Nike and other companies are expected to suffer considerable damage from a decision by Vietnamese authorities to extend their strict Covid-19 restrictions in the Ho Chi Minh City region until the end of the month. They were originally scheduled to be lifted on Sept. 15, but the measures taken so far have prevented reaching the targets they had set to control the spread of the Delta variant.
About 80 percent of the footwear factories in the region have remained closed for nearly two months, and some others have been allowed to remain in operation with the workers effectively quarantined inside them, according to local reports. A similar story has been unfolding in the apparel industry.
An American investment broker, BTIG, is now projecting a low single-digit increase in revenues or even flat sales for Nike in its current financial year, ending next May, instead of its forecast low double-digit growth, as the company sources 51 percent of its footwear and 30 percent of its apparel from Vietnam.
Most of the products made in Vietnam for the holiday season have already reached their destination or are on the water, but the current suspension in production will hit Nike and some other companies hard, even if the impact on retailers and consumers is delayed until next spring. According to BTIG, it could take between five and six months for the factories to return to normal levels of operation after they are reopened.
Big manufacturers like Yue Yuen and Kingmaker have sought to divert some of their production from Vietnam to other locations. However, Yue Yuen, which has been making 45 percent of its footwear in Vietnam, has just reported a year-on-year drop of 18 percent in its revenues from manufacturing in August.
