People enter a closed clothing shop in Vung Tau, Vietnam on Monday, July 19, 2021. Southern Vietnam, with a population of nearly 40 million people, started a two-week lockdown to curb a surge of COVID-19 that is registered at a record number of cases in the country, writes Meredith Derby Berg on Footwear News.
People enter a closed clothing shop in Vung Tau, Vietnam on Monday, July 19, 2021. Southern Vietnam, with a population of nearly 40 million people, started a two-week lockdown to curb a surge of COVID-19 that is registered at a record number of cases in the country. (AP Photo/ Hau Dinh)
The recent COVID-19-related shutdown of Vietnam, the second largest supplier of footwear to the United States behind China, is yet another bump in the road that will likely impact holiday inventories during what has been an endless supply chain headache for footwear brands.
The southern region of Vietnam is about one week into a two-week lockdown that started last Sunday given a record coronavirus case count in the country. In light of the shutdown, two Nike footwear suppliers in Vietnam stopping manufacturing.
But it’s clear that Nike isn’t the only brand affected by the shutdown. Adidas, Puma, Wolverine Worldwide, and Under Armour also import footwear from the region. From January 1 to June 30, Wolverine and Puma were the largest importers from Vietnam, Panjiva data shows.
“This [Vietnam shutdown] is bigger than Nike and Adidas,” Matt Priest, president and CEO of the Footwear Distributors and Retailers of America, told FN. “Just about every brand you know about is there. It’s going to have a pretty deep impact on getting goods into the U.S. marketplace, particularly when retailers are looking for inventory.”
Based on Priest’s discussions with FDRA members, the Vietnam situation will likely be a factor for the all-important holiday selling period, not the current back-to-school selling season.
For back to school, Priest noted that most retailers have enough inventory and “feel pretty confident.”
Puma, which recently updated its full-year guidance thanks to a rebound in second quarter sales, made a specific note in its statement that the new guidance is contingent upon continued manufacturing operations in Vietnam and China and no big issues related to the ongoing COVID-19 pandemic. The company reports earnings on July 29.
While it’s the most significant shutdown Vietnam has faced since the pandemic began, it may only last for another week or two, said Priest — somewhat good news in an otherwise challenging year on the supply chain front.
The shutdown will also likely give ports and the overall supply chain time to catch up on any existing backlogs, Priest said. That’s true even as consumer demand for good returns, fueled in part from President Joe Biden’s first round of advance child tax credits that rolled out last week.
According to an FDRA forecast, in 2021, 62.2% of U.S. athletic footwear was imported from China, and 23.3% from Vietnam. That compares with 61.2% from China in 2020 and 24.3% from Vietnam. As far back as 1996, 68.3% of U.S. athletic footwear came from China and 0.2% was imported from Vietnam.
“The expectation is that this elevated supply chain disruption is going to be here for a long time, easily for another year. All of these variables seem to be once-in-a-lifetime variables and they’ve all fallen in the same year,” Priest concluded. “It’s sharpening our companies for sure, and it’s helping them to develop more agility as it relates to the different disruptions at different ports of entry or learning how to bring in a lot of products at one time to stockpile.”