Nike call shows just how complicated and messy logistics have become, Retail News, ET Retail



After spending a few minutes talking about Olympic triumphs, lively sneaker drops, and a head office tour with LeBron James, Nike Inc. executives spent much of the remainder of their quarterly earnings call at tackle something much less glamorous: logistics.

“We are not immune to headwinds in the global supply chain that challenge the manufacturing and movement of products around the world,” CFO Matt Friend said on the call.

Nike has cut its revenue forecast and has warned of inventory shortages in the coming months that will affect its business in all regions. The mess stems from long shipping times and factories that have been forced to shut down production due to Covid-related lockdowns. This left management searching for answers.

The leaders said they did not expect the situation to worsen over the past 90 days, with government shutdowns in Vietnam and Indonesia and bottlenecks obstructing transit around the world.

They went into extraordinary detail to explain the situation to investors and analysts. Friend said 80% of Nike’s shoe factories in Vietnam and nearly half of its clothing factories are closed, resulting in the loss of 10 weeks of production so far. It will take several months to return to full capacity.

Shipping times, meanwhile, doubled on key routes from Asia to North America due to congestion at ports and railways, as well as labor shortages. . Goods that used to take 40 days to ship across the globe now take 80 days, leaving products stranded in transit for months. Margins were affected by higher ocean freight surcharges.

“Matt and I wish we had a crystal ball, but we don’t,” said general manager John Donahoe. “We do what great sports teams do, which is face reality, make adjustments, be agile and perform in a way where we come out stronger.”

Analysts fear this is not enough, especially as Nike heads into the crucial holiday season when rising consumer demand could still block global trade channels.

“We are concerned that this issue is simply too important to control, even for the world’s best-managed sports brand,” Camilo Lyon, analyst at BTIG, wrote in a note to clients after the call.



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