direction. Nike has reorganized products, marketing and channels around specific sports such as running, basketball and soccer, and restored relationships with wholesalers.

In the latest quarter, Nike's Performance business still delivered high-single-digit growth, with several specialist sports categories including running and soccer achieving double-digit growth, but the scale was not yet enough to offset declines in Sportswear, Jordan and the China market.

Pace is in a sense correcting the organizational aftereffects left by the previous round of globalization and DTC reform. China happens to be one of the markets where these problems have been exposed most fully.

Under Nike's arrangement, Greater China will remain an independent market unit within the APGC framework, and the approach to serving Chinese consumers and the local market will remain unchanged.

In the China market, Nike is exiting some online distribution channels that are "unprofitable and damaging to the brand." In the future, its digital business will be more concentrated on Tmall, JD.com, Douyin official flagship stores, Nike.com and the Nike App, in the hope of reducing deep discounts and returning products to fuller brand expression and full-price sales.

On the physical retail side, Hill disclosed that most brick-and-mortar stores operated by Greater China partners have not been updated in the past seven years. After re-emphasizing sports, products and the consumer experience, Shanghai House of Innovation has achieved growth for ten consecutive months, which Nike sees as a model for channel repair.

Nike is also increasing local product development capability in China. This quarter, the company created its first local vice president of product innovation in Greater China and doubled the size of its local product innovation team, hoping to bring Chinese market insights more directly into the product development process.

Running has become one of the few businesses that validates this approach so far: Nike's China running business has grown for six consecutive quarters and continued to achieve double-digit growth in the latest quarter.

From channel cleanup to store renovations and local product development, Nike China's current main theme is no longer simply pursuing a recovery in scale, but rebuilding the relationship between product, price and channels.

CFO Dave Denton said on the earnings call that the proactive channel cleanup will put Greater China revenue under further pressure for the remainder of this fiscal year compared with the first quarter.

Nike also expects that proactive adjustments, including those in China, Sportswear and Jordan Brand, will continue to affect fiscal 2027 and partly extend into fiscal 2028.

The merger of Greater China into Asia Pacific is therefore more than just a regional consolidation. While cutting away an independent regional layer, Nike is asking its China team to be closer to products and consumers.

China has been lowered by one organizational level, yet Nike hopes to trade that for faster operating speed.