Nike had less than stellar news for sneakerheads during its September 23 earnings call. While its profits were up 16% in the quarter ended Aug.31 from a year ago, revenues were below the $ 12.47 billion forecast by analysts.
Executives said the company continues to experience supply chain disruptions due to plant 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 on the earnings call (pdf) that the company was “not immune to the headwinds in the global supply chain” that challenged the world’s manufacturers whole.
Michael Zuccaro, senior analyst at Moody’s, expects the company to continue battling logistics disruptions in the coming months, noting that Nike merchandise is expected to sell out quickly and cost more. “There are fewer products on the market which has cut off sales for Nike,” he said.
Vietnam factory shutdown grumbles sneaker delivery
In July, Covid-19 outbreaks in Indonesia and Vietnam caused Nike factories to close, disrupting the supply chain for the company’s two main sources of footwear.
Friend said Indonesian factories are now fully operational, but Vietnamese production is not expected to start until next month. Already, he said, Vietnam’s shutdowns 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. U.S. executives overseeing the production of products ranging from clothing to furniture recently discussed returning operations in China to avoid government lockdowns.
What does this mean for my Nike orders?
Like almost all retailers gearing up for the holiday shopping season, Nike anticipates delays due to delays in global shipments. In recent weeks, a record number of container ships have piled into US ports, and the shoe company now claims it takes twice as long to deliver goods from Asia to North America than before the pandemic.
Nike has moved away from selling to in-store retailers in recent years and has seen an acceleration in online sales in the early months of the pandemic, Zuccaro noted. The company said demand for its SNKRS app, which offers limited release products, increased 130% in the last quarter. But even as Nike continues to release 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 end of year celebrations. Nike has said it expects demand to exceed supply until the end of its fiscal year in May 2022.