Business Essentials for Professionals


Adidas And Puma Predict Huge Hit In China Sales Due To Coronavirus

Adidas And Puma Predict Huge Hit In China Sales Due To Coronavirus
Warning of a major disruption in sale in China because of the coronavirus outbreak was issued by the German sportswear makers Adidas and Puma. The companies however said that while there was some improvement in the conditions in the Chinese market, the business hit had spread to other markets with the spread of the virus.
The warnings were preceded by a plunge in the stocks of the companies in the last few weeks. Share price of Adidas stock has reached a one-year low.
It expects that its sale revenues in the first quarter of the current year in the greater China region will drop by up to 1 billion euros or $1.14 billion, Adidas said, and added that there would be a decline of between 400 million and 500 million in the operating profits of the company as well.
“The virus hit looks worse than feared,” Jefferies analyst James Grzinic wrote in a note.
Despite encouraging signs emerging out of China in recent days, Puma does not expect its business to return back to normal any time soon and the company added that the business forecast that it had given on February 19 was abandoned now because that was calculated on the assumption that the coronavirus outbreak will be a short one.
“Given the duration of the situation in China, the negative impact in other Asian countries and now also the spread to Europe and the U.S., we unfortunately have to conclude that a short-term normalization will not occur,” Puma said.
Almost one third of the revenues of both Adidas and Puma is accounted for by the sale in Asia – a market that in recent years has been a growth driver for the global sporting goods industry. Additionally, this region is also one of the major hubs of sourcing for the companies in this segment and China is one of the major supplier market for both Adidas and Puma.
While more than 120,000 have been infected by the virus and almost 4,300 people killed by it across the world since the outbreak in China at the end of December last year, the outbreak has also upended global business because of a curb in travelling and a prolonged lockdown of factories in China and in other affected countries.
In the period since China’s Lunar New Year on January 25, there had been a drop of almost 85 per cent in its business in the greater China area, Adidas warned last month. In its latest announcement, the company said that while it has noted some “slight improvements” in its business activity in greater China, but customer shopping is now being impacted in Japan and South Korea because of the coronavirus outbreak there. Some of the company’s other markets have also been affected.
A big fall in sales was being seen by Puma in its Asian markets such as Singapore, Malaysia, Japan and South Korea because of a drastic drop in Chinese travelers to these markets. The company also said that a significant decline was also being noted in shopper traffic across Europe.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc