Workers in a Nike factory near Ho Chi Minh City work at a production line conveyor belt, putting together Nike sports shoes.

Nike is at risk of running out of sneakers made in Vietnam as the Covid crisis worsens around the global, according to a new report from S&P Global Market Intelligence.

The warning comes after two of Nike’s suppliers in Vietnam, Chang Shin Vietnam Co. and Pou Chen Corp., recently halted production due to a rapidly growing Covid outbreak in the region. In fiscal 2020, Nike said contract factories in Vietnam made roughly 50% of total Nike branded footwear.

A new analysis from Panjiva, a business line of S&P Global Market Intelligence, found Vietnam accounted for 49% of U.S. seaborne imports linked to Nike and its products in the second quarter of 2021.

Nike’s imports from Vietnam are led by footwear, Panjiva said, which was included in 82% of shipments in the 12 months ended June 30.

“The health and safety of our teammates, as well as that of our suppliers, remains our top priority,” a Nike spokeswoman told CNBC in an emailed statement.

“We continue to work with our suppliers to support their efforts in response to the dynamic and unprecedented nature of Covid-19,” she said. “As we continue to navigate these circumstances, we expect our suppliers to prioritize the health and livelihoods of their employees and continue to comply with legal requirements and the Nike Code of Conduct on the provision of wages, benefits and severance. We are confident in Nike’s ability to navigate these near-term dynamics and we remain prudent in our planning.”

Nike shares were down around 1.3%. The stock is up about 11.5% year to date. Nike has a market cap of roughly $250 billion.

The disruption is hitting Nike’s supply chain, and others’, right as the retail industry is moving into the all important back-to-school season. Companies have likely already received and stowed away merchandise to stock shelves through the fall, but now is when many businesses would be placing orders for the holidays. Other obstacles, including a shortage of cargo containers and lack of room at ports, have troubled supply chains in recent months.

Brooks Running Company CEO Jim Weber told CNBC last month that his company was running on a roughly 80-day cycle for shipping, compared with what used to take just 40 days.

“There’s no question the supply chain is strung out in our industry,” he said.

Apparel brands including Levi Strauss and H&M are facing similar headwinds in Bangladesh, which is home to a number of major clothing manufacturing hubs.

The department store chain Nordstrom is experiencing delays in the midst of its biggest annual sale.

During a post-earnings conference call with analysts last month, Nike CFO Matt Friend said the company was forecasting supply chain delays and higher logistics costs to persist for much of its fiscal year 2022. Demand from consumers has in many instances been outstripping supply, he said.

That means consumers could very likely find choices limited, or see some items totally out of stock, when they show up to stores or go online to shop in the months ahead.

Source: CNBC