The global supply chain havoc creates several problems for Nike more than the company was anticipating. The U.S. sportswear giant expects sales growth in the mid-single digits, but the prior expectations were low double-digit growth.
On Thursday, Nike shares fell more than 3% and lowered its fiscal 2022 expectations due to labour shortages and a longer exporting period. Other factors also come into play, like the major production shutdown in Vietnam. Nike’s footwear factories in Vietnam produce around 50% of its footwear and 30% of its apparel.
Around 80% of factories remain closed due to Covid-19 restrictions in the country. Nike CFO Matt Friend said they have already lost more than two months of production, and it keeps widening. Apart from that, Nike is suffering from shipping setbacks also. The shipping times were double in North America before the pandemic.
The demand for Nike sneakers and workout gear is still strong across the globe. But the performance in next quarter will be hurt due to the inventory and transit issues. In addition, the sportswear giant keeps working on its website and mobile app because a huge chunk of the population shifted to online shopping during the health crisis.
The net profit of the company grew to $1.87 billion from $1.57 billion last year. The per-share increment is $1.16 from 95 cents. This goes beyond the expectations of the analysts.
Previous data says that the Nike stock price and sales growth are strongly correlated with each other. After the manufacturing and transit issues are resolved, the sales growth is expected to thrive, and so is the share price.
On Thursday market closing, Nike share was up at 13% but down nearly 9% from the all-time high. The demand for sneakers and apparel is more than the supply in this fiscal year. But in fiscal 2023, Nike expects normalised production and transit operations.