Friday September 24th 2021
Difficulties in Vietnam
Factory closures slow down Nike
After the corona restrictions in North America and Nike are rolled back, Nike’s sales are skyrocketing. But the global pandemic is far from over. Due to plant closings in Vietnam, the growth of the Adidas rival is being severely dampened.
Adidas competitor Nike is being slowed down by the month-long closure of its Vietnamese factories due to strict corona measures. “We have already lost ten weeks of production,” said CFO Matt Friend when presenting the latest quarterly figures on Thursday. For some of the plants, plans to reopen have already been approved. The pandemic experience to date has shown, however, that it will take several months for production to reach the usual level.
According to earlier information, Nike produces around half of its shoes and 30 percent of its sportswear in Vietnam. In view of the plant closings, some of the production has been relocated to plants in China and Indonesia, said Friend. Due to the overloading of global supply chains, the finished goods currently need 80 days to get from Asia to North America – about twice as long as usual. The result: For the current fiscal quarter, Nike only expects sales at the previous year’s level and does not rule out a slight decline.
The bottlenecks are thus choking off a rapid recovery of the Nike business after declines in the Corona year 2020. In the first fiscal quarter, which ended at the end of August, sales rose by 16 percent year-on-year to 12.25 billion dollars (10.45 billion euros). Analysts had, however, expected an even stronger increase to around 12.5 billion dollars. In the quarter, sales almost doubled. In view of the current development, Nike has now also reduced its sales forecast for the entire fiscal year. Instead of a double-digit percentage growth, only a single-digit increase is expected. The share temporarily lost around 3.5 percent in after-hours trading on Thursday.
The strategy of Nike CEO John Donahoe includes expanding direct business with consumers. Here sales even increased by 28 percent, emphasized Nike. In addition to the online business, the reopening of the company stores with the lifting of the corona restrictions also contributed to this. The profit rose in the past fiscal quarter by 23 percent to 1.87 billion dollars.