Pandemic-related supply chain woes are hitting retailers everywhere, but certain companies could be more vulnerable than others, a Cowen report found. Covid case surges in Vietnam and elsewhere in Asia have led to factory shutdowns and production disruptions. "The production stoppages in Southeast Asia starting in August due to COVID have served to heighten shipping delays and costs across the industry spectrum," Cowen's John Kernan said in an Oct. 8 note. This is likely to lead to expected guidance revisions as earnings season approaches, he added. Out of 21 S & P 500 companies that reported third-quarter financial results so far, 71% discussed negative impacts of supply chain challenges on their earnings calls as of Oct. 8, according to FactSet. To look at how supply chain issues could impact companies, Cowen analyzed major retailers' exposure to sourcing in Vietnam and China. Athletic apparel names Foot Locker, adidas , Nike and Puma top the list for Vietnam sourcing exposure at 45% to 50%. However, exposure is not the only factor affecting companies' risk regarding supply chain difficulties. Companies able to pass on higher costs to customers will also fare better than those that can't, Cowen noted. "Price increases can mitigate recent input cost inflation while full price sell through environment should remain strong," Kernan said. Cowen's top retail and consumer brand picks going into the new year are Lululemon Athletica , Dick's Sporting Goods , Yeti , Figs , Under Armour and Deckers Outdoor . Other potential winners from ongoing supply chain disruption are off-price retailers, which sell branded items at discounted pricing. Cowen highlighted Burlington Stores , TJX Companies and Ross Stores as examples. "The Off-Price retail business model is uniquely positioned to take advantage of imbalances in supply and demand and indeed goods remain plentiful along with open-to-buy dollars," Kernan said. Overall, supply woes will likely affect shopping heading into the end of the year, according to Cowen. "With ongoing global supply chain disruption leaving inventory levels lean across channels and costs increasing, we see prospects for a pull-forward of Holiday shopping to mid-Fall from traditionally Nov/Dec," Kernan said.
A cargo ship moves under the Bayonne Bridge as it heads out to the ocean on October 06, 2021 in Bayonne, New Jersey.
Spencer Platt | Getty Images
Pandemic-related supply chain woes are hitting retailers everywhere, but certain companies could be more vulnerable than others, a Cowen report found.