Shares of Nike (NKE), Adidas (ADS), and H&M (HM) Fall Amid a Social Media Backlash in China

Shares of Nike (NYSE: NKE) are trading about 3% lower in Thursday's pre-open after the sportswear giant found itself in the center of a social media backlash in China.

Reports emerged that Nike released a statement that they’re “concerned” about reports of forced labor in Xinjiang. The statement didn’t have a date on it and it is still unclear whether it is authentic.

“We are concerned about reports of forced labor in, and connected to, the Xinjiang Uyghur Autonomous Region (XUAR),” Nike said in the statement.

“Nike does not source products from the XUAR and we have confirmed with our contract suppliers that they are not using textiles or spun yarn from the region.”

Some influential social media profiles on Chinese social media Weibo picked up this statement, which quickly became one of the highest trending topics in the country. Popular local actor, Wang Yibo, said he will no longer cooperate with Nike in response to the company’s alleged statement.

According to Morgan Stanley, Greater China is the NKE’s highest margin region (35%+ operating margin).

China has faced harsh criticism from the Western countries, with the likes of the United States, the European Union, Britain and Canada imposing sanctions on some of the country’s officials for alleged human rights abuses in Xinjiang.

Human Rights Watch is continuously accusing Chinese state officials of mistreatment of the mostly Muslim Uighur population in the north-western region of Xinjiang.

In addition to NKE, the Sweden-based fashion company H&M said earlier this week it was deeply concerned about reports. Similar to Nike, H&M denied they are sourcing products from this Chinese region. Nike’s arch-rival voiced similar concerns.

The state media singled out H&M for its anti-China campaign, which then prompted a strong backlash on social media as users asked for a boycott of Nike, Adidas, H&M, and others who criticized China.

Adidas stock price is down almost 4% in Frankfurt this morning while shares of H&M are trading about 2% in the red.

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