Indonesia is noting an uptick in orders – both cyclically and with new long-term capital projects. Political posturing? Perhaps. But the rationale makes sense.
Here are some important takeaways from a senior executive from the Indonesian Footwear Association.
1) Footwear exports ($2bn vs. $140bn total exports) are trending up 11% this year. That should accelerate as the current factory build plan has accelerated due to pressure from the major brands and retailers to move production on the margin outside of China.
2) Adidas and Nike have increased their orders to local manufacturers.
3) Production of New Balance shoes will increase from 50,000 pairs last year to 500,000 pairs by the end of this year and would eventually reach 1 million pairs per annum next year. Why is this one particularly noteworthy? New Balance has been known forever as the “made in the USA” footwear company. An incremental shift to Asia will help it be more price competitive. 1mm pair is not a game changer on a base of what we estimate to be 30-35mm pair for New Balance. But let's watch it.
Overall, any evidence of a shift away from China in this industry is good...given that 86% of the shoes on our feet originate in China.
