Business

Nike, Adidas and Versace: More big brands are being hit by the coronavirus

Posted February 5, 2020 11:24 a.m. EST

— Faced with shuttered stores and empty streets, big consumer brands and fashion houses are getting nervous about the impact of the coronavirus on their businesses.

Nike, Adidas and Capri Holdings, which owns Versace, Jimmy Choo and Michael Kors, are among the companies this week that have warned investors that sales could take a hit as the virus spreads across China.

"The situation in China and the measures being taken to protect the population are having a material impact on our business," John Idol, the CEO of Capri Holdings, said in a statement Wednesday.

The coronavirus outbreak has killed nearly 500 people and infected more than 24,500 more — mainly in China, where close to 60 million people are living in cities on lockdown.

Retailers are shutting their doors as efforts to contain the virus ramp up and would-be shoppers stay home.

Roughly 150 of Capri's stores in mainland China are closed, according to the company. Nike said it has shuttered about half of the stores it owns in China, while Adidas said the company and its franchisees had shut a "significant" number of shops.

Nike and Capri Holdings said the stores that do remain open are operating with reduced hours and seeing fewer shoppers.

"In the short term, we expect the situation to have a material impact on our operations in Greater China," Nike said in a statement Tuesday, though it noted that its online business has shown "continued strength."

Nearly 18% of Nike's sales came from the greater China region in the most recent quarter.

Adidas said it was "too early to assess the magnitude" of the impact at this point. But Capri Holdings told investors that it expects the coronavirus to reduce revenue by $100 million this quarter, and warned the hit could be bigger if "the severity of the situation worsens."

The companies join a growing list of global brands that have decided to limit operations in China, despite their reliance on the country for growth. Apple has said all 42 of its stores in China will shut until February 9 "out of an abundance of caution." Starbucks said it had closed more than half of its roughly 4,300 Chinese locations last week.

Retailers are starting to worry that their businesses outside China will be affected as well. Capri Holdings warned that its sales and profit could suffer even more if additional travel restrictions are put in place and there's a drop in spending by Chinese tourists abroad.

Jefferies analysts point to Tiffany & Co., which is being bought by LVMH, Macy's and Coach as companies that could be damaged by declining tourism from the region into the United States.

Such a dip in Chinese tourists seems inevitable as airlines cancel flights. American Airlines has suspended all flights between the United States and mainland China through March 27, while Delta Air Lines has said it won't fly from the United States to China through April 30.

Hong Kong carrier Cathay Pacific said Wednesday that it was slashing flights to mainland China by 90% and making significant reductions elsewhere in its network over the next two months. The total number of flights will be reduced by 30%.

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