(CNN) — Plenty of people want to buy Nike clothes and sneakers. But nearly two years into the coronavirus pandemic, supply chain issues mean the company is struggling to meet that demand and grow its business.
Nike sales increased just 1% to $11.4 billion in the quarter ended November 30, the US footwear giant reported after the closing bell on Monday. That was better than analysts expected, even as sales dropped sharply in some markets.
Crucial markets: Revenue from Greater China plummeted by nearly a quarter, with sneaker sales down by 50%, Nike executives told analysts on Monday. Revenue also declined in Asia Pacific and Latin America.
One big culprit was factory closures related to the pandemic in Vietnam, where Nike was forced to cancel production of 130 million items. Store closures in China also hampered sales.
“The results this quarter in China were absolutely — were overwhelmingly impacted by supply disruptions from Vietnam,” said Nike chief financial officer Matthew Friend.
“We also had to navigate through local measures that were put in place to reduce the spread of Covid … those were clearly the two biggest drivers that impacted our performance this quarter,” he added.
Nike is far from the only company to be negatively affected by supply chain issues. Auto production has been limited by a shortage of computer chips, while shipping delays have caused problems for a range of industries.
Nike executives are confident that the worst of the company’s supply chain snafus have been resolved. Its factories in Vietnam have reopened, and production is ramping up.
“Relative to where we were 90 days ago, we’re increasingly confident that inventory supply will normalize and that we’ll be in a position to meet the incredible demand that we’re seeing across the marketplace,” said Friend.
There is one looming risk to that optimistic outlook: Omicron.
The fast-spreading coronavirus variant is ripping through major economies around the world, forcing some governments to impose fresh restrictions. Omicron is now the dominant strain in the United States, accounting for over 73% of new cases, according to the CDC.
Friend told analysts that the environment is “uncertain” and “volatile,” but said Nike was better prepared to deal with potential disruption to its operations.
“I think we’re better positioned than we’ve ever been, and we’re two-plus years into navigating through the challenges and the complexities of the volatility as it relates to the pandemic,” Friend said.
“We’re going to continue to watch it closely like everyone is,” he added.
Not so fast: The variant could keep the pressure on supply chains well into the new year, dashing hopes for a return to normalcy later in 2022.
“The recovery in global industrial production will gain considerable momentum later in the year as component shortages and cost pressures ease,” economists at Oxford Economics wrote recently.
Auto production will start a slow recovery, according to Oxford Economics. And shipping cost pressures are expected to ease gradually over the course of the year.
Omicron could yet deliver a major setback. Oxford Economics said the variant is a “significant” risk to its outlook in the near-term.
US castoff lands mega listing
China Mobile is ending the year with a bang, reports my CNN Business colleague Michelle Toh.
The Chinese telecom giant announced Tuesday that it wants to raise as much as 56 billion yuan ($8.8 billion) on the Shanghai stock exchange after it was forced to quit Wall Street in January.
In a filing to the Hong Kong stock exchange, where its stock also trades, the company said it planned to issue between 845.7 million and 972.6 million new shares for nearly 57.6 yuan (about $9) apiece.
That would make it one of the world’s biggest equity offerings this year, according to Refinitiv.
The massive Shanghai debut makes for a splashy homecoming for China Mobile. The company did not specify a listing date in its prospectus, but said it planned to apply to start trading “as soon as possible.”
Earlier this year, China Mobile, along with two other Chinese state-run telecom firms — China Telecom and China Unicom — were kicked off the New York Stock Exchange, after the Trump administration barred American investment in companies with ties to the Chinese military.
Elon’s huge tax bill
Tesla CEO Elon Musk says his tax bill this year will be $11 billion, and he’s probably right: The filings he has made with the Securities and Exchange Commission about his recent stock trades back up that massive number.
That would be a massive change from some recent years. An investigation by ProPublica found that Musk, and fellow billionaires such as Jeff Bezos and Michael Bloomberg, legally paid zero in income taxes in 2018.
How did zero become $11 billion? My CNN Business colleague Chris Isidore has the details:
Musk doesn’t earn a cash salary or bonus. He’s instead been paid through stock options, giving him the right to buy shares of Tesla at the market price when the options are issued, but likely well below their value at the time they are exercised.
Musk received 25.5 million split-adjusted options in 2012, and had 22.9 million of those options vest over subsequent years as Tesla hit certain operational and financial targets. But he didn’t have to pay taxes on those options until he used them to buy shares.
Since that block of options is due to expire in August 2022, Musk finally started the process of turning them into stock in early November.
When he exercises the options, the value of the newly purchased shares are taxed as income — a 40.8% rate for someone in Musk’s tax bracket.
And that is where the huge tax bill comes from.
General Mills and Rite Aid report earnings before the bell.
Also today: Earnings from BlackBerry after the closing bell.
Coming tomorrow: Earnings from CarMax.