“We are not immune to the global supply chain headwinds that are challenging the [manufacturing] and movement of product around the world,” Chief Financial Officer Matthew Friend said on an earnings call.
The issues forced Nike to cut its full-year sales outlook on Thursday, despite Friend saying that “consumer demand has never been higher.”
Friend stressed that the company’s performance would have been “stronger, if not for supply chain congestion, resulting in lack of available supply.”
News of the gloomier outlook sent Nike shares more than 4% lower in premarket trading Friday.
The company now expects revenue for this fiscal year to grow by single digits, compared to its previous guidance of double-digit growth on the previous year.
Supply chain headaches
According to Friend, “the situation deteriorated even further” over the past few months.
But the company has recently been troubled by pandemic-related restrictions, forcing factories to shut. In Vietnam, for instance, it has lost 10 weeks of production since July.
Meanwhile, the amount of time to get its products from Asia to North America has doubled, from roughly 40 days to 80 days, according to Friend.
“Over the last 90 days, two things have happened in the industry that we didn’t anticipate. First, already long transit times worsened; and second, local governments mandated shutdowns in Vietnam and Indonesia,” he told analysts Thursday.
“As of today, Indonesia is now fully operational. But in Vietnam, nearly all footwear factories remain closed by government mandate.”
The executive noted there were plans to reopen some facilities in stages, but predicted that a “gap will continue until factories are able to reopen and produce product at normal capacity.”
Nike has also been snarled in other regions.
In North America, Europe, the Middle East and Africa, its teams have seen transit times shoot up, largely due to “port and rail congestion and labor shortages,” according to the CFO.
Unresolved snags, and the emergence of new problems including the Delta variant, mean shoppers are likely to face higher prices and fewer choices this holiday season.
Shipping companies expect the global crunch to continue. That’s massively increasing the cost of moving cargo, and could add to the upward pressure on consumer prices.
In response to the crisis, Nike said Thursday that it was planning to spend more on air freight for the holiday season.
“[We’ll] manage every lever we can in this supply chain-constrained environment,” said CEO John Donahoe.
— Hanna Ziady contributed to this report.
