Nike’s Exit from Russia Latest in Defections from Country

Ticker Symbol: NKE

Nike, the world’s largest sneaker maker, announced its decision to shut down its business operations in Russia, ending a decade-long presence in the country. The move comes almost four months to the date of the February 24^th invasion of Ukraine by Russia. The company did halt sales in Russia earlier in the year since it could not secure shipments, but the latest move would see the company closing all retail stores and corporate offices as well.

The move by Nike follows in the steps of other U.S. companies that have also pulled out of Russia following the country’s widely condemned invasion of another sovereign country. Headline companies such as Starbucks, HP Inc, BP, Ikea, and McDonald’s have also exited after a long presence in the country. Nike had over 100 stores in Russia.

The company had previously noted during its’ third-quarter earnings call in March that sales from Russia and Ukraine accounted for less than 1% of total global sales for Nike. The company announced on March 3^rd that it was suspending operations of its’ stores in Russia temporarily, but franchise-operated stores would continue their operations.

Companies exiting Russia may have a limited ability to return to the country given that new laws are currently under consideration to allow the state government to seize all assets of foreign companies that look to curtail operations due to the war. Financial and criminal penalties are also being considered and are widely expected to be imposed within the coming months. Given these considerations, the exit of Western companies from the country could accelerate soon.

Nike shares were trading up 1% in the morning session, relatively in line with the broader market. On a year-to-date basis, however, the company is down 36.5% versus the 20.7% decline for the large-cap S&P 500. Wall Street expects the company to deliver earnings per share of $3.69 for the fiscal year 2022, which ended on May 31^st, on its’ earnings call on June 27^th. Looking ahead to fiscal 2023, analysts are expecting sales growth of over 10%, and earnings to total $4.47. The stock currently trades at 23.6 times next year’s earnings, a discount from its’ historical valuation.

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