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Nike strives to resolve supply chain issues as holiday shopping looms

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If you’re coveting a new pair of Nike sneakers this holiday season, you might have to wait a bit.

The sportswear giant has warned it has been hit by supply chain issues – caused globally by the Covid-19 pandemic – that will impact the production and delivery of his goods in the world until next spring.

Nike is grappling with issues ranging from a shortage of shipping containers to a shortage of workers, the company said on Thursday, adding that it was also grappling with manufacturing. problems due to local blockages in its factories in Vietnam and Indonesia.

“We are not immune to the headwinds of the global supply chain which [manufacturing] and product movement around the world, ”CFO Matthew Friend said on a earnings conference call.

“We expect all geographies to be affected by these factors.”

The problems forced Nike to reduce its sales outlook for the entire year on Thursday, although Friend said “consumer demand has never been higher.”

Supply chain issues have already weighed on the company’s most recent results. Results for the quarter ended in August were mixed, with revenues lower than analysts’ expectations but net income exceeding projections, according to data from Refinitiv.

Friend pointed out that the company’s performance would have been “stronger, without supply chain congestion resulting in a lack of available supply.”

News of the darker outlook pushed Nike shares down more than 4% in pre-market trading on Friday.

The company now expects this year’s revenue to increase to single digits, compared to its previous forecast of double-digit growth for the previous year.

Supply chain headaches

According to Friend, “the situation has deteriorated further” in recent months.

Nike manufactures about three-quarters of its shoes in Southeast Asia, with 51% and 24% of manufacturing in Vietnam and Indonesia, respectively.

But the company has recently been troubled by restrictions linked to the pandemic, forcing factories to close. In Vietnam, for example, it has lost 10 weeks of production since July.

Meanwhile, the time it takes to get its products from Asia to North America has doubled from around 40 days to 80 days, according to Friend.

“In the past 90 days, two things have happened in the industry that we did not anticipate. First, the already long transit times have deteriorated; and second, local governments have imposed closures on Vietnam and in Indonesia, “he told analysts on Thursday.

“To date, Indonesia is now fully operational. But in Vietnam, almost all shoe factories remain closed on government mandate. “

The executive noted that there were plans to reopen some facilities in stages, but predicted that a “gap will continue until factories are able to reopen and produce products at normal capacity.”

Nike has also been harassed in other regions.

In North America, Europe, the Middle East and Africa, its teams have seen transit times increase, largely due to “port and rail congestion and labor shortages,” according to the chief financial officer.

Global supply chains have been disrupted by the fallout from the pandemic, causing shortages of consumer products and making it more expensive for businesses to ship goods to where they are needed.

Unresolved issues and the emergence of new ones, most notably the Delta variant, mean buyers are likely to be faced with higher prices and less choice this holiday season.

Other retailers, such as Adidas, Crocs and Hasbro, have already warned of disruption as they prepare for the crucial year-end period. Booksellers are also urging customers to place their holiday orders early.

Shipping companies expect the global crisis to continue. This massively increases the cost of transporting goods and could add to the upward pressure on consumer prices.

In response to the crisis, Nike said Thursday it plans to spend more on air freight for the holiday season.

“[We’ll] manage all possible levers in this limited supply chain environment, ”said CEO John Donahoe.

– Hanna Ziady contributed to this report.

The-CNN-Wire
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