Nike is the latest business to adjust yearly sales estimates because of the COVID-19 pandemic — and one of the first big fashion retailers to do so. Nike announced that it cuts its fiscal 2022 sales estimate, mainly because of the many problems that are resulting in delays during shipping. The company revealed that, as a result of the global supply chain problems, their estimated holiday season and next year will negatively suffer.
Nike explained that while the company still strives to do the best sales-wise, these expectations are reasonable within the changing economy because of the COVID-19 pandemic. The company now is only expecting a mid-single-digit increase for its sales growth for the full year. Previously, Nike had forecasted a low double-digit increase instead.
There are many reasons why Nike has come out to warn investors and customers of their new forecasts for the year. For one, the holiday season is expected to be quite large this year — and already many companies and economists are warning consumers that their stock is low. Therefore, the number of products available for purchase may not meet the expected large consumer demand.
Nike in particular may suffer. While the company is struggling to deal with the many global supply chain problems that are currently hampering businesses all around the world, Nike in particular has even more problems when it comes to the production of their items. About half of all Nike footwear is manufactured in Vietnam. However, almost all footwear factories in Vietnam have remained closed by the government because of the COVID-19 pandemic and surges in infections in the country.
This is — and will continue — to put a huge damper on Nike footwear production and sales. While the company does expect its footwear factories in Vietnam to reopen eventually, it will likely take time to get back to the full-scale production the factories were previously at. Plus, with the Delta variant causing surges in the United States and all over the world, factory closures may unfortunately continue to happen if the virus continues to surge in infections.
Nike isn’t the only fashion retail company that has lost weeks in production because of the factory closures in Vietnam. Both Adidas and Abercrombie and Fitch also do a lot of their production in Vietnam and have also suffered greatly from the shutdowns there.
These factory closures will affect the holiday season, definitely. However, as it may continue to take some time to work through this COVID-19 pandemic — and as it will take time for factories to get back to full-scale production — Nike is anticipating this will affect their sales into 2022.
Global supply chain bottlenecks are also negatively affecting Nike sales, and will more than likely continue to do so. All businesses worldwide have suffered from these bottlenecks, and many have had to pay higher prices to try to get their items into stores or warehouses before the holiday season even begins. As a result, many prices of goods may increase this year.