Nike foot-and-mouth warning

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Wednesday, 18 April, 2001, 11:59 GMT 12:59 UK

Nike foot-and-mouth warning

Leather goods could soon be more expensive.

The world's number one shoe maker, Nike, has warned its profits could be hit in the coming months because the foot-and-mouth crisis is pushing up the price of leather. Nike warned that prices for leather, which have increased by at least 15% this year, "are rising due in part to European cattle diseases".

Much of that increase is blamed on the destruction of hundreds of thousands of cattle in Europe, in an effort to stop the spread of the disease.

"If these prices continue to rise, fiscal year 2002 gross margins may be negatively affected," Nike executives wrote in a Securities and Exchange Commission filing.

The warning comes as Nike reports a 33% fall in sales for the third quarter ending 28 February compared with last year.

Hell for leather

Nike's filing said leather is "a significant raw material" for the company but didn't say how much it uses or how much price hikes could hurt profits.

Industry calculations estimate that the production of a pair of Nike shoes uses about 2 square feet of leather, which now costs about $2.50 a square foot.

A 15% increase would add 70 cents to the production cost of a pair of shoes.

Taking a hiding

Shoppers could also pay more for this summer's range of leather consumer goods like furniture, car seats, footballs, clothing and shoes.

With fewer animals slaughtered in Europe, hide prices are soaring.

Leather interiors for cars will be more expensive

Europe's mass culls have decimated the local supply of hides, down by 75% in Britain alone, and have lifted the price by 20%.

Worldwide the supply squeeze has pushed up cowhide prices by about 15% in the last two months.

The US is a big exporter of hides and the overseas demand for some skins has pushed prices up 66%.

http://news.bbc.co.uk/hi/english/business/newsid_1283000/1283067.stm

-- Martin Thompson (mthom1927@aol.com), April 18, 2001

Answers

Now is not the time to be buying cattle futures.

-- RogerT (rogerT@c-zone.net), April 18, 2001.

70 cents more for a shoe?

That's almost a daily wage for a Nike sweatshop worker ($1.25/day) in Indonesia.

Meanwhile, Phil Knight, the king of the corporation, is a multibillionaire (at least in his stock value), who pays sports stars millions for their advertising but his workers don't even make a living wage.

It will be interesting to watch the changes in the global economy when oil prices rise to the point where it stops becoming profitable to ship materials around the globe to find the cheapest, most easily exploited labor.

-- mark (mrobinowitz@igc.org), April 19, 2001.


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