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Due to the local epidemic, Vietnamese shoe factories have been suspended for more than two months, and some internationally renowned sports brands are continuing to experience supply chain disruptions.

Affected by this, Nike's stock price has fallen all the way since August. On September 13, 2021, U.S. time, the company's share price fell 2.8% to $159.06, down more than 7% from a month ago.

Earlier, Wall Street investment bank BTIG downgraded Nike from a buy rating to neutral.

According to a report recently released by BTIG lifestyle and health analyst Camilo Lyon, Nike, Adidas, Under Armour and Hoka One One are the sports goods companies most affected by the Vietnamese factory shutdown.

Almost in sync with Nike, the share prices of sports brands Adidas and Under Armour have fallen from their peaks a month ago, falling about 5% and 12% respectively.

Camilo Lyon commented: “Our inspections of our supply chain and retail contacts have shown that factory shutdowns have caused severe supply chain disruptions, and this situation has deteriorated since Nike’s latest earnings report on June 24.”

Nike's fourth quarter 2021 financial report shows that sales increased by 96% year-on-year to USD 12.3 billion; sales in the North American market increased by 141% year-on-year to USD 5.38 billion, a record high.

For the US footwear industry, Vietnam is the second largest supplier after China. In the global supply chain, top sports brands show a high degree of dependence on Vietnam.

According to statistics, last year, more than half of Nike's footwear products and 30% of its apparel products were produced by factories in Vietnam. The main producers are Eclat and Quang Viet. Camilo Lyon predicts that the proportion of products from Vietnam will decline this year.

In addition, Shenzhou International, a Hong Kong-listed company that is also a Nike foundry, also announced in July that it would cut production due to the epidemic in Vietnam. Since overseas factories are mainly concentrated in Southeast Asia, the company has not been spared from the negative impact of factory shutdowns, and its share price has fallen 3.24% in the past month.

In view of the more complex production of footwear and higher technical requirements for employees, although sports shoes and sports clothing are also affected by the shutdown, the situation for footwear is obviously more difficult.

According to the report, orders for high-performance sports shoes have suffered the most serious delays, and the cancellation probability of new products in the spring of 2022 is rising.

In fact, as early as shortly after the beginning of the 2020 epidemic, some brands responded by shifting production capacity or building their own factories in their own countries to diversify potential risks.

According to FootWear News, Adidas redistributed production and procurement to other regions and used air freight to transport high-priced products.

On July 19, local time, Vietnam announced the initiation of 14-day lockdown measures in 16 provinces and cities to prevent the spread of the epidemic.

Ho Chi Minh is the place hardest hit by the epidemic in Vietnam. On September 14, the local government announced that it would extend the social distancing regulations for another 15 days, meaning that the factory would have to wait until September 30 at the earliest to resume work.

Adidas announced its performance in the second quarter of fiscal 2020 in August, and its revenue in the second quarter increased by 52% year-on-year to 5.077 billion euros. However, revenue in Greater China was 1 billion euros, a year-on-year decrease of nearly 16%.

According to a Reuters report, Adidas hopes to restart its production lines in Vietnam after the end of the control measures, while at the same time working hard to transfer some of its production capacity to other countries.

Analysts predict that Vietnamese shoe factories can recover 50% of their production capacity by the end of the year. If 100% recovers, they are expected to wait until 2022.