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Vietnam Exports Fewer Footwear Products as Covid Chokes Demand

Despite its status as the rising star of footwear sourcing, Vietnam’s manufacturing sector has been pummeled by the coronavirus crisis.

According to data published Friday by the country’s Ministry of Industry and Trade, Vietnam saw a year-over-year decline in footwear exports of 8.6 percent, bringing in $10.9 billion between the months of January and August. The sourcing hub’s primary importers of footwear products include the U.S., the E.U. and China.

During the same eight-month period, Vietnam also experienced a 15.6 percent decrease in exports of accessories like handbags, wallets, suitcases and umbrellas, resulting in $2.1 billion in earnings.

By contrast, in 2019, Vietnam earned nearly $18.3 billion from footwear exports alone, representing a 12.7 percent increase from the year prior. Handbag exports from the country saw an increase of almost 10 percent, accounting for over $3.7 billion in earnings, according to Vietnam’s General Statistics office.

Taiwanese footwear manufacturer Pou Chen Group, a massive supplier of casual and athletic styles for brands like Nike, Adidas, Asics, New Balance, Timberland and Salomon, saw a year-over-year drop in consolidated sales of nearly 23 percent during the month of July, with exports contracting from $25.1 million to $19.4 million.

Pou Chen, which maintains a sizable presence in Vietnam, says it serves dozens of the world’s household name brands and has the ability to produce more than 300 million pairs of shoes per year. But despite the supplier’s massive production capacity, exports have been slipping over the past eight months as one facility temporary closed over social-distancing violations.

Consolidated sales from January through July amounted to $142.2 million, down more than 22 percent from the same period in 2019, when sales reached $182.6 million. What’s more, the supplier saw a drop of nearly 10 percent drop from June to July this year.

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In June, Pou Chen client Nike reported a fourth-quarter revenue drop of 38 percent ($6.31 million) compared to the year prior. The athletic giant saw a net loss of $790 million in sales, largely spurred by rampant store closures across North America, EMEA and APLA (Asia-Pacific and Latin America).

The vast majority (90 percent) of Nike-owned stores were closed for around eight weeks during the spring months due to the pandemic. Product shipments to partner retailers also contracted by half during the fourth quarter. As of June 25, about 90 percent of those stores have reopened globally.

While many brands are hoping for a fruitful Black Friday-Cyber Monday, Nike moved swiftly this spring to cancel about one-third of its pre-Covid purchase orders for fall product.

“While this had a negative impact on gross margins in the fourth quarter, it was the right decision to tighten future inventory movement throughout our supply chain and utilize the inventory we have on hand,” Matt Friend, Nike’s executive vice president and chief financial officer, said during a June earnings call.

In early August, competitor and fellow Pou Chen customer Adidas reported a net loss of $373 million during its second quarter, compared with a profit of $626 million during the same period of 2019. Net sales dropped by 34 percent on a currency-neutral basis to $4.21 billion from $6.49 billion year over year.

While the brand’s e-commerce sales nearly doubled during the second quarter, bolstering a revenue stream that now accounts for more than one-third of Adidas’ total business, the boost couldn’t make up for the quarter’s brick-and-mortar losses. About 70 percent of Adidas’ stores were shuttered during the month of April and beyond, though 92 percent had reopened by August.

At the time, the company declined to provide a full-year outlook due to lingering uncertainties surrounding Covid’s continued impact. The pace of business normalization is yet unknown, Adidas said, in light of newly reopened stores and a changing macroeconomic climate.