In an effort to help curb the spread of the deadly coronavirus, travel restrictions in China have limited tourism, production and foot traffic to stores.
Some retailers have shuttered their outposts or reduced operating hours in heavily affected areas, leading to lower sales that are likely to hurt their bottom lines — although the extent of the impact remains unclear. As the illness continues to claim lives (deaths have surpassed 1,300 and infections have reached 60,000 as of Thursday), retailers are keeping a close eye on its impact on business as well as on associates and partners who work in the country.
Here are the fashion purveyors that have so far issued warnings — from closures to downwardly adjusted outlooks — as a result of the coronavirus.
Ralph Lauren Corp.
Over the past week, Ralph Lauren has temporarily shuttered two-thirds of its stores in China. Due to significantly reduced travel and retail traffic, the company said that it expects “broader impact” across its businesses in the country as well as other parts of Asia that have been impacted by the coronavirus.
“Our dedicated teams are operating with agility in a highly dynamic situation, and we will continue to assess the implications for our business across retail, corporate and our supply base,” president and CEO Patrice Louvet said in a statement on Feb. 13. “While the health crisis creates near-term uncertainties, the fundamentals of our business are strong, and we continue to see significant long-term opportunities for growth in China and across Asia.”
Ralph Lauren now estimates that its fourth-quarter guidance will be negatively impacted by $55 million to $70 million in sales as well as $35 million to $45 million in operating income in Asia.
In China, the majority of Calvin Klein and Tommy Hilfiger stores — both company-operated and franchise locations — have temporarily closed due to government-imposed restrictions in light of the coronavirus. According to parent PVH Corp., the stores that remain open for limited hours are experiencing “significantly lower-than-planned traffic and sales trends.”
“We are closely monitoring the situation in China,” Chairman and CEO Emanuel Chirico said on Feb. 12. “Our priority is the well-being of our associates and business partners, their families and local communities, and our hearts are with those that have been impacted by the coronavirus. I want to sincerely thank our dedicated associates in Asia, who are going above and beyond, with many working remotely from home, to drive our business forward.”
Greater China is expected to account for roughly 7% of PVH’s 2019 revenues. The Asia-Pacific region as a whole is forecast to make up 16% of its total sales. About 20% of the company’s global sourcing is derived from China, including 10% inbound to the U.S.
Kering expressed confidence in its medium-term prospects despite uncertainty about the coronavirus.
“I don’t want to engage in guesswork, but based on past experience and knowing how dynamic and resilient the Chinese people are, we expect things to return to normal promptly once the emergency is over,” Chairman and CEO François-Henri Pinault said in a Feb. 12 conference call, “and we are already working on the next steps.”
The Gucci, Saint Laurent and Bottega Veneta parent noted a “strong drop in traffic and in sales” over the past 10 days at stores that remain open. Half of its store network in China has closed. The country represents a third of its luxury sales around the world.
About 60% of VF Corp.’s owned and partner stores in China are currently closed, while those that remain open have experienced “significant declines” in foot traffic.
According to the firm, the Asia-Pacific region and mainland China represented 12% and 6%, a respectively, of its overall revenues last year. Additionally, roughly 16% of the total cost of its goods sold is sourced directly from China, and 7% of that is exported to the U.S.
“The safety and well-being of our associates and partners in China is our highest priority. Our thoughts are with those people affected by the coronavirus,” Chairman, President and CEO Steve Rendle said in a statement on Feb. 7. “While the coronavirus will impact our financial results in the Asia-Pacific region in the near term, VF’s growth opportunity in China and across the Asia-Pacific region is significant, and the fundamentals of our business are strong. VF is well positioned to navigate the impact of the coronavirus situation, given the diversity of our business and operating model in other key geographies.”
Burberry Group PLC
Burberry announced on Feb. 7 that its retail sales have been impacted by store closures across China and Hong Kong: 24 of its 64 stores in China have been temporarily shuttered, and those stores still operating with reduced hours are “seeing significant footfall declines.”
Despite fears, the brand raised its outlook, expecting full-year sales to grow by a low single-digit percentage, compared with previous forecasts of “broadly stable” revenues.
“The outbreak of the coronavirus in mainland China is having a material negative effect on luxury demand. While we cannot currently predict how long this situation will last, we remain confident in our strategy,” said CEO Marco Gobbetti. “In the meantime, we are taking mitigating actions and every precaution to help ensure the safety and well-being of our employees. We are extremely grateful for the incredible effort of our teams, and our immediate thoughts are with the people directly impacted by this global health emergency.”
Skechers USA Inc.
For the first quarter of 2020, Skechers anticipates sales in the range of $1.4 billion to $1.425 billion and EPS of $0.70 to $0.75, incorporating “an initial estimate of the impact to the company of current events in China” that includes “a significant number” of temporary store closures and “below average” comparable store sales.
In the company’s fourth-quarter earnings call on Feb. 6, CFO John Vandemore said that a “meaningful number” of company-owned outposts and franchise locations in China are shuttered, while those still open have logged “significantly below-average traffic and comparable store sales.”
“If the severity of the situation in China worsens and impacts our businesses outside of China and/or our global supply chain, this guidance may change,” he added.
Nevertheless, EVP and COO David Weinberg said the firm “[remains] optimistic about the strength of Skechers in China and committed to our long-term growth strategy in the country.”
Tapestry — parent to Kate Spade, Coach and Stuart Weitzman — announced on Feb. 6 that it had anticipated maintaining its full-year guidance; however, the escalating outbreak is “significantly impacting our business” in China. Although Tapestry did not specify a number, the company said that it had closed “the majority of our stores” on the mainland.
For the second half of the year, the New York-based firm expects a $200 million to $250 million dent in sales and a reduction in earnings per share of 35 cents to 45 cents. It downwardly revised its guidance, now projecting full-year revenues of roughly $5.9 billion and EPS in the range of $2.15 to $2.25.
“Our primary concern is the health and well-being of our team, their families and their local communities who are dealing with the daily realities of this situation. We believe in the resilience of the Chinese people,” chairman and CEO Jide Zeitlin said in Tapestry’s second-quarter earnings call. “We are very confident in our ability to successfully navigate what we expect to be a time-limited dislocation resulting from the coronavirus outbreak, underscored by our successful track record in managing through similar challenging periods in years past.”
Capri Holdings Ltd.
Factoring in the impact of the coronavirus, the Michael Kors, Versace and Jimmy Choo parent downwardly revised its revenue forecast for the year to $5.65 billion and projected lower earnings per share in the range of $4.45 to $4.50. Its previous guidance put sales at $5.8 billion, with the downward adjustment shaving more than $100 million off that estimate, and adjusted EPS at $4.95.
Currently, roughly 150 of Capri’s 225 stores in mainland China are closed. Those that remain open have seen “severely reduced” traffic and sales.
“This situation is very serious and dynamic,” Chairman and CEO John Idol said in the company’s third-quarter earnings call on Feb. 5. “Our thoughts and prayers go out to the people of China and all those affected by this virus globally. The health and safety of our employees is a priority, and we continue to take the necessary precautions to ensure their well-being. We can only hope for a speedy and positive resolution to this crisis.”
On Feb. 5, Adidas announced that it was shuttering a “considerable” number of stores throughout China amid the continued spread of the illness. The German sportswear giant, however, said that it was “too early to assess the magnitude” of the effect the closures will have on its business.
Adidas operates about 12,000 stores in China, of which 500 are company owned. The region has consistently driven significant growth for the brand: Its sales in the country jumped 11% in the three-month period ended Sept. 30 and 14% in the second quarter.
Roughly half of Nike stores in China are temporarily being closed and some are remaining open with reduced hours while the athletic brand is “prioritizing the health and safety of our teammates and partners.” On Feb. 4, the company said that it was experiencing “lower than planned retail traffic” in the stores still in operation.
Greater China accounted for $1.68 billion of Nike’s $10.66 billion in revenue last quarter, with sales in the region growing 22% year over year.
“Despite this difficult situation, Nike’s long-term opportunity to continue to serve consumers in Greater China with inspiration and innovation remains exceedingly strong,” said President and CEO John Donahoe. “At the same time, we continue to have extraordinary brand and business momentum in all other geographies.”
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