New Balance expands its manufacturing capabilities in the U.S. in response to global supply chain disruptions.

• In Methuen, Massachusetts, New Balance has established its fifth North American manufacturing facility.
• Before production began in January, New Balance renovated its 80,000-square-foot space with about $20 million.
• The Covid pandemic has severely impacted the footwear industry due to supply chain disruptions, including factory shutdowns in China and Vietnam.

Despite pandemic uncertainty and strained foreign relations, one retailer is strengthening its presence in North America.

New Balance, a privately held business renowned for its cushioned sneakers and retro-inspired workout gear, has established a manufacturing facility in Methuen, Massachusetts, according to a statement made by President and CEO Joe Preston on Monday. This move bolsters the company's dependence on North America for production as businesses grapple with supply chain disruptions globally.

Larry Fink, chairman and CEO of the world's largest asset manager, stated last week that Russia's invasion of Ukraine has disrupted the global order that has been in place since the end of the Cold War. As a result, U.S. businesses may reduce their dependence on foreign economies for growth.

The 80,000-square-foot space underwent $20 million in renovations, according to New Balance.

The facility currently employs nearly 100 individuals who manufacture New Balance's top-selling Made 990v5 running shoe. By the end of the year, the company aims to increase its workforce and production capabilities, resulting in an additional 750,000 pairs of sneakers being produced annually.

Preston stated in a phone interview that controlling our destiny is part of our overall mantra, which has become increasingly relevant in the past couple of years due to Covid. Despite the supply constraints, our business experienced a 30% increase in revenue in 2021.

New Balance, a Boston-based shoe company, is expanding its production capabilities in the U.S. The company owns five manufacturing facilities across Maine and Massachusetts that employ about 1,000 workers. These facilities help to produce its line of "New Balance Made" sneakers, which are at least 70% domestically manufactured and make up a limited portion of U.S. sales. Last year, New Balance reported worldwide sales of $4.4 billion.

Preston states that the objective is to expand in North America, which aligns with the brand's "Made in America" philosophy.

The CEO stated that differentiating ourselves from our competition by producing our own products rather than outsourcing all of our production would improve the quality and craftsmanship.

The pandemic has severely impacted the footwear industry due to supply chain disruptions, such as temporary factory shutdowns in China and Vietnam. Retailers like Nike and Adidas heavily depend on inexpensive labor and materials from overseas.

Since the outbreak of Covid-19, the percentage of shoes sold in the U.S. that originated from China has decreased, according to the Footwear Distributors & Retailers of America. This is due to the trade war between the U.S. and China, which has prompted retailers to shift their manufacturing focus to other countries in order to avoid high tariffs.

The coronavirus pandemic and Russia's attack on Ukraine have caused uncertainty and tension, affecting factory operations in Vietnam and other countries.

FDRA president and CEO Matt Priest stated that the unpredictability is compelling brands to make daily decisions regarding their sourcing for the next batch of orders.

He stated in a phone interview that there is a significant geopolitical shift occurring, as seen in Russia where numerous Western corporate brands withdrew in a short period of time, leaving a lasting impression on the magnitude of the shifts taking place.

Last week, Nike announced that its facilities in Vietnam are operational, but the time it takes to ship goods from overseas to North America has been extended. The company stated that it takes six weeks longer to ship goods compared to pre-pandemic levels, which is two weeks longer than the same period last year. To ensure that shelves are stocked for the fall season, Nike is moving up its buying timelines.

While increasing production in the U.S. may seem like an easy solution, Priest argues that it is a costly option and finding workers can be challenging.

If you can't find workers for a cafe on Main Street in your hometown, you won't be able to find workers for a shoe factory either, as we lack the necessary raw materials and supply chain here.

New Balance has low turnover rates among its U.S. factory workers, but still relies on overseas factories for most of its production. This puts the retailer in the same position as Nike and Adidas, but having a North American presence helps offset some challenges, says Preston.

Domestic manufacturing allows you to bring products to market faster and respond more quickly to consumer trends because you are closer to the consumer, as stated.

He stated that New Balance requires additional capacity due to the growing popularity of its running shoes and the attraction of a new generation of younger customers.

In the U.S., New Balance ranks fifth among sneaker brands in terms of dollar sales, with a market share of 3.4%, according to data from The NPD Group. Although this represents a small percentage, it places New Balance behind only four competitors: Nike, Adidas, Jordan, and .

"Our brand momentum stems from our performance and lifestyle businesses, and the overlap between these two areas can generate excitement," Preston stated.