Cramer says he's worried about Nike's business in China after guidance cut

Published Fri, Sep 24 20219:59 AM EDTUpdated Fri, Sep 24 20214:05 PM EDT

Jesse Pound @/in/jesse-pound @jesserpound

A weakening outlook for apparel giant Nike may be driven by a slowdown in demand from customers in China, CNBC's Jim Cramer said Friday. On Thursday, Nike cut its fiscal-year sales growth guidance to mid-single digits from low-double digits, citing supply chain issues. Many companies with manufacturing bases in Asia, and Vietnam in particular, have reported production and shipping delays during the pandemic. However, Cramer said on Friday's " Squawk on the Street" that the dramatic guidance cut from Nike suggested that there were also issues with demand in China. "I'm worried about Nike. I'm worried about Nike because this China number which they are portraying about being a supply problem I think is a demand problem," Cramer said. "Now I think you can argue that in other places around the globe there's just not enough product, but I think these levels — greater China revenue grew 1% — that's just not supply." Nike reported 1% sales growth in greater China on a constant-currency basis for its most recent quarter, compared with 15% growth in North America and 8% in Europe, the Middle East and Africa. Nike chief financial officer Matthew Friend said in a conference call Thursday that the company has already lost 10 weeks of production in Vietnam and that the guidance cut was "due solely to the supply chain impacts," according to a transcript provided by FactSet. However, Cramer said demand may be a bigger part of the story than Nike executives are saying. "I question, in a close textual analysis, whether the word 'solely' is correct," the " Mad Money " host said. Nike saw demand take a hit in China earlier this year amid uproar about the company saying it was "concerned" about reports of forced labor in the country. The Chinese government has also widened a crackdown on profitable businesses in some sectors, including tech and finance, in recent months. In the current environment, Cramer said that there may be weakening demand in China for products that are "a badge or a status of wealth," with the exception of Apple's iPhone. Nike closed down 6.3% on Friday.

Jim Cramer

Scott Mlyn | CNBC

A weakening outlook for apparel giant Nike may be driven by a slowdown in demand from customers in China, CNBC's Jim Cramer said Friday.