Daily Management Review

Coronavirus Outbreak In China Has Hit Its Business, Warns Adidas And Puma


Coronavirus Outbreak In China Has Hit Its Business, Warns Adidas And Puma
The outbreak of coronavirus in China is hurting the sale of German sportswear makers Adidas and Puma because of closure of stores in the country as well as a reduction in the number of Chinese tourists shopping from stores outside of China while travelling, both the companies have warned.
The Asian market accounts for almost one third of the total sale of Adidas and Puma and in recent years, the Asian market has been a major growth engine for the global sportswear market. Additionally, for both the companies, Asia has also been their major markets to source products and China features prominently in that list as a manufacturers of the products sold by the company. 
Since the start of the Chinese New Year on January 25, there has been a 85 per cent year on year drop in the sale of Adidas in the greater China area, the company said in a statement on Wednesday. For the entire of 2018, about 20 per cent of the total global sale of the company was accounted for by the Chinese market.
The sale revenues and profits for the first quarter of the current year is likely to be hit because of the virus outbreak in China, Puma also said in a statement. However the company still hopes that it would be able to meet its targets set for 2020. The company said this after reporting better-than-expected results for the fourth quarter of 2019 which resulted in an 8 per cent rise in its shares.
During the quarter, there had been lower shopper traffic in Japan and South Korea as well, Adidas said, but also assured the market that it had not yet faced any major business impact because of the virus outside of Greater China. The company said that currently, it was not possible for it to quantify the impact of the virus outbreak for the entire of 2020 and said that more details would be provided by it when it announces its results next month.
There are about 12,000 physical stores in China of Adidas and most are in the franchise format. The number of company owned stores is less than 500 in China. On the other hand, Chinese suppliers also account for almost a fifth of its shoes and apparel products. The company was trying to work out methods to address the impact on sourcing of products from China, an Adidas spokeswoman told the media.
The virus outbreak in China has resulted in more than half of its stores being temporarily closed, Puma said, and added that its sales in other markets was also being impacted because of drastic reduction in the number of Chinese travelers – particularly in some of the other major Asian markets such as Singapore, Japan and Taiwan. The projections of the company are based on the assumption that the virus situation would get addressed and normal business activities would restart in a short period of time.
"We should be able to fulfill February and March orders with a three-week delay," said Puma Chief Executive Bjorn Gulden.