In late June, Nike announced its second-quarter financial report, which showed that due to the recovery in demand in the U.S. market, the company’s profits and revenue exceeded Wall Street expectations, with revenue in North America reaching $5.38 billion, more than doubling. It beat market expectations of $4.31 billion. The industry also predicts that if this trend continues, Nike will “achieve another great performance” next quarter. However, the third quarter has just begun, and Nike is facing a trouble…
According to news from the Financial Associated Press on July 20, a report from Panjiva, a supply chain research organization, pointed out that due to Due to the impact of the epidemic, Vietnam’s supply chain has been severely “broken”, and the production of Nike’s two main shoemaking factories in Vietnam – Chang Shin Vietnam Co. and Pou Chen Corp. has been suspended. Market forecasts say that if the two factories continue to operate, the sports shoes produced by Nike in Vietnam will soon be sold out. By then, this major international sports brand will face a shortage crisis.
It is reported that in order to reduce production costs, in the early wave of “industrial transfer”, Nike has transferred most of its production capacity from China to Southeast Asia and South Asia. Among them, Vietnam’s Output exceeded China in 2010 and accounted for about half of the brand’s global output.
Data in fiscal year 2020 show that Nike produced in Vietnam factories accounted for about 50% of the brand’s total global sales; S&P A report from its research institute also pointed out that 49% of Nike’s U.S. seaborne imported products in the second quarter came from Vietnam, with the main products being footwear.
It should be mentioned that this is not the first time something has happened to a Nike factory. In early May, Nike’s main shoemaking factory, Fengtai, announced that due to the impact of the epidemic, it would close three factories in India, and more than 20% of its production capacity would be “cut”. This means that the shutdown of the Vietnam factory is “making matters worse” for Nike. Affected by negative news about the supply chain, Nike’s stock price fell about 1.3% to $157.87 on July 19.
In addition to the supply chain being stuck, Nike also faces two major difficulties: First, tax investigations. British media reported on July 15 that Nike failed to prevent Brussels regulators from investigating its Dutch tax arrangements in a lawsuit filed against Dutch insiders over rulings on Nike’s tax arrangements between 2006 and 2015. Analysts pointed out that this may greatly reduce the preferential arrangements that large companies such as Nike can obtain from EU member states in the future.
The second is that it has gradually lost “popular support” in the Chinese market. Since the Xinjiang cotton incident, Chinese consumers have launched a wave of “boycotts” and spontaneously chosen domestic brands. Taking data from Tmall’s “618” promotion period as an example, Nike’s sales dropped sharply by nearly 30%. However, Anta’s sales increased by more than 50% year-on-year, with sales exceeding 500 million yuan.
The Chinese market is crucial to Nike. According to media reports, Nike has suffered its first quarterly loss in 2 years during the epidemic. It is also facing a crisis of layoffs. Fortunately, the rapid recovery of demand in China has dragged it out of the quagmire. In the third quarter of fiscal year 2021, Nike suffered losses in many markets around the world, but its revenue in China bucked the trend and grew by 51%.
In order to restore the Chinese market, at the end of June, Nike CEO John Donahoe also publicly stated that Nike is a brand that “belongs” to China and serves China. And born. As soon as this statement came out, it immediately hit the hot search list on Weibo, but some netizens questioned that Nike was not born for China, but “born for money.” </p
