Vietnam Factory Closures Hit Shoe Chains, Nike Stock Drops – Footwear News

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Major shoe brands are still feeling the effects of factory closures in Vietnam.

Since July, factories in Vietnam, the United States’ second-largest shoe supplier behind China, have been closed due to COVID-19 concerns. The closures, which have lasted for nine weeks, have been particularly problematic for footwear and sportswear brands that rely on supply operations in the region.

As the holiday shopping season approaches, analysts expect to see the impact on sales and inventory, with sports brands likely to face more headwinds than fashion brands. According to a recent note from BTIG’s Lifestyle and Wellbeing Analyst, Camilo Lyon, Nike, Under Armour, Adidas and Deckers Outdoor’s Hoka business are the companies most likely to suffer the most impact. closures in Vietnam.

“While the situation is fluid, we are hearing that performance footwear has experienced the most significant delays and is at increasing risk of being canceled for Spring 22,” Lyon wrote in a note.

While athletic footwear and apparel have been impacted by the shutdowns, the complexities and high levels of staff associated with footwear production have made it more subject to headwinds than apparel. Most of the impact is felt in the southern part of the country, which is home to the majority of manufacturing bases for footwear and apparel companies.

Since two Nike shoe suppliers in Vietnam ceased production in July, the company has had nearly two months of no unit production in the region. Vietnam previously accounted for 51% of Nike’s footwear and 30% of apparel units last year. In light of recent supply chain issues, BTIG has downgraded Nike to neutral since purchase.

“While NKE is generally incredibly well equipped to handle such disruptions, we are concerned that this issue is simply too big to control, even for the best-run sports brand in the world,” Lyon wrote in a note. “As such, we are downgrading to neutral until better visibility is gained on timelines to return to standardized production and shipping schedules.”

Nike stock fell 1.3% after BTIG’s downgrade. Adidas and Under Armor were also down on Monday morning.

On the other hand, fashion brands were generally less impacted by the closures. In the case of Steve Madden, Chairman and CEO Edward Rosenfeld said on a July 28 investor call that the company had shifted nearly half of its female production from China to Mexico and Brazil for l fall to reduce backlogs.

Sports companies are also trying to mitigate the impact. Adidas has reallocated production and supply to other regions and is using airfreight for high-priced products.

Factories in Vietnam are expected to reopen on September 15. And when they do, analysts predict operations will likely return to normal production levels over time.

“Once the factories reopen, we expect a gradual return to full production capacity reaching 50% until the end of the year, then a full return to 100% later in 2022.

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