The complete lockdown of Vietnam, a key apparel exporting country, due to spiking COVID-19 infections could be about to wreak havoc on shoppers.
“Vietnam is completely locked right now, it will be locked another either one week or two weeks, and hopefully, then it will be unlocked, and we will air it in and try to get it in as quickly as possible. But in categories like dresses, we have a lot on order and some of our bottoms are on order from Vietnam and we’re starting to break sizes and see problems there,” Urban Outfitters CEO Richard Hayne warned analysts on an earnings call Tuesday evening.
Urban Outfitters shares plunged nearly 10% on Wednesday as investors grew concerned about the situation in Vietnam and disregarded a strong second quarter.
“Supply chain challenges may limit sales, pressure margins with bottlenecks widespread but most notably in Vietnam. This is leading Urban Outfitters to pre-commit to more inventory, given an inability to chase [sales], and is also leading to some missed sales,” said Jefferies analyst Janine Stichter.
The Vietnamese government implemented a tighter lockdown on Monday as the Delta variant has taken hold, with people not allowed to leave their homes even for food, Reuters reports. New COVID cases in Vietnam have averaged 10,680 a day, per data from Johns Hopkins. In the past month alone, Vietnam has seen 268,094 new COVID cases — a record high for the country. Deaths from the virus have tallied 8,644, also a record high.
In turn, the country’s textile industry has ground to a halt — leaving U.S. importers such as Urban Outfitters to scramble to secure merchandise from other countries (see India).
Vietnam’s garment and textile industry earned $39 billion from exports in 2019 (pre-pandemic), according to data from the Vietnam General Statistics Office. Garment manufacturing makes up the majority of businesses in Vietnam at 70%, notes Vietnam Briefing.
“It will impact everyone [in the apparel industry],” one retail expert told Yahoo Finance about the situation in Vietnam. Out of stocks in popular apparel sizes and colors for back-to-school and fall could be the most visible impact to shoppers until the lockdowns are lifted.
“We have a lot of product there and we’re trying to get it in. So we are just doing whatever we can to get it in whenever we can,” added Urban Outfitters’ Hayne.