Coronavirus News: Adidas, Puma Warn Of Decline In Profits From Outbreak In China

Sportswear companies Adidas and Puma warned Wednesday that the effects of the coronavirus on China will cause a major decline in sales.

“The virus hit looks worse than feared,” Jeffries financial analyst James Grzinic said.

Adidas’ stock took another hit Wednesday, dropping 6% after trading opened for the day. The company said it expected first-quarter sales in China to drop by $1.1 billion and operating profits to drop somewhere between $450 and $600 million.

Adidas said it was also expecting to take a hit of over $100 million in Japan and South Korea because of the virus while the rest of the world’s growth is hedged at 6% to 8%. This was done to account for any additional drops that may occur because of the coronavirus.

Puma was close behind as its own stock dropped another 4.4% after the Wednesday opening. A company spokesperson said Puma didn’t expect business to “return to normal” soon and was abandoning its 2020 financial guidance laid out on during an investors call on Feb. 19. This was the same call where the company said it expected the coronavirus outbreak to be “short-lived.”

Both are reportedly planning for further losses should the 2020 Summer Olympic Games from Japan and the EURO 2020 Championship are delayed, as the events are major revenue generates for Adidas and Puma.

“Given the duration of the situation in China, the negative impact in other Asian countries and now also the spread to Europe and the U.S., we unfortunately have to conclude that a short-term normalization will not occur,” Puma said.

Asia has served as a major driver for Puma and Adidas’ sales, accounting for a third of the companies’ annual sales. China also serves as a primary production source for both companies, who own factories used to produce various pieces of apparel and sporting goods.

However, Adidas and Puma factories in China were reportedly open again while they relied on excess stock to try and fill demands. Both cautioned that there could still be some minor shipping delays as things stabilize in China.