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Factory shutdown in Vietnam to impact textile retailers

Nov 19, 2021
Factory shutdown in Vietnam to impact textile retailers

Vietnam

The impact of prolonged factory shutdowns in Vietnam is likely going to be worse than many apparel and footwear retailers have planned for, lasting well into 2022, according to analysts at BofA Securities.

The Wall Street research firm said in a note to clients over the weekend that the recovery in Vietnam will be more gradual than retailers are anticipating, and that businesses are being too optimistic about turnaround times.

BofA cited a number of reasons for its predictions, including the fact that the reopening of the economy in southern Vietnam — where many apparel and footwear producers are housed — has been moving much slower than in the north.

Vietnam experienced a devastating surge in Covid cases this past July through August, prompting another round of local lockdowns. The temporary pause to production dealt a blow to companies such as Adidas and Nike, which rely heavily on the region for manufacturing their sneakers and athletic apparel. Businesses have since started to reopen, but vaccination rates remain significantly lower compared with other countries, BofA noted.

Mohamed Faiz Nagutha, economist, BofA, said that, “While production activities indeed recovered fast last year after the brief Covid-related disruption, production is likely to take longer to normalize this time around – perhaps as long as 6 months.

He added that current factory operation rules in Vietnam remain strict and very complicated, which could hinder employees’ ability to return to work.

Puma has already warned that supply chain bottlenecks, particular in Vietnam, will entail a shortage of its products far into next year. Last week, Adidas trimmed its 2021 outlook due to sourcing disruptions.

Source: CNBC

Image Source: Google Images

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