Dozens of Chinese celebrities have terminated contracts or said they’ll cut ties with the brands, while H&M, the world’s second largest clothing retailer, has been pulled from major e-commerce sites.
Investor insight: Nike shares tumbled more than 3% Thursday on Wall Street, while Adidas sank more than 6% in Frankfurt. In London, Burberry lost more than 4%. H&M’s stock also slid nearly 2% in Sweden.
The outrage was triggered by a social media post from a group linked to the ruling Communist Party, which resurfaced a statement H&M made in September about reports of forced labor in Xinjiang. State media has since targeted other major brands that have previously spoken out.
Human rights groups have repeatedly accused Beijing of detaining Uyghurs and other Muslim minority groups in “re-education” camps where they’re forced to make products that find their way into global tech and retail supply chains.
Blowback in China against companies that have spoken out on Xinjiang may pass, according to Bernstein analyst Aneesha Sherman. Shares of H&M rose 1% in early trading Friday, while Nike’s stock is up roughly 1.5% in premarket trading.
But the episode is a reminder of the challenges Western brands face as they court the immense spending power of Chinese consumers.
“It’s a tough position to manage, because they can’t really back down on their [stances], but at the same time they want to make sure they don’t abandon the Chinese customer,” Sherman told me.
China accounted for roughly 5% of H&M’s sales in 2019. Sherman estimates that figure grew to about 10% in 2020, as China’s economy recovered faster from coronavirus than its home market of Europe.
“In a year like this, even taking a 5% haircut off the top line is a big hit when H&M is trying to recover,” Sherman said.
Luxury brands like Burberry are even more exposed, she added. Burberry listed “any significant change to Chinese consumer spending habits” as a key risk to sales in its most recent annual report.
Big picture: The US-China tensions that gained prominence during the Trump era haven’t gone away, with the Biden administration and allies taking a hard line with Beijing. That creates challenges for Western companies that operate in the Chinese market.
“It does affect these brands,” Sherman said. Plus, weeks like this only strengthen the hand of local competitors, which are more tapped in to regional tastes and can avoid politically-generated controversy, she noted.
This powerful oil lobby has changed its tune on a carbon tax
But the devil will be in the details, my CNN Business colleague Matt Egan reports. The American Petroleum Institute laid out a series of principles that must be met before the century-old group endorses a price on carbon.
Advocates of carbon pricing say it’s crucial to fighting the climate crisis, since it would accelerate efforts to curb planet-warming emissions and force investors, companies and individuals to bear the cost of pollution.
But API opposed the last serious effort to impose a price on carbon in 2010. Since then, ExxonMobil, Chevron and other industry leaders have publicly backed carbon pricing — clearing the way for others to follow.
“This is a pretty big deal for the industry. There is broad recognition that obviously the country has to do something on climate change,” API CEO Mike Sommers told CNN Business. “We want to be a willing partner with the Biden administration and others in Congress who are serious about taking on this challenge.”
Still, there’s skepticism among climate groups that API’s change of heart will translate to its backing of meaningful legislation.
“A statement of theoretical support for a market-based carbon price is a long way from agreeing to what will likely need to be strong, binding rules to limit fossil fuel usage [and] methane emission,” Dylan Tanner, executive director of InfluenceMap, a think tank focused on energy and climate change, said in a statement.
WeWork is finally going public by merging with a SPAC
The latest: The Wall Street Journal was first to report that WeWork has agreed to merge with a special-purpose acquisition company, or SPAC.
The merger with BowX Acquisition Corp. would value WeWork at $9 billion. That’s a fraction of the $47 billion private market valuation the company fetched previously.
Remember: WeWork was plunged into crisis in 2019 as investors combed through the company’s IPO paperwork, which revealed former CEO Adam Neumann’s unchecked power and numerous potential conflicts of interest, as well as the startup’s staggering losses.
The company was forced to postpone its IPO, accept a bailout from SoftBank and reconfigure its business.
Now, it could raise money by tapping into the SPAC boom. In recent months, investors have raced to set up so-called “blank check” companies, which exist purely to find private companies to merge with, effectively taking them public.
Details, details: BowX Acquisition Corp., which raised $420 million from investors last year, is led by Vivek Ranadivé, who founded Tibco Software and now owns the Sacramento Kings. Ranadivé will join WeWork’s board.
Personal income and spending data for February posts at 8:30 a.m. ET, along with a key measure of inflation.
Coming next week: The US jobs report for March is a crucial economic indicator as the recovery gathers steam.