- Lands' End expects more supply chain challenges as the holiday season approaches.
- Factory closures in Vietnam are making it hard for the retailer to accurately predict its holiday season.
- The retailer reported better-than-expected earnings on Thursday, but its stock fell as supply chain issues weighed on its outlook for the rest of the year.
Consumer demand isn't the problem — it's getting the products to the shelves on time, according to apparel retailer Lands' End.
The retailer's stock closed down more than 9% on Thursday at $31.10. Although the company turned in better-than-expected fiscal second-quarter results, supply chain issues are making its outlook uncertain and driving down its stock price.
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"You have countries that are important for manufacturing, like Vietnam. Right now, you have the south of Vietnam completely closed from the middle of July to at least the middle of September," said Lands' End CEO Jerome Griffith, in an interview on CNBC's "Power Lunch."
The factory shutdowns are a result of the ongoing global pandemic and have made it difficult to accurately predict the company's performance this holiday season, Lands' End said. U.S. shoppers have wanted to restock their closets, but getting products to them isn't always easy.
Lands' End expects supply chain issues will eat into profit margins in the second half of the year. Retailers have had to pay higher prices for goods amid strong consumer demand. Also, transportation costs are rising as retailers try to speed up the receipt of orders.
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Bottlenecks exist throughout the supply chain, Griffith said.
"You're seeing factories having products completed, not being able to book containers. Containers coming over on ships, but the ships not being able to get into harbors. And once they get into harbors, a lack of truckers driving goods from harbors to wherever they need to go," he said.
The cost of shipping containers can be as much as four times what it was a year ago, Griffith said.
Sometimes the higher costs can be offset by price increases, but it's not a guarantee.
"In a lot of cases, what is going to happen throughout the industry, is it's going to be passed on to the consumer," Griffith said. Lands' End has been using artificial intelligence to predict where it can raise prices based on spikes in consumer demand.
