Nike Faces Earnings Red Flag Due to Supply Chain Disruptions

Production Disruptions in Vietnam and Indonesia Regions
Sales Forecast Below Expectations for June to August

[Asia Economy Reporter Yujin Cho] Global sports brand Nike has hit a red light in sales growth as supply chain disruptions caused by COVID-19 lockdown measures have become a reality.

According to the Wall Street Journal (WSJ) on the 23rd (local time), Nike announced that its first quarter (June to August) sales, based on its own standards, reached $12.25 billion (approximately 14.4 trillion KRW), a 16% increase compared to the same period last year.

This figure is significantly below Wall Street's expected $12.47 billion. Net profit recorded $1.87 billion, a 23% increase compared to the same period last year.

Nike's management stated that sales fell short of expectations due to supply chain issues, noting that production disruptions in Vietnam and Indonesia affected product supply and would act as a short-term negative factor for the company's performance.

Matthew Friend, Nike's Chief Financial Officer (CFO), said during the earnings conference call that "a 10-week production disruption occurred due to COVID-19 regional lockdowns in Vietnam," adding, "Nike is fully exposed to headwinds in the global supply chain."

He added that supply bottlenecks caused by production disruptions have spread to logistics delays, with products taking an average of more than 80 days to move from production sites to North America.

Vietnam is a major production base where more than one-third of Nike's shoes and apparel products are manufactured. Recently, due to renewed COVID-19 outbreaks and lockdown measures in Vietnam, major factories have halted production lines.

Nike's management expressed concerns that extended factory closures and logistics disruptions would further stagnate sales growth in the second quarter.

John Donahoe, Nike's Chief Executive Officer (CEO), said, "We will focus on what we can control to overcome supply chain issues."