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Nike misses sales estimates as holidays, supply chain crunch loom

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Nike footwear are seen displayed at a sporting items retailer in New York Metropolis, New York, U.S., Could 14, 2019. REUTERS/Mike Segar/File Picture

Sept 23 (Reuters) – Nike Inc missed estimates for quarterly income on Thursday, signaling weaker-than-expected demand because it struggles with a provide chain crunch in Vietnam forward of the essential vacation procuring season.

The Beaverton, Oregon-based firm’s shares, that are down about 9% from their document excessive hit in August, initially fell 3% in prolonged buying and selling earlier than paring again to 1.5% decrease.

Months lengthy manufacturing facility closures in Vietnam, the place about half of all Nike footwear is manufactured, have piled extra strain on world provide chains, that are already reeling below the impression of the pandemic, with some analysts predicting that Nike will likely be in need of merchandise throughout the essential vacation procuring season.

Brokerage BTIG this month downgraded Nike’s inventory, saying “the chance of great cancellations starting this vacation and working by no less than subsequent spring has risen materially for Nike.”

The corporate is going through no less than two months of “just about no unit manufacturing at its Vietnamese factories which accounted for 51% of footwear and 30% of attire items (43% of whole items) final 12 months,” BTIG analysts wrote in a word.

Nike didn’t tackle its provide chain points in Vietnam in its earnings assertion, however did nod to greater product bills primarily as a consequence of elevated freight prices.

To make sure, different attire firms together with Abercrombie & Fitch and Adidas AG have taken successful to their companies as a consequence of manufacturing points in Vietnam. Lockdowns in lots of components of the nation are set to final no less than till the top of September.

Attire retailers have additionally needed to grapple with greater uncooked materials and spend extra on transport to get their merchandise in shops on time because the COVID-19 pandemic takes a toll on world provide chains.

Retailer inventories are already trending at historic lows, with knowledge from the Federal Reserve Financial institution of St. Louis exhibiting that on the finish of August, shops had sufficient merchandise to cowl solely just a little greater than 1 month of gross sales, a pointy drop from the close to 2-month lead they’d in April final 12 months.

Nike mentioned income rose to $12.25 billion from $10.59 billion within the first quarter ended Aug. 31, whereas analysts on common had anticipated $12.46 billion, in line with IBES knowledge from Refinitiv.

Nike’s internet earnings rose 23% to $1.87 billion, or $1.16 per share, within the first quarter.

Reporting by Uday Sampath in Bengaluru and Richa Naidu in Chicago. Further reporting by Siddharth Cavale; Enhancing by Anil D’Silva and Diane Craft

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