Steer clear of Nike heading into the company's earnings release next week, Barclays advised. Analyst Adrienne Yih downgraded shares to equal weight from overweight, saying the sports apparel retailer could report "potential low-quality" earnings results next week as it continues to deal with inventory issues. "We downgrade shares of NKE to Equal Weight based on: 1) our bearish Wholesale sector demand risk thesis, 2) continued volatility in the Greater China ("China") market, 3) excess NA inventory creating heightened operating risk, 4) potential demand erosion in both NA and EMEA, and 5) FX headwinds, primarily in Europe," Yih wrote in a Tuesday note. Shares of Nike are down 36% this year, and roughly 40% off their 52-week high, as the sports apparel giant dealt with rising inflation, supply chain issues and Covid lockdowns in China. Still, the analyst said investor caution is warranted and she expects those challenges will continue as inventory risk rises, specifically in North America, pointing to weakness in a region that has thus far helped offset declines in China sales. "The FY4Q22 IM [Inventory Management] spread was -1,988 bps. We expect the 1Q23 IM Spread to worsen further, driven by North America ("NA"). We believe the fall/holiday season will continue to be highly promotional across U.S. Retail and worry the wholesale portion of NKE's business could begin to see slowing receipts in spring '23," read the note. "Despite already-cautious investor sentiment, we believe that margin expansion will be more challenged in the medium-term, and therefore pressure on earnings may make it difficult for NKE to break out of a trading range over the next 12-to-18 months," Yih wrote. The analyst lowered her price target to $110, a 12% cut from $125 previously. The new price target is roughly in line with Monday's closing price of $107.21. The stock dropped 2.3% in Tuesday premarket trading and was down 3.5% Tuesday midday. — CNBC's Michael Bloom contributed to this report.