German sportswear makers generate about a third of revenues in Asia

German sportswear makers Adidas and Puma have warned that the coronavirus outbreak has severely disrupted their businesses in China, forcing store closures and a sharp drop in sales in one of their most important markets. Adidas said on Wednesday that sales in the country had plummeted 85 per cent since January 25 compared with the same period a year ago. The world’s second-largest sportswear group added that it had closed a “significant number” of outlets and reported a “pronounced” reduction in customers at those that remained open.

“We have experienced a material negative impact from the coronavirus outbreak on our operations in China,” it said in a statement. Rival Puma said that more than half its stores in the country were closed and that it expected a negative impact on revenues and profits in the first quarter of the year. “[Business] has of course been negatively affected by the outbreak,” said Bjorn Gulden, chief executive.

The Chinese economy has ground to a near-standstill following the rapid spread of the highly contagious coronavirus. Although both Puma and Adidas said it was too early to accurately quantify the long-term impact on their businesses, their updates offer some of the first details on the impact of the virus on the sportswear industry, which has about $250bn in annual sales and is increasingly reliant on Asian consumers for growth. The region — and China in particular — is also key for manufacturing. Almost a fifth of the 409m pairs of shoes and trainers Adidas made in 2018 were produced in China, although the country’s relative importance in production has declined in recent years as operations in Vietnam, Indonesia and Cambodia expanded. Most of Puma’s factories were back up and running again following the lunar new year break, the group said. The German companies each derive about a third of their revenues from Asia-Pacific, with the impact of the virus rippling into the wider region. Revenue in Puma’s other Asian markets has also suffered due to the lower number of Chinese tourists. Adidas said it had also seen declines outside mainland China, mainly in South Korea and Japan, but that there had not been “any major business impact” there. ECB rate decision, UK Budget, Adidas results Puma said it expected to be able to hit its 2020 targets despite the disruption and expected the situation “will normalise in the short term”. However if stores were still closed in four weeks’ time then the company would have to reconsider its guidance, Mr Gulden warned. Investors shrugged off the news, with shares in Puma rising as much as 8 per cent to €77, while those in Adidas increased as much as 2.6 per cent to €293. Puma forecast earnings before interest and tax in a range between €500m and €520m for the full year. The group reported a 47 per cent rise in EBIT to €55m in the three months to December, on sales up 18 per cent to €1.48bn on a currency-adjusted basis.

 

 

19.02.2020
source: Financial Times, link