While some top footwear players were optimistic that supply chain pressures would ease early in the new year, at least one analyst is sounding the alarm.
“We are resetting most estimates and price targets to better reflect decreased visibility due to supply chain constraints, increased freight and materials costs and near-term headwinds as stimulus payments are lapped,” wrote Williams Trading analyst Sam Poser in an in-depth note to clients that detailed his forecast for top shoe brands and retailers.
“It’s become clear to us, based on movement of stocks post earnings and discussions with investors that there’s a mistaken belief that worst of the supply chain related issues occurred in Q4,” Poser wrote.”Actually, most of the product impacted by last fall’s 10-week shutdown of factories in Southern Vietnam were goods for spring ’22, and some of that product was not produced or is coming in late.”
The production hurdles have impacted January to April ’22 deliveries the most, Poser asserted. He went on to note that over 100 container ships are waiting at sea outside ports in Los Angeles and Long Beach, while trucks and trucker shortages are also an issue. At the same time other U.S. ports are becoming backed up as companies reroute goods and airfreight solutions are needed.
“No investor, in our view, should be surprised about the impact of the supply chain issues that are occurring now. No company that ships goods by sea from Asia is immune,” Poser wrote, noting that the cost to ship a container from Asia is about $20,000 compared to $5,000 at this time last year. “Unless, a company that does business in the U.S. has little reliance on goods made in China, Vietnam or in the balance of Asia, on-time deliveries on goods shipped by sea will remain challenging for foreseeable future, and the need for more expensive air freight will continue.”
In the note, Poser downgraded Foot Locker, On and Canada Goose to “sell” from his previous “hold” rating, moved Nike to “hold” from “buy” and revised estimates for a slew of other companies.
