Sportswear company Nike fell 6.3%, causing the biggest drag on the Dow and S&P 500 indexes. Earlier, Nike issued a pessimistic sales forecast and warned that the holiday shopping season may be delayed due to supply chain constraints.
Shoe retailer Foot Locker FL.N also fell sharply.
Can Nike’s stock price still rise after the production and supply chain have been hit?
Almost all of Nike’s factories in Vietnam have been closed due to the local government’s epidemic prevention policies. The company’s CFO Matthew Friend said, “Based on the previous experience of closing factories due to the new crown epidemic, it is necessary to restart It will still take some time to start construction and resume full production.” So far, the company’s production in Vietnam has been interrupted for 10 weeks, and it will still take several months to resume production.
Comprehensive report sources: Reuters, Investing, pictures from Nike’s official website
Not only Nike is deeply affected by production problems in Vietnam, peers Abercrombie & Fitch and Adidas have also been hit. Retailers’ inventories are currently close to historical lows – according to earlier data from the St. Louis Federal Reserve, at the end of July, stores had only enough inventory for more than a month of sales, a sharp decline from nearly two months in April last year. Nike said inventory at the end of the last quarter was $6.7 billion, the same as a year earlier and slightly lower than the $6.9 billion in the previous quarter.
In addition to production problems, supply chain crises are also a big problem.
Stock brokerage BTIG downgraded Nike’s stock rating this month and flagged the risk that it will see significant cancellations starting this holiday season and continuing at least into next spring. The risk of the order will rise sharply. Because “Last quarter, the shipping time in North America increased significantly, and it is now almost twice as long as before the epidemic. The company also faces similar problems in Europe, the Middle East, and Africa.”
Matt Friend also previously told analysts that it takes an average of 80 days to ship goods from Asia to Nike’s headquarters.
Nike releases its latest financial report, revealing supply chain difficulties
Caused by the epidemic Supply chain disruptions have slowed down the production and shipment of clothing, footwear and accessories products worldwide, a situation that has been reflected in Nike’s financial report.
Nike announced on Thursday that revenue for the first fiscal quarter of fiscal year 2022 ended August 31, 2021 was US$12.25 billion, an increase of 16% over the same period, compared with the previous fiscal quarter Flat. The results were below Wall Street analysts’ expectations, which had been for $12.47 billion.
Nike brand online revenue increased by 29% year-on-year. Nike brand direct sales were US$4.7 billion, a year-on-year increase of 28%.
From a regional perspective, in the first fiscal quarter, Nike’s revenue in Greater China increased by 11% year-on-year to US$1.98 billion, the smallest increase among all regions. Revenue in North America increased 15% to US$4.88 billion, and revenue in Europe, the Middle East and Africa increased 14% to US$3.31 billion.
Nike executives said that consumer demand for the company’s products remains strong. If the supply chain is not blocked, the company’s sales in the first fiscal quarter may be will be higher. They warned that production disruptions in Vietnam and Indonesia would hurt the company’s short-term prospects.
Nike Chief Financial Officer Matthew Friend said on a conference call: “We are not immune to global supply chain headwinds.” He said, The company lost 10 weeks of production in Vietnam due to a lockdown in Vietnam due to a surge in COVID-19 cases, and it takes an average of 80 days to move products from Asia to North America, twice as long as before the epidemic.
More than half of Nike’s footwear and about a third of its apparel are produced in Vietnam, where the local government recently extended a lockdown until at least October 1.
Nike executives said they expect revenue growth to be flat in the quarter ending in November, affected by factory closures and extended shipping times. Nike’s sales surged earlier this year as consumers pent up demand for sneakers and sportswear due to the pandemic last year.
Vietnam’s lockdown began in the summer, when clothing sellers typically start stocking up on clothing for the year-end holidays. Analysts say supply chain issues are likely to become more complex as orders pile up and international shipments flood.
Nike executives said the company’s inventory before the holidays was low and it would take months to resume full production. The company is moving some production out of Vietnam and using air freight to avoid shipping bottlenecks. </p
