Nike manufacturing in Vietnam grinds to a halt due to COVID-19, creating another supply chain challenge

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Nike Inc. may soon run out of shoes from Vietnam as the COVID-19 pandemic continues to wreak havoc on the supply chain.

Manufacturing at major plants in Vietnam stopped recently as coronavirus spread through factories and communities, according to Reuters.

Nearly half (49%) of Nike’s
NKE,
-1.71%
U.S. imports by sea during the fiscal second quarter were from Vietnam, Panjiva data shows. Most of the items were shoes.

“That raises the question as to whether other major sneaker brands may face similar challenges,” Christopher Rogers, a senior researcher at Panjiva, wrote in the report. Panjiva is a business line of S&P Global Market Intelligence.

See: U.S. and Vietnam agree to ease tension over Asian country’s currency policy

Companies had begun to shift their manufacturing to Vietnam and other countries in recent months due to issues like tariffs and the pandemic, hoping to diversify their supply chain away from dependence on China.

However, Panjiva notes that Nike has been turning back to China, with imports from the region up 54.6% in the second quarter.

Nike discussed its supply chain issues during the most recent earnings report on June 24.

“Across the total marketplace, we continue to see strong retail sales growth and consumer demand for our brands exceeding marketplace supply, with marketplace inventory down double digits versus the prior year,” said Matthew Friend, Nike’s chief financial officer, on the fiscal fourth-quarter earnings call.

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“Nike owned inventory declined 7%, with double-digit declines in closeout inventory. In-transit full-price inventory remains elevated as we continue to experience longer end-to-end lead times for supply. We expect supply chain delays and higher logistics costs to persist throughout much of fiscal 2022.”

Total seaborne imports to the U.S. jumped 53.9% in the second quarter. Panjiva attributes the year-over-year surge to increases from Wolverine World Wide Inc.
WWW,
-2.00%,
parent company to brands like Merrell, Saucony and Keds, and Puma SE
PUM,
-0.74%.

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Nike stock has gained 11.2% for the year to date, outpacing the Dow Jones Industrial Average
DJIA,
-2.64%,
which is up 10.4% for the period.



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