What's going on?

Sportswear giant Nike gave a disappointing quarterly update earlier this week.

What does this mean?

Nike�s revenue and profit beat expectations last quarter, on the back of fine performances in Europe, the Middle East and Africa, and Asia and Latin America. But there were a couple of major problems under the surface. For one thing, this was the third-straight quarter where demand for the company�s products exceeded supply, which caused sales in North America � the company�s biggest market � to fall 5% from the same time last year. And for another, Chinese lockdowns impacted around two-thirds of the company�s business in the country, dragging sales in the region down by 19%.

Nike wasn�t particularly positive going forward either, saying it didn�t expect revenue to grow much � if at all � this quarter. And even the announcement of a new $18 billion stock buyback program didn�t help ease an irate investor, who sent the company�s stock down 3%.

Why should I care?

The bigger picture: Nike hands its rivals extra sales.
Nike�s shift toward direct sales and away from wholesale revenue continued to play out last quarter, with the former up 7% and the latter down 7%. The strategy isn�t without its risks, mind you: it leaves retailers like Footlocker with more shelf space in their stores, which is space they�re now more likely to give to Nike�s competitors. That�s especially notable because those retailers tend to be fairly discount-happy, which could go down a treat as cash-strapped shoppers start to look for quality brands at lower prices.

Zooming out: Nike hands even more rivals extra sales.
Nike also announced last week that it�s leaving Russia, faced with the prospect of a law that would allow the government to seize its assets and impose criminal penalties on it. That, analysts suspect, provides a great opportunity for both local and Chinese sportswear brands � including Li Ning and Anta � to make even more of a dent in Western companies� market shares.