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.

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%.

Another Domino - Leather

-- (A mind is a terrible thing@2 waste.com), April 18, 2001

Answers

What the hell is Nike talking about?Nike shoes are made of PLASTIC.

-- Dan Newsome (BOONSTAR1@webnet.tv), April 18, 2001.

Dan,

Naw, Nike uses a good bit of leather in their shoes. My sneaks are all-leather uppers with plastic trim.

Wow, this whole thingie about "domino effects" brings back memories[g].

Economies are not static; as a general rule, when one guy is losing money, another somewhere else is making it. Failing to realize this was one of the biggest -- and most common -- errors made by Doomsters about Y2K, of course.

In this case, those who DO have leather will be able to command a higher price for it. Demand will outstrip supply. Alternatives (such as plastics) will be found (and the suppliers of these plastics will make more money).

Some people will go broke, and that's bad; I'm not making light of it. But others will make money.

In this case, you can imagine that one guy over here lets 5 employees go because his cattle all had F&M disease. But at the same time, another guy over here might HIRE 5 employees to meet the new demand.

These types of dominos fall sideways.

-- Stephen M. Poole (smpoole7@bellsouth.net), April 19, 2001.

After high school and before I joined the AF, I worked at SKM-Seattle Knitting Mills-where there did not appear to be any knitting going on. At first I worked in the front with the old German Woman who hand sewed drapes and curtains for people, I was good at hand sewing, it was summer and we were making Christmas drapes for some rich home. I later worked in the back where I finished machine sewn drapes by hand using invisible stitches to connect the lining. As things slowed down I was moved upstairs to cut leather along with my life-long friend Linda. She cut leather. It was an interesting job. You throw the skin on a "canvas", tilted like the old architects tables, place the pattern into the best position (keeping away from the teats, the leather is thin and stretched there) and cut with a very sharp knife. Having sewn by machine since I was 9 years old, it was interesting how little work it took to make a leather coat. I lasted one week. Standing on a cement floor for 8 hours was painful. It gave Linda varicose veins at 19, I figured there were less painful ways to make a living.

-- Cherri (jessam5@home.com), April 19, 2001.

Cherri:

Reminds me of the years I spent at Justin Boots. At one time, our offices were at the rear of the floor where the design folks worked. It was interesting to see the folks sketch the different squiggles that would accommodate a new line of each boot. Off to the right were the folks who cut the leather. Of course Justin didn't just use cattle. If a species wasn't endangered, they made boots out of it. The factory was across the street. I had to talk to some users there on several occasions, so I got to see the various steps involved with cutting soles, stitching the boots together, nailing heels, etc. Most of the sewing is done while the boot is inside-out, and there was an interesting contraption which flipped the boot right-side-out so that the top-stitching could be applied.

-- Anita (Anita_S3@hotmail.com), April 19, 2001.