Vietnam sourcing still problematic for Adidas, Nike — Panjiva

Supply Chain Research

Vietnam sourcing still problematic for Adidas, Nike

Cons. Discr. - Retailing 471 Coronavirus 511 Earnings 728 Quote Watch 452 U.S. 5322 Vietnam 376

Vietnam has benefited from the surge in U.S. imports over the past year, building on gains from the trade dispute between the U.S. and China. Imports from the country were up year over year every month until September, when they plunged to a 7.6% decline from growth of 36% in August. The trend continued in October as imports fell by 20.1% year over year and by 9.1% from 2019.

This drastic shift in import activity can be traced back to the renewed COVID-19 outbreak in the country in mid-2021, first discussed in Panjiva’s research of July 19. The resurgence led to strict government-mandated lockdowns that shut factories and halted work at warehouses across the nation, disrupting supply chains across the globe.

U.S. imports from Vietnam go below 2019

Chart shows U.S. seaborne imports by volume from Vietnam on a monthly basis. Source: Panjiva

Footwear is one industry that has had to adapt to these changes. Adidas, for example, had to reallocate production to other regions and prioritize other items over products made in Vietnam, as discussed in Panjiva’s Aug. 12 research. Panjiva data shows that imports of footwear to the U.S. increased by 31.4% year over year in Q3, following the trend of increased-demand-driven imports.

Vietnam accounted for 27.4% of the total U.S. apparel imports in Q3 from a share of 31.5% in 2020. Imports from the country increased by 26.1% year over year, lifted by the overall trend, albeit showing slower growth compared to the industry. Companies looking to maintain inventories likely switched to other sources, including China, which saw imports increase from 42.3% of U.S. value in 2020 to 44.4% of value in Q3. The return of some goods to the region is likely a prudent option for shippers that made adjustments during the height of the U.S.-China trade row, accepting higher costs to ensure supply.

Vietnam footwear loses share, rises with the industry

Chart shows U.S. imports of footwear on a monthly basis. Source: Panjiva

Adidas elaborated more on its supply chain hurdles in Vietnam during the Q3 earnings call on Nov. 10. CFO Harm Ohlmeyer said inventories were down 23%, currency-neutral, in the quarter partly due to “the exclusion of Reebok inventories, but mainly reflects the factory lockdowns in Vietnam during the quarter.”

Ohlmeyer added, “[W]e have a supply problem. At the end of Q3, almost 30% of our inventories, globally, were goods in transit. That means they’re sitting somewhere in a harbor, sitting on a ship or sitting on a truck or a train, but not being delivered to a customer or to a consumer.” The CFO’s remarks encapsulate the situation many other companies continue to face, as long lead times increase the amount of inventory in the global logistics system.

Panjiva data shows that imports in October associated with Adidas fell by 5.8% by volume year over year after being relatively flat in the preceding months – down by 1.1% in August and up by 1% in September. The proportion of imports from Vietnam also declined from 41.2% in July to 6.3% in October, potentially making an impact on the company’s overall trading activity.

Imports associated with rival Nike show a similar pattern, dropping from a 51.3% share of the total in July to a share of 16.2% in October. The July increase, from a 38.7% share in Q2, may indicate a reaction to the rising COVID-19 cases in Vietnam at the time — the company may have anticipated the lockdown and shipped as many goods as possible before it was imposed, in a bid to mitigate the forthcoming impact. It could also be due to early peak-season purchases that came in before the restrictions. Regardless, imports linked to Nike increased by 29.9% year over year in October, possibly indicating plenty of inventory for the holiday season as well.

Adidas and Nike Vietnam sourcing declines

Chart shows proportion of U.S. imports associated with Nike and Adidas originating in Vietnam on a quarterly and monthly basis. Source: Panjiva

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