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Nike Slips as Supply Issues Force Cut in Guidance, Hurt Q1 Growth

Stock MarketsSep 24, 2021 08:16AM ET
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© Reuters.

By Dhirendra Tripathi

Investing.com – Nike stock (NYSE:NKE) traded 5% lower in Friday's premarket as supply chain issues forced the company to lower its outlook for the year. 

The revised guidance came as supply from Vietnam, a key production hub of Nike products, remains disturbed. Supply issues held the company's fiscal first-quarter revenue below expectations, driving the retailer to warn of delays in the busy holiday shopping season.

Data from Panjiva, a business line of S&P Global (NYSE:SPGI) Market Intelligence, pointed out that Vietnam accounted for 49% of U.S. seaborne imports linked to Nike and its products in June quarter of 2021.

Nike lost 10 weeks of production in Vietnam during the period and said it would take several months to restore full production. Lockdowns in many parts of the country are set to last at least until the end of September, according to Reuters.

The Asian country was forced to order factories to shut in July as the pandemic ravaged through capital Ho Chi Minh City and areas around it.

Shipping and transport challenges also continued as congestion at ports mounted and truck drivers remained in short supply. As a result, inventories of both raw materials and finished products stayed low.

Nike now expects 2022 sales growth to be around 5% compared to the low-double-digit increase it previously estimated. Second-quarter revenue growth is seen between flat and up 3%.

First-quarter revenue rose 16% to $12.2 billion. Earnings per share rose 22% to $1.16 and beat estimates. Costs termed ‘demand creation expense’ by the company rose 36% and were the key reason why Nike’s selling and administrative expenses were higher by 20%.  

Nike Slips as Supply Issues Force Cut in Guidance, Hurt Q1 Growth
 

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Comments (1)
John Snowden
John Snowden Sep 24, 2021 9:53AM ET
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Good thing this just affects one retailer and the situation is 100% contained, this cannot possibly be the start of any trend or anything like that. Nothing to see here.
 
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