Nike’s imports drop 39% amid port congestion, straining inventory

Date: Wednesday, March 24th, 2021

Dive Brief:

  • Nike executives cited port congestion and other supply chain bottlenecks for constraining its inventory levels, in an earnings call last week for its Q3.
  • The company's inventory was delayed by three weeks in North America, which it said has affected the timing of its wholesale shipments. Nike's inventory in North America was up 31% YoY during the quarter, but much of this was in-transit inventory. Comparatively, the inventory in its distribution centers was down 20% YoY for the quarter, Nike CFO Matt Friend said last week.
  • "Disruption in the global supply chain due to container shortages, transportation delays and port congestion has interrupted the flow of inventory supply," Friend said. "The result has been supply shortages relative to continued strong marketplace demand."

Dive Insight:

This recent earnings cycle has been full of companies talking about how supply chains have slowed due to port congestion and equipment shortages in recent months.

Experts have suggested that retails retool their supply chains and take these longer lead times into account.

Nike President and CEO John Donahoe said the company has been able to do just that and shift its operations to absorb the longer lead times.

"And so, we do expect a more consistent flow of inventory in the fourth quarter, recognizing that transit times are elevated versus the prior year," Donahoe said last week.

Data emailed from S&P Global Panjiva shows that Nike's imports slid 29% YoY for the three months up until Feb. 28 and were down 39% YoY in February.

Retailers and manufacturers such as Foot Locker and Honda have said port congestion has affected their inventory levels. Honda even scaled back production, as a result.

In some cases, these delays resulted in retailers getting their holiday inventory late, leaving them with too much rather than too little.

"Much of this inventory came in later than expected, which resulted in not being able to fully support demand during the holidays, and higher inventory levels exiting the year," Nordstrom CFO Anne Bramman said on the company's Q4 earnings call this month.

Bramman said Nordstrom will deal with the inventory through markdowns, and it expects the situation to normalize by the company's Q2.

The inventory struggles for retailers come as they're experiencing high demand from consumers, which is expected to continue with a new round of stimulus.

"There is strong demand for that inventory across our strategic partners and Nike Direct ... we intend to continue to fulfill that demand in both of those locations," Donahoe said.

[Read from the original source.]

Let's Start a Conversation