Nike is on the cusp of losing the production of 160 million pairs of shoes after the closure of a factory in Vietnam due to a Covid spike.
The sportswear giant announced in July that manufacturing in Vietnam had to be paused after the Delta variant was sweeping through the country’s communities.
Vietnamese contract factories made up a huge 50 per cent of branded footwear last year and the news of Nike’s factory closure caused its share price to slip 2.7 per cent.
There are concerns that the ongoing issues with supply chains will hamper production just before the all-important holiday season.
Research company BTIG has said that the impact to Nike could be felt as far into the future as spring 2022.
“We believe the risk of significant cancellations beginning this holiday and running through at least next spring has risen materially for Nike as it is now facing at least two months of virtually no unit production at its Vietnamese factories which accounted for 51 per cent of footwear and 30 per cent of apparel units (43 per cent of total units) last year,” analysts wrote in a report.
BTIG believes that Nike has lost approximately 80 million pairs of shoes so far to the disruption.
“We assume another (approximate) 4 months worth of 50% production capacity for a total of 160 million pairs potentially not made this year,” the note said.
“This compares to an estimated 350 million that were made last year in Vietnam.”
Production is expected to resume this week after the initial pause was supposed to last only two weeks when it was first announced in July.
Analysts are expecting the supply chain to remain slow to begin with due to social distancing measures.
They believe that factories will start delivering a normal output in around five to six months.
“While Nike typically is incredibly well-equipped to manage such disruptions, we fear this issue is just too large to control, even for the best-run athletic brand in the world.”