Nike sales miss estimates due to supply chain crisis


Nike Inc. missed quarterly revenue estimates Thursday, signaling weaker-than-expected demand as it struggles with a supply chain crisis in Vietnam ahead of the crucial holiday shopping season.

Shares of the Beaverton, Oregon-based company, which have lost 9% from their all-time high reached in August, initially fell 3% in extended trading before sliding back down 1.5%.

Month-long factory closures in Vietnam, where about half of Nike’s footwear is made, have added pressure on global supply chains already reeling from the impact of the pandemic, with some analysts predicting Nike will be short of product during the crucial holiday shopping season.

Brokerage BTIG downgraded Nike shares this month, stating that “the risk of significant cancellations from this holiday season and into at least next spring has materially increased for Nike.”

The company faces at least two months of “virtually zero unit production at its Vietnamese factories, which accounted for 51% of footwear and 30% of apparel units (43% of total units) last year,” BTIG analysts wrote in a note.

Nike did not refer to its supply chain problems in Vietnam in its earnings statement, but did nod to rising product expenses, mainly due to increased transportation costs.

Certainly, other apparel companies, such as Abercrombie & Fitch and Adidas AG, have been affected by production problems in Vietnam. Shutdowns in many parts of the country are set to last at least until the end of September. Apparel retailers have also had to cope with a surge in raw materials and spend more on shipping to get their products to stores on time as the COVID-19 pandemic puts a dent in global supply chains.

Retail inventories are already at record lows, and data from the Federal Reserve Bank of St. Louis shows that, at the end of August, stores had enough merchandise to cover only a little more than a month’s worth of sales, down sharply from the nearly two-month head start they had in April last year.

Nike said revenue rose to $12.25 billion from $10.59 billion in the first quarter ended Aug. 31, while the average analyst had expected $12.46 billion, according to IBES data from Refinitiv.

Nike’s net income rose 23% to $1.87 billion, or $1.16 per share, in the first quarter. (Reporting by Uday Sampath in Bengaluru and Richa Naidu in Chicago.

Source Reuters

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