Nike’s revenue pinched by supply-chain disruptions
Nike executives said the company’s inventories heading into the holidays are low and it will take several months to get back to full production.
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The COVID-19 pandemic has caught up with Nike Inc. The sneaker giant’s revenue growth is being limited by supply-chain disruptions that have slowed the production and delivery of shoes and other goods around the world.
Nike on Thursday reported revenue of $12.25 billion for the quarter ended Aug. 31, up 16% from a year earlier and essentially flat with the June quarter. The results were below expectations of Wall Street analysts, who had expected revenue to reach $12.47 billion.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| NKE | NIKE INC. | 77.39 | +2.29 | +3.06% |
Nike executives said consumer demand for the company’s products remains strong and its fiscal first-quarter sales would have been even higher if not for supply-chain issues. They warned that production problems in Vietnam and Indonesia would hurt the company’s short-term outlook.
"We’re not immune to the global supply-chain headwinds," Nike finance chief Matthew Friend said on a conference call. He said the company lost 10 weeks worth of production in Vietnam due to lockdowns there after a surge in COVID-19 cases and that it is taking an average of 80 days to move products from Asia to North America, or twice as long as before the pandemic.
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More than half of Nike’s footwear and about a third of its apparel manufacturing occurs in Vietnam, where local authorities recently extended a lockdown until at least Oct. 1.
Nike executives said they expected flat revenue growth in the current quarter, which ends in November, due to the impact of the factory closures and longer transit times. Earlier this year, Nike’s sales surged on pent-up demand from consumers for sneakers and athletic attire.
Vietnam’s lockdown started over the summer, when apparel sellers usually start stocking up for the year-end holiday season. Supply-chain issues could be compounded as orders pile up and flood international freight, analysts said.
A group of more than 80 shoe and apparel companies, including Nike, sent a letter to President Biden in mid-August urging him to speed up U.S. vaccine donations to Vietnam. The health of the U.S. apparel industry is "directly dependent on the health of Vietnam’s industry," the group said in the letter. The U.S. has delivered six million vaccine doses to Vietnam since July.
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"Over the past 18 months, we’ve demonstrated our ability to manage through turbulence," Nike Chief Executive John Donahoe said Thursday. "And that’s what we’ll continue to do as we navigate through these current supply-chain issues. We’ll focus on what we can control."
Nike executives said the company’s inventories heading into the holidays are low and it will take several months to get back to full production. The company is shifting some production out of Vietnam and using air freight to avoid bottlenecks at ocean ports.
Nike’s net income for the August quarter was $1.87 billion, up 23% from the year-earlier period. Earnings per share were $1.16, exceeding what analysts had projected.
Nike’s direct-to-consumer sales led the company’s revenue growth. Direct sales were $4.7 billion, up 28% from a year earlier.
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In the early months of the pandemic, Nike closed stores but continued to pay its workers; meanwhile, it doubled down on digital sales to reach consumers confined to their homes. Before the pandemic hit, the sportswear giant had been beefing up its direct-to-consumer business through its own website and stores.