Adidas and Puma warn of coronavirus drag on sales
German sportswear makers generate about a third of revenues in Asia
German sportswear makers Puma and Adidas have warned that the coronavirus outbreak has severely disrupted business in China, prompting store closures and a sharp drop in sales in one of their most important markets.
Puma on Wednesday said that more than half its stores in China were closed, and that it expected a negative impact on revenues and profits in the first quarter of this year. Rival Adidas said sales in the country had slumped 85 per cent year on year since January 25, and that it had closed a “significant number” of stores and seen a “pronounced” reduction in customers at those that remain open.
The Chinese economy has ground to a near-standstill following the rapid spread of the highly contagious coronavirus, with some workers quarantined and consumers staying away.
The updates from the German companies offer some of the clearest details yet on the impact of the virus on the $250bn-a-year sportswear industry, which is increasingly reliant on Asian consumers for growth. The Asia-Pacific and China are also key manufacturing hubs for apparel and shoes.
Puma and Adidas generate about a third of their revenues from the Asia-Pacific region, and both said it was too early to accurately quantify the long-term impact on their businesses.
“We have experienced a material negative impact from the coronavirus outbreak on our operations in China,” Adidas said in a statement.
The group said it had also seen declines outside mainland China, predominantly in South Korea and Japan, but that it had not seen “any major business impact” there.
Puma’s chief executive Bjorn Gulden said business this month “has of course been negatively affected by the outbreak”.
The impact has rippled into the wider region, with revenues in Puma’s other Asian markets also suffering due to the lower number of Chinese tourists. The region delivered Puma’s strongest sales growth last year of 22 per cent, driven by China and India.
But the company said it expected to be able to hit its 2020 targets despite the disruption, and was working under the assumption that the situation “will normalise in the short term”.
The group forecast earnings before interest and tax in a range between €500m and €520m for the full year. Shares rose 8 per cent, largely recovering losses since the outbreak rose to international prominence in mid-January.
Puma said sales climbed 18 per cent to €1.48bn on a currency-adjusted basis in the fourth quarter, while earnings before interest and tax surged 47 per cent to €55m.