Nike had less than stellar news for sneakerheads in its earnings call on Sept. 23. While its profits rose 16% in the quarter that ended Aug. 31 compared with last year, revenue was below the $12.47 billion analysts had projected.
Executives said the company continues to experience supply chain disruptions due to factory closures in southeast Asia and shipping delays, meaning sales during the holiday season and in the spring will be lower than originally anticipated.
Matt Friend, Nike’s chief financial officer, said in the earnings call (pdf) the company was “not immune to the global supply chain headwinds” challenging manufacturers around the world.
Michael Zuccaro, a senior analyst with Moody’s, expects the company to continue struggling with logistical disruptions in the coming months, noting that Nike merchandise is likely to sell out quickly and cost more. “There is less product out there, which has suppressed Nike sales,” he said.
Factory closure in Vietnam snarls sneaker delivery
In July Covid-19 outbreaks in Indonesia and Vietnam caused Nike factories to shut down, disrupting the supply chain in the company’s two top sources of footwear.
Friend said Indonesian factories are now fully operational, but Vietnam production is not set to start until next month. Already, he said, the Vietnam closures account for 10 weeks of lost production.
Nike is far from the only company to face supply chain disruptions due to a surge in Delta variant cases in Vietnam. US executives overseeing the production of goods ranging from clothing to furniture have recently discussed moving operations back into China to avoid government lockdowns.
What does this mean for my Nike orders?
Like nearly all retailers preparing for the holiday shopping season, Nike is anticipating delays due to backlogs in global shipping. In recent weeks record numbers of container ships have piled up at US ports, and the footwear company now says it takes double the time to deliver goods from Asia to North America as it did before the pandemic.
Nike has shifted away from selling to in-store retailers in recent years and saw an acceleration in online sales during the first months of the pandemic, Zuccaro noted. The company said demand on its SNKRS app, which offers limited release products, grew by 130% over this 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 past the holiday season. Nike said it expects demand to outstrip supply until the end of its fiscal year in May 2022.