(Reuters) – Nike Inc on Thursday lowered its sales forecast for fiscal 2022 and said it expected delays during the holiday shopping season, blaming a supply chain tightening that left with rising freight costs and products stranded in transit.
Plant closures for months in Vietnam, where about half of all Nike shoes are made, have increased pressure on global supply chains already reeling from the pandemic.
Shares of the Beaverton, Oregon-based company, which are down about 9% from their August record, fell 3.3% in extended trading after saying they expected now at an average single-digit increase in full-year sales growth, compared to the small double-digit increase he had previously estimated.
Nike also said it expects second-quarter revenue growth to be in the “stable to below single-digit year-over-year” range due to plant closures.
âIn Vietnam, almost all shoe factories remain closed on government mandate. Our experience with COVID-related plant closures suggests that reopening and returning to full production scale will take time, âsaid Matthew Friend, Chief Financial Officer of Nike.
Nike said it had lost 10 weeks of production in Vietnam so far and that it would take several months to return to full production.
The BTIG brokerage downgraded Nike’s stock this month, saying “the risk of major cancellations from these holidays and at least until next spring has increased significantly for Nike.”
“Transit times in North America have deteriorated over the past quarter, now almost twice as long as pre-pandemic levels,” Friend said, adding that Nike was facing similar issues in Europe, in the Middle East and Africa.
Other clothing companies, including Abercrombie & Fitch and Adidas AG, have also been hit hard by their operations due to production issues in Vietnam. Closures in many parts of the country are expected to last at least until the end of September.
Clothing retailers had to deal with higher raw material costs and spend more on shipping to get their products to stores on time.
Retailers’ inventories are already trending to historic lows. Data from the Federal Reserve Bank of St. Louis showed that at the end of July stores had enough merchandise to cover just over a month of sales, a sharp drop from the nearly advance. two months they had in April of last year. .
Nike said revenue reached $ 12.25 billion, up from $ 10.59 billion in the first quarter ended Aug. 31, while analysts on average expected $ 12.46 billion, according to IBES data from Refinitiv. .
Nike’s net income rose 23% to $ 1.87 billion, or $ 1.16 per share, in the first quarter.
Reporting by Uday Sampath in Bengaluru and Richa Naidu in Chicago; Additional reports by Siddharth Cavale; Editing by Anil D’Silva, Diane Craft and Karishma Singh