Nike had less than stellar news for sneakerheads during its September 23 earnings call. While its profits rose 16% in the quarter that ended Aug. 31 from a year ago, revenue was lower than the $12.47 billion forecast by analysts.
Executives said the company continues to experience supply chain disruptions due to factory closures in Southeast Asia and shipping delays, which means sales during the holiday season and in the spring will be lower than initially forecast.
Matt Friend, chief financial officer of Nike, said in the earnings call (pdf) the company was “not immune to global supply chain headwinds” challenging manufacturers around the world.
Michael Zuccaro, senior analyst at Moody’s, expects the company to continue to battle logistical disruptions in the coming months, noting that Nike products are likely to sell out quickly and cost more. “There are fewer products on the market, which has suppressed Nike’s sales,” he said.
Closure of a factory in Vietnam hinders the delivery of sneakers
In July, Covid-19 outbreaks in Indonesia and Vietnam shut down Nike factories, disrupting the supply chain of the company’s two main sources of footwear.
Friend said Indonesian factories are now fully operational, but production in Vietnam is not expected to start until next month. Already, he said, the shutdowns in Vietnam represent 10 weeks of lost production.
Nike is far from the only company facing supply chain disruptions due to an increase in cases of Delta variants in Vietnam. US leaders overseeing the production of goods ranging from clothing to furniture have recently discussed returning operations to China to avoid government lockdowns.
What does this mean for my Nike orders?
Like nearly all retailers gearing up for the holiday shopping season, Nike is anticipating delays due to backlogs in global shipments. In recent weeks, a record number of container ships have piled up in US ports, and the shoe company now says it takes twice as long to deliver goods from Asia to North America than before the pandemic.
Nike stopped selling to in-store retailers in recent years and saw an acceleration in online sales in the early months of the pandemic, Zuccaro noted. The company said demand on its SNKRS app, which offers limited release products, increased 130% in the last quarter. But even as Nike continues to roll out new sneakers in the coming weeks, customers shouldn’t expect to get their hands on these items easily.
These constraints could last well beyond the holiday season. Nike said it expects demand to exceed supply through the end of its fiscal year in May 2022.