Nike Lowers Sales Estimate For Full Year And Warns Of Delays In Holiday Season

Nike Inc on Thursday cut its fiscal 2022 sales expectations and said it expects delays during the holiday shopping season, blaming a supply chain crunch that has left it with soaring freight costs and products stuck in transit.

Months-long factory closures in Vietnam, where about half of all Nike footwear is manufactured, have piled more pressure on global supply chains already reeling from the impact of the pandemic.

The Beaverton, Oregon-based company’s shares, which are down about 9per cent from their record high hit in August, fell 3.3per cent in extended trading after it said it now expects a mid-single-digit increase in full-year sales growth, versus the low-double-digit increase it had previously estimated.

Due to plant closures, Nike anticipates second-quarter sales growth to be “flat to down low-single digits against the prior year.”

“In Vietnam, nearly all footwear factories remain closed by government mandate. Our experience with COVID-related factory closures suggest that reopening and ramping back to full production scale will take time,” Nike Chief Financial Officer Matthew Friend said.

Till now, more than 10 weeks of production has been lost by Nike in Vietnam and added that it would require a number of months for production to reach full capacity.

Nike’s stock was downgraded earlier this month by Brokerage BTIG citing “the risk of significant cancellations beginning this holiday and running through at least next spring has risen materially for Nike.”

“Transit times in North America deteriorated during the last quarter, now almost twice as long as pre-pandemic levels,” Friend said, adding that Nike is facing similar issues in Europe, the Middle East and Africa.

Other garment firms, including as Abercrombie & Fitch and Adidas AG, have seen their profits suffer as a result of production difficulties in Vietnam. Lockdowns are expected to persist until the end of September in several regions of the country.

To get their items in stores on time, apparel merchants have had to deal with rising raw material costs and pay more on transportation because of bottlenecks in the global supply chain.

Retailer stocks are already at an all-time low. According to data from the Federal Reserve Bank of St. Louis, shops had enough goods to cover only a little more than a month’s worth of sales at the end of July, a significant reduction from the near two-month lead they had in April last year.

Nike said revenue rose to $12.25 billion from $10.59 billion in the first quarter ended Aug. 31, while analysts on average had expected $12.46 billion, according to IBES data from Refinitiv.

Nike’s net income rose 23per cent to $1.87 billion, or $1.16 per share, in the first quarter.

(Adapted from GulfNews.com)

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