Nike Slumps as NBA Suspends Season, U.S. Lawmakers Target Ban on Forced Labor Goods

Nike shares were hit by the suspension of the NBA season and a bill that targets U.S. companies tied to forced labor practices in China.
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Nike Inc.  (NKE) - Get Report shares extended declines in pre-market trading after U.S. lawmakers included the sportswear giant on a list of companies it says are linked to the use of forced labor in China.

Nike was also pressured by news that the National Basketball Association would suspend regular season after one of its players, reportedly Rudy Gobert of the Utah Jazz, tested positive for the coronavirus.

That decision followed news that the NCAA ordered its signature March Madness basketball tournament, set to begin next week, to take place without fan attendance amid the growing coronavirus pandemic.

Republican Senator Marco Rubio, along with House Democrat James McGovern, have co-sponsored the Uyghur Forced Labor Prevention Act, which seeks to put the burden of proof on U.S. companies with links to the Xinjiang region of China that their products were not made by forced labor. Ethnic Uyghurs, 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 denied.

"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.

"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 employment of people from XUAR.

Nike shares were marked 6.9% lower in pre-market trading Thursday, compared to a 4.5% projected decline for the Dow Jones Industrial Average, to indicate an opening bell price of $78.20 each. The move would extend the stock's one-month decline to around 24%.

Nike told investors late last year that China "continues to set the pace" for the company's global growth, lead by the iconic Air Jordan brand, which helped drive a 20% year-on-year increase in second-quarter sales. In fact, revenue from its China operations has risen 64%, to around $6.2 billion per year, since 2016.

In terms of online sales, the numbers were even more compelling, with digital revenue rising 70% from the year-earlier period, thanks to partnerships with online giant Tencent's Tmall and WeChat.