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coronavirus | Adidas | Expensive sneakers won’t top shopping lists for some time | ECONOMY

Adidas AG became the first major consumer firm to provide a figure on the impact of the new coronavirus.

And it will not be the last one. The final cost for the shoe manufacturer stan smith it may be much larger than the nearly $1 billion impact on revenue the company announced Wednesday.

Adidas, which also makes the Yeezy line, from Kanye Westand the Ivy Park collection, by beyoncésaid first-quarter revenue in the Greater China region will contract between 800 million euros ($906 million) and 1 billion euros compared to the same period in 2019 due to the effect of the outbreak.

The company expects operating profit in the region to decline by up to 500 million euros in the quarter. This reflects the closures of Chinese stores and a decrease in visits to stores that have remained open. China accounted for 23% of Adidas sales in 2019.

Yes ok adidas noted that things have begun to pick up in China since the end of February, as shops and factories have begun to reopen, the danger is of further complications as the virus spreads.

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Just how complicated it could become, no one can say for sure. One example of evidence of this threat is rival Puma SE, which noted that it was not possible to quantify the effect of the coronavirus on full-year results. Consequently, it scrapped the projection it released on February 19 that was based on expectations of a quick recovery from the virus.

From the perspective of adidasthe influx of customers is already decreasing in its stores in Japan and South Korea, which will hurt first-quarter sales by 100 million euros.

Kasper Rorstedexecutive director of adidas, acknowledged that sneakers and sportswear will not be high on people’s shopping lists when they come out of quarantine. But he assured that the company is on a good footing to weather the crisis. The company projects an increase in group sales, excluding currency movements, of between 6% and 8% for 2020. It estimates that the operating margin will increase from 11.3% in 2019 to between 11.5% and 11.8% this year. But that doesn’t reflect the impact of the outbreak coronavirus.

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With the virus spreading to the United States and Europe, there is a serious risk that consumers in those regions will panic as well.

Market-wide footfall is already taking a hit on both sides of the Atlantic. If the disease continues to spread, shoppers’ reluctance to head to the mall will only increase.

Government measures to prevent large gatherings, the increasingly widespread use of having employees work from home and the collapse of stock markets could reduce demand. Plus, avoiding the gym for fear of infection means less need for new workout equipment.

Meanwhile, the risk of cancellation of sporting events such as the UEFA Euro 2020 football cup and the Olympic Games is particularly serious for adidas. If these events were cancelled, the firm would see a hit to its sales of between 50 and 70 million euros, he said. The biggest impact would be generated by the suspension of Euro 2020.

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The actions of adidas they fell as much as 8.8% on Wednesday. Even without the coronavirus warning, there might have been some concern about performance in the fourth quarter of 2019.

Although sales, excluding currency movements, increased 10% in the last three months of the year, gross margin decreased by 3.2 percentage points, hurt by adverse currency movements and a less favorable mix of products sold. But right now, the disease is the focus of investors’ attention.

Rorsted compares the situation to a football game. The company had a great first half. Halftime has been longer than expected, but the second half will also come at some point.

However, now, investors do not know when the game will resume as normal and what else could happen before kick-off.

This column does not necessarily reflect the opinion of the editorial board or of Bloomberg LP and its owners.

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