Nike, Under Armour and others face supply problems in Vietnam

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In particular, some of America’s biggest sellers of clothing and footwear cite a catalyst that has increased the pressure: factory closures in Vietnam leading to a second wave of coronavirus outbreaks there. That’s why brands from PacSun to Nike warn about the effects on their supplies.

at the end of september, nike (NS) Its CEO cut its full-year sales outlook because of supply chain issues, in keeping with strong consumer demand.
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Nike manufactures about three-quarters of its footwear in Southeast Asia, with Vietnam and Indonesia accounting for 51% and 24% of manufacturing, respectively.

But as the Vietnamese government imposed pandemic restrictions, including mandatory closings of factories for several weeks from July to September, Nike said it produced 10 weeks of lost production.

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Even when factories restart, which the company expects to happen in phases starting in October, full production could take several months, Nike chief financial officer Matthew Friend recently said. I said in the earnings call. Company officials said during that call that half of Nike’s clothing factories in Vietnam are currently closed.

Under Armor accounts for a third of Vietnam’s sports brand in the production of footwear and clothing. Under Armour (UA)CEO Patrick Frisch said during his most recent earnings call in August that he was closely monitoring the impact of factory closures there on its supply chain, calling it a “developing situation.”

Ugg, Coach and Michael Kors Have Exposure

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Vietnam is an important supplier to the US especially for apparel and footwear.

“The United States is a huge partner. It’s our second largest source of apparel and footwear,” said Steve Lamar, president and CEO of the American Apparel and Footwear Association, an industry group. According to AAFA, China is the largest supplier of clothing and footwear.

In July, Vietnam was hit by a coronavirus outbreak caused by a suspected new version of the virus, which Vietnam’s health minister said led to a rapid spread of new infections in the country’s industrial areas.

The government later imposed a strict lockdown and temporarily closed factories until mid-August, then extended it until September. Some factories are still closed.

All this means that production has come to a standstill from sneakers and sandals to jeans, dresses, T-shirts, jackets and more.

In a research note last month, BITG analyst Camilo Leone said athletic footwear brands such as Nike and Adidas are at risk of severe supply chain disruption because “Vietnam acted as a strong manufacturing alternative to China in recent years”. Is.”

Other brands that have significant manufacturing exposure in Vietnam, he said, include Ugg makers deckers outdoor (deck), columbia sportswear, coach parent tapestry (TPR) and Capri Holdings (which owns the Michael Kors brand).

Lyon estimates it could take five to six months for factories in Vietnam to get back up and running normally when the lockdown ends. And whenever they get back on the line, he anticipates another issue: staffing.

“Vietnamese factories will also have trouble getting workers back to work,” he said.

Teen retailer PacSun is expecting an impact on the holiday season.

PacSoon’s president, Brien Olsen, said in an interview with Granthshala Business in August that about 10% of its merchandise is sourced from Vietnam.

Olson said the retailer was already dealing with a delay of two to four weeks for its back-to-school inventory this year because of ongoing global supply chain delays.

Now, she said, new products for the winter and holiday seasons may also face a delay of another four weeks, she said, bringing new fashions and styles in jeans, tops, sweaters and sweatshirts to stores on time. is a challenge. Manner.

And there’s an added impact on the consumer, Olson said: Having fewer products means the retailer will pull back on the discount “because there’s no need for it,” she said.

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Credit : www.cnn.com

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