Home Adidas shoes Nike stock collapses on lower HSBC rating linked to weakness in China

Nike stock collapses on lower HSBC rating linked to weakness in China


Nike (NKE) – Get the Class B report from NIKE, Inc. Shares fell on Monday after HSBC analysts lowered their rating target on the world’s largest sportswear company amid concern over its weakening presence in China.

HSBC analyst Erwan Rambourg downgraded his rating on the group to ‘hold’ to ‘buy’, with a price target of $ 182 per share, noting weakening demand in one of the key markets of the group. Nike’s sales in China, in fact, fell 24% from a year ago to $ 1.844 billion in the three months ending in November, although CFO Matthew Friend said the decline had been “extremely affected by the supply disruptions from Vietnam” as well as by the local measures put in place to stop the spread of Covid infections in the world’s second-largest economy.

Adidas, Nike’s main western rival in China, has seen sales plummet in the region 15% to 1.155 billion euros ($ 1.31 billion) in the three months ending in September.

“We were hoping that Western brands would have started to gain a foothold (in Chinese demand), but we don’t see any sign of a real recovery, and the extent of the decline at Nike has shocked us a bit,” Rambourg said of HSBC.

“Inventory shortages created during the July-September 2021 shutdowns and over the following months (with only a gradual reopening) are expected to continue to impact the turnover of Western sporting goods players for at least one month. less the first months of 2022nd, due to longer lead times. so that the goods reach the shelves, ”he added.

Nike shares fell 4% early in Monday to change hands to $ 150.60 each.

Nike said last month that closures in Vietnam, its main manufacturing hub, prevented 130 million units of the product from going on sale in the last quarter, the company said, but record Black Friday sales for its division digital helped North America’s overall revenues increase 12% to $ 4.48. billion, offsetting the drop in sales in China

Revenues for Nike Direct, its consumer-focused division, grew nearly 30% in North America thanks to gains in apparel and equipment. The shoes, Nike said, were mostly flat.

Overall, Nike gained 83 cents a share – well ahead of Street’s consensus forecast – on sales of $ 11.4 billion, while noting that it is “increasingly confident” that supply chain issues will normalize in the first half of the next calendar year, although uncertainty will continue to linger.