U.S. Markets closed

Nike, Adidas Say Coronavirus Will Hurt Business in China

Eben Novy-Williams

(Bloomberg) -- Nike Inc. closed about half of its company-owned stores in China as a result of the coronavirus outbreak, which it expects to have a material impact on operations in the country.

The stores that remain open are operating at reduced hours, as retail traffic has dropped as a result of the outbreak, the Oregon-based sportswear giant said Tuesday after the close of trading. The company’s shares fell as much as 3.3% in after-hours trading.

Nike became the first big consumer company to cite impact from the virus on its business. Rival brand Adidas AG followed suit Wednesday, saying it has closed a significant number of stores in China and franchisees are doing likewise. It’s too early to assess the negative impact on its operations there, the German company said. Adidas shares pared gains in Frankfurt.

Elsewhere, Starbucks Corp. has closed half of its stores -- about 2,000 in total -- and Apple Inc. said the outbreak will affect its supply chain. Still, most major corporations have said it’s too soon to assess the financial effect from the rapidly spreading epidemic.

“First and foremost, our thoughts are with the people affected and we remain focused on the health and safety of our teammates and partners,” Nike Chief Executive Officer John Donahoe said in the statement. “Despite this difficult situation, Nike’s long-term opportunity to continue to serve consumers in Greater China with inspiration and innovation remains exceedingly strong.”

China has long been considered Nike’s greatest growth area. The company generated $6.2 billion in sales in the region last year, up from $2.6 billion in 2014. The area’s share of overall Nike revenue nearly doubled in that same period.

It’s unclear how the outbreak might affect Nike’s sourcing and production in the country. Nike manufactures about 23% of its footwear and 27% of its apparel in China.

Nike leases a large office in Shanghai, its headquarters for Greater China. It also owns a distribution facility in Taicang.

The company said it will give more guidance when it reports earnings in March for its fiscal third quarter, which ends this month.

(Updates with Adidas statement in third paragraph)

--With assistance from Tim Loh.

To contact the reporter on this story: Eben Novy-Williams in New York at enovywilliam@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, John J. Edwards III, Thomas Mulier

For more articles like this, please visit us at bloomberg.com

Subscribe now to stay ahead with the most trusted business news source.

©2020 Bloomberg L.P.