Nike's China sales in spotlight after Xinjiang backlash

FILE PHOTO: An Air Max shoe made by Nike Inc is shown in this illustration photograph taken in Encinitas, California, U.S. June 27, 2016. REUTERS/Mike Blake

By Nivedita Balu

(Reuters) - All eyes will be on Nike Inc's sales forecast for China as it reports quarterly numbers against the backdrop of calls to boycott global brands in the country for their comments on alleged human rights abuses in Xinjiang.

While overall results are expected to get a boost as Americans spend their stimulus checks on Air Max and Jordan sneakers, sales growth in China, Nike's fastest growing business with a roughly 20% share of the total revenue, has shown signs of slowing following the backlash.

Research firm Cowen's data showed that sales in China were weakening into June, and product sales on e-commerce platform Tmall declined as search trends for "guochao", Mandarin for homegrown fashion, gained popularity.

Graphic: Nike's power play in global markets - https://graphics.reuters.com/NIKE-PREVIEW/jbyvrzoqove/chart.png

For an interactive graphic, click: https://tmsnrt.rs/3xQrbll

THE CONTEXT

Earlier this year, Nike and rivals Adidas and H&M, faced heat on Chinese social media after internet users found statements the companies had made in the past on the use of forced labor in Xinjiang. https://reut.rs/2UAKLDJ

Nike has said it does not directly source cotton from the region and confirmed with its contract suppliers that they are not using textiles or spun yarn from the area.

"We could see near-term sales volatility in Greater China, the brunt of which is likely to be felt in the next 1 to 2 quarters," BTIG analyst Camilo Lyon said.

Nike reports results on June 24.

Graphic: Nike's domination in the sports footwear market - https://graphics.reuters.com/NIKE-RESULTS/qzjpqxqawvx/chart.png

For an interactive graphic, click: https://tmsnrt.rs/3d5wwgo

THE FUNDAMENTALS

* Nike's fourth-quarter sales in Greater China are expected to surge about 35% to $2.22 billion, slower than the 50% growth in the previous quarter

* Overall, revenue is expected to grow 74.4% to $11.01 billion from a year ago, when the pandemic was at its peak.

* The blue-chip stock is one of the worst Dow 30 performers this year, down about 6% compared with the index's 10.9% gain.

WALL STREET SENTIMENT

* The current average analyst rating on NKE shares is "buy" and the breakdown of recommendations is 27 "strong buy" or "buy", 4 "hold" and 1 "strong sell"

* The median price target is $163.30. The stock closed at $133.10 on Wednesday

QTR ENDING REFINITIV IBES ACTUAL RESULT SURPRISE %

ESTIMATE

Feb. 28 2021 76 cents 90 cents Beat 18.1

Nov. 30 2020 62 cents 78 cents Beat 25.1

Aug. 31 2020 47 cents 95 cents Beat 102.5​

May. 31 2020 7 cents -51 cents Missed -865.4

Feb. 59 cents 78 cents Beat 32.2​

29​ 2020​

Nov. 30 2019 58 cents 70 cents Beat 20.7​

Aug. 31 2019 70 cents 86 cents Beat 22.8

May. 31 2019 66 cents 62 cents Missed -5.9

(Reporting by Nivedita Balu in Bengaluru; Editing by Saumyadeb Chakrabarty)

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