- Since July, footwear factories in Vietnam have had to close due to the impact of the COVID-19 epidemic.
- Nike’s footwear production in the region has been frozen for nearly two months.
- Factories in Vietnam are expected to reopen on September 15.
Since July, factories in Vietnam, which is the second largest footwear supplier to the US after China, have had to stop working due to problems related to the COVID-19 pandemic. The closure, which has been going on for nine weeks, is problematic for athletic shoe and clothing brands that rely on sourcing in the region.
According to Footwear News, BTIG analyst Camilo Lyon said that Nike, Under Armor, Adidas, and Deckers Outdoor are the sportswear and footwear manufacturers most affected by the impact of the COVID-19 epidemic in Vietnam.
“While the situation is still changing, we predict that the sports shoe manufacturing industry in Vietnam may face the risk of order cancellation in the first phase of 2022,” said Mr. Lyon.
As of 2020, Vietnam accounted for 51% of Nike’s footwear output and 30% of apparel products. However, for nearly two months, Nike’s footwear production in the region has been frozen. Due to recent supply chain issues, BTIG has downgraded the ranking of the world’s leading sportswear brand.
“Although Nike has experience dealing with disruptions, we think the problem is too big to handle, even for the world’s top sports brand. As a result, we’re lowering our rating of Nike down to neutral,” added Camilo Lyon.
Nike’s share price fell 1.3% after being downgraded by BTIG. Shares of Adidas and Under Armor also fell on Monday (September 13).
To minimize the negative impact on its supply chain, Adidas is reallocating production and sourcing to other regions.
Factories in Vietnam are expected to reopen on September 15. As a result, analysts predict that activity will likely return to normal production levels over time.
“When the factories reopen, we expect to gradually build back to the maximum production capacity of 50% by the end of the year. Then recover to 100% in 2022,” said Camilo Lyon.