Reuters reported Thursday that Nike will exit its Russia operations over the coming months, following similar moves from McDonald’s and Starbucks.
Nike (NKE) – Get Nike Inc. Report shares edged higher Thursday after the sports apparel giant said will exit its business operations in Russia less than a week ahead of its fourth quarter earnings.
Nike, which paused business from its stores and e-commerce channels in Russia and Ukraine earlier this year, said it will scale-down operations over the coming months and permanently exit the county, Reuters reported.
The move follows similar decisions from blue chip American companies such as Starbucks (SBUX) – Get Starbucks Corporation Report and McDonald’s (MCD) – Get McDonald’s Corporation Report, which sold its Russia operation earlier this month and took a non-cash hit of around $1.3 billion.
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Nike shares were marked 0.17% higher in pre-market trading following confirmation of its Russia exit to indicate an opening bell price of $105.10 each, a move that would still lave the stock’s year-to-date decline at around 37%.
Nike will publish its fiscal fourth quarter earnings on Monday, after the markets close. The group declined to provide guidance for its coming fiscal year when it reported third quarter earnings in March, but noted that “marketplace demand continues to exceed available supply as inventory supply begins to normalize … setting the foundation for another year of strong growth.”
A host of Wall Street analysts, however, have lowered their price targets on Nike stock, citing the impact of Covid restrictions in China on both the group’s broader supply chain and its overall sales in the country, which topped $2.1 billion last quarter.
Deutsche Bank lowered its target price by 13%, to $152 per share on Thursday, following on from a modest nudge lower by Cowen & Co. to $133 per share.
Earlier this week, Bank of America said that “conditions in China remain clouded by COVID shutdowns, making it difficult to chart a recovery trajectory for FY23,” and lowered its price target by $3, to $122 per share.
Nike earned 87 cents per share for the three months ending in February, a 3.3% decline from last year but well ahead of the Street consensus forecast of 71 cents. Group revenues climbed 5% to $10.87 billion, Nike said, thanks to solid demand in the United States that offset an 8% slump in Covid-hit China.
North American sales were up 9% to $3.88 billion, Nike said, thanks to its ongoing direct-to-consumer push.
Equipment sales were up 36% from last year, apparel was up 12% and branded footwear rose 5%.
Looking into the final months of its financial year, Nike said in March that, with all of its Vietnam-based factories up-and-running, “we’re going to start seeing an improved flow of supply” into north American markets, even as shipping times remain elevated owing to domestic transport issues, thanks to overall demand that is ‘significantly’ exceeding inventory levels.