Yes, this title partially refers to the character Long Duk Dong in the 1984 hit '16 Candles.' But more importantly, it refers to the crisis with the Vietnamese Dong. The currency is coming off its greatest 2 month slide since the Asian currency crisis 10 years ago. Why does this matter to me as an apparel/footwear analyst?
- Vietnam is the #2 producer of footwear outside of China. While its share is only 5% vs. China's 84% (it is also 5% of apparel vs. China at 40%), it serves as a low cost buffer for production when China takes up prices and/or cannot meet production needs.
- With inflation running at 22% and workers are striking because wage hikes as high as 14% are not enough, and the currency doing nothing but go down, I can't possibly see how this is a good thing.
This is not good for anybody in any industry.
- While I think that numbers look very good at Nike, I'd be remiss to not point out that 31% of its sourcing is in Vietnam. Adidas is 28%