As Coronavirus Hits Nike’s Vietnam Sneaker Factories, Supply Chain Disruptions Could Get Worse

As COVID-19 infections increase across Southeast Asia, footwear production in the region is being impacted — and Nike is feeling the burn, according to reports.

Two Nike footwear suppliers in Vietnam — Chang Shin Vietnam Co. Ltd. and Pou Chen Corp. — have stopped manufacturing, Reuters reported late last week. The southern region of Vietnam went on two-week lockdown starting at midnight on Sunday given a record coronavirus case count in the country.

The interruption “may exacerbate the supply chain disruptions that [Nike] has had to deal with,” wrote Christopher Rogers, senior researcher at Panjiva, a division of S&P Global Market Intelligence, in a Monday report.

“Vietnam accounted for 49% of U.S. seaborne imports linked to Nike and its products in the second quarter of 2021 after growth of 6.6% year over year,” Rogers wrote.

Additionally, footwear was in 82% of Nike’s imports from Vietnam for the 12 months ended June 30, Rogers said.

Nike told FN in a statement, “The health and safety of our teammates, as well as that of our suppliers, remains our top priority. We continue to work with our suppliers to support their efforts in response to the dynamic and unprecedented nature of COVID-19.”

The company said it expects its suppliers to prioritize the health and livelihoods of their employees, and continue to comply with legal requirements and the Nike Code of Conduct on the provision of wages, benefits and severance. “We are confident in Nike’s ability to navigate these near-term dynamics and we remain prudent in our planning,” the statement said.

Rogers cited Nike CFO Matthew Friend’s expectation on the firm’s most recent quarterly conference call that “supply chain delays and higher logistics costs to persist throughout much of fiscal 2022.”

Despite supply chain issues, Nike in late June reversed its quarterly loss and posted net income of $1.5 billion, or 93 cents a diluted share. Revenues in the quarter totaled $12.3 billion, nearly doubling from a year ago. Shares in Nike jumped to record highs as a result.

“There has been a refocusing on China, though, with imports up 54.6% year over year in the second quarter of 2021 being the major driver of a 12.5% rise in total imports linked to [Nike],” Rogers noted.

Other footwear firms may eventually be impacted by the manufacturing issues out of Asia, too, Rogers said. In total, Q2 US seaborne imports rose about 54%, following a Q1 increase of 25.2%, according to Panjiva.

Overall, from January 1 to June 30, Wolverine and Puma were the largest importers from Vietnam, Panjiva data shows, when it comes to US seaborne shipments of sport shoes from the region. Wolverine had about a 161% change year over year in shipments fro the six-month period, while Puma shipments increased 122.7%.

On the negative side, Under Armour imports declined 4% in the second quarter, Rogers wrote, though at a lower rate than the 44.1% decrease from the first quarter.

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