Footwear Insight

THE FOOTWEAR EYE to be here for the long-term, and Holiday will be challenging." Lululemon executives reported they have instituted air freight costs for some key hol- iday products and prioritized Fall/Holiday styles while seeking other sourcing possi- bilities. Other brands are taking a similar approach. "Air freight is a strategic expense and there's a time and a place for it," suggests Mary McNelly, Senior Director of Logistics for Crocs speaking at the FDRA event. "The market is different from what you would have used air freight for a couple of years ago. It is more expensive." Vietnam is a vital sourcing location: It has doubled its market share in the leather and footwear industries to 15 percent over the last decade and trails only China and Bangladesh in textile and garment production. Athletic giants Nike and Adidas will not go unscathed by the situation in Vietnam, facing problems beyond securing higher-priced container space on shipping vessels like some of their smaller competitors in the athletic segment. BTIG Managing Director and Lifestyle Brands and Wellness Analyst Camilo Lyon recently downgraded his rating on Nike stock to "neutral," writing, "We believe the risk of significant cancellations beginning this holiday and running through at least next spring has risen materially for Nike as it is now facing at least two months of virtually no unit production at its Vietnamese factories." In August, Adidas said it was developing a "dedicated action plan" to mitigate industry- wide supply chain challenges. The strategy was said to include production re-alloca- tion to other regions and the securement of additional production capacity. Vietnam reportedly accounts for approximately 30 percent of the Three Stripes global supply. "So far, we've been able to secure additional capacity for 30 million pieces," Adidas CEO Kasper Rorsted told analysts in early August. "Particularly for high-priced products, we will use air freight…We are prioritizing key campaigns and product launches as essen- tial to continue driving top line and brand momentum…We are redeploying existing inventory, creating new sales packages uti- lizing existing stock, which will allow us to reduce cancellation rates and discounting." Other shoe brands are undoubtedly facing challenges as well, although most of them haven't disclosed their difficulties publicly. An estimated 50 percent of Columbia's apparel, accessories and equipment is produced in either Vietnam or China. Hanesbrands generates much of its international income from six countries, including Vietnam, and Deckers has an on-site supervisory office in the country to oversee production for its branded products there. During the com- pany's Q2 ending in July, Deckers execs confirmed that some Fall shipments of UGGs were accelerated "to mitigate macro supply chain pressure" and ensure it had products "well positioned in the marketplace." Crocs' McNelly sums up the harsh realities of today's logistics and supply chain climate. "[Vendors] are paying more for less — for less predictability, less space and less movement," she says, predicting "it's going to take a long time to get back to the new normal." n footwearinsight.com September/October 2021 ~ Footwear Insight • 11

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