Retail & Consumer

Nike supplier halts production at 3 Vietnam plants due to COVID-19

3 minute read

Nike shoes are seen displayed at a sporting goods store in New York City, New York, U.S., May 14, 2019. REUTERS/Mike Segar

HANOI, July 15 (Reuters) - Changshin Vietnam, a South Korean shoemaker, became the second major Nike (NKE.N) supplier to suspend production in Vietnam as it shut three of its factories near Ho Chi Minh City on Thursday due to a coronavirus outbreak.

The factories in Dong Nai province, which employ nearly 42,000 workers, will remain shut until July 20, the Vietnamese government said in a statement, adding many of the 177 infection cases detected in the province were from the factories.

Nike did not respond to Reuters request for comment outside U.S. business hours, while calls to Changshin went unanswered.

On Wednesday, Taiwan's Pou Chen Corp (9904.TW), which makes footwear for Nike Adidas (ADSGn.DE), suspended operations at its plant in Ho Chi Minh City. The plant will be closed until July 23 for "health and safety considerations", the company said, adding it did not expect a major financial impact.

Vietnam had until recently successfully contained coronavirus outbreaks, with limited disruption to its crucial manufacturing sector. However since late April, it has seen record cases on many days this month, most of those in the commercial hub Ho Chi Minh City and its neighbouring industrial provinces of Dong Nai and Binh Duong.

The country has recorded 38,200 infections and 138 deaths overall, a vast majority of those since May.

Almost all of Nike's footwear is manufactured outside the United States. The company has said contract factories in Vietnam produced about 50% of total Nike brand footwear in fiscal 2020, but did not specify the volumes that came from Changshin or Pou Chen.

The latest resurgence in virus cases could signal another hiccup for the world's largest sportswear chain in 2021, after container shortages and U.S. port congestion held up Nike's inventory earlier in the year. read more

"Having the factories shut for one or two weeks for Nike is going to cause a massive problem for its supply chain," China Market Research Group analyst Shaun Rein said, adding the shutdown would lead to price hikes.

Nike also saw its China sales take a hit after calls to boycott global brands for their comments around forced labor in Xinjiang. read more

Eclat Textile Co, a Taiwan-based garment and fabric supplier, has suspended production at its Dong Nai plant until July 17, it told the Taipei stock exchange.

Additional reporting by Ben Blanchard in Taipei, Joyce Lee in Seoul and Aishwarya Venugopal in Bengaluru; Editing by Ed Davies, Martin Petty and Shinjini Ganguli

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