Nike Shares Slump as China Attacks Alleged Uighur Abuses Statements

Nike found itself embroiled in a social media-led backlash in China overnight linked to alleged statements it made over the treatment of minority Uighur Muslims.
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Nike Inc  (NKE) - Get Report shares slumped lower Thursday after the world's biggest sports apparel group was criticized by China's Foreign Ministry for a statement it made about the country's treatment of Uighur Muslims.

The undated statement, which gained traction on Chinese social media sites Wednesday alongside similar comments from European fashion retailer H&M  (HNNMY) , was addressed by Ministry spokesperson Hua Chunying in a media briefing Thursday. 

A screenshot of the statement suggested Nike had said it was "concerned about reports of forced labor in, and connected to, the Xinjiang Uyghur Autonomous Region."

Ethnic Uighurs, one of the few Islamic groups in China, are suspected of being forced to work against their will in the region, a charge Beijing has repeatedly and vociferously denied. Earlier this week, the U.S. government joined Europe, the U.K. and Canada in imposing travel and economic sanctions on four Chinese officials linked to Uighur abuses.

"I did not pay attention to when the relevant companies made the statement, but they did make this statement, which has drawn some strong reactions from Chinese netizens,' Hua said. "We have previously said that such accusations made by the United States and other Western countries on Xinjiang are based entirely on lies."

Nike shares were marked 4.75% lower in early trading Thursday to change hands at $127.00 each, trimming the stock's six-month gain to around 2.2%.

The share price reaction could be related to news that the Securities and Exchange Commission is looking to rollout out rule changes that could see China-based tech stocks listed in the United States removed from American exchanges, creating the risk of reprisal from officials in Beijing.

China is a crucial market for Nike, with sales in the region "setting the pace" for revenue growth, the company said during its last earnings report on March 18, "with its second consecutive $2 billion quarter and grew 42% on a currency-neutral basis with EBIT growth of 75% on a reported basis," according to CFO Matthew Friend. 

Last year, Nike was included on a list of companies that U.S. lawmakers -- led by Republican Senator Marco Rubio, along with House Democrat James McGovern -- said were linked to the use of forced labor in China, something the company has always rejected.

"Nike remains dedicated to ethical and responsible manufacturing and we are deeply committed to ensuring the people who make our product are respected and valued," the company said in a statement on May 11.

"While Nike does not directly source products from the Xinjiang Uighur Autonomous Region (XUAR), and does not have relationships with the Haoyuanpeng Clothing Manufacturing, Qingdao Jifa Group, or Esquel facilities in XUAR," the statement added. "We have been conducting ongoing diligence with our suppliers in China to identify and assess potential risks related to the employment of people from XUAR."