German sportswear brand Adidas and Puma on Wednesday said that coronavirus is going to cost the company heavily in the near term with sales likely to witness a major decline. While Adidas said that coronavirus is going to cost almost half a billion euros in its first-quarter profits, Puma said that it doesn't seem to recover from the loss suffered due to coronavirus outbreak anytime soon.
Coronavirus is eating into the profits of companies which will now in all likelihood take a major hit at the global economy. Travel companies and airlines seem to be the biggest casualties but now the virus has started taking its toll on all major sectors including sportswear. The decline in sales is now spreading into other Asian and European countries.
Adidas, Puma feel the heat
Adidas on Wednesday said that it expects sales to decline by almost 1 billion euros ($1.14 billion) in China and its operating profit to decline between 400 million to 500 million. Puma also said that it has been hit badly and it doesn't seem to recover from the losses anytime in the near term.
Puma said that although China is slowly getting back to business and things are getting normal, it was scrapping the 2020 guidance it gave in February. "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.
Coronavirus effect to last long
Asia is one of the biggest markets for Adidas and Puma. Even Nike has a huge presence in this market. However, sales of all these sportswear brands have seen a considerable decline over the past one and half months, owing to the coronavirus outbreak.
Adidas and Puma get almost a third of their sales from Asia. Also China is biggest sourcing hub for these companies with most of the production done from that country. Adidas had last month warned that it was witnessing a steep decline in sales in mainland China owing to coronavirus.
The company said that China sales plunged almost 85% on a year-over-year basis and is further going to hurt its profits. Puma also said that coronavirus had affected its major shopping hubs in countries like Singapore, Malaysia, Japan and South Korea, where too coronavirus has had a major effect.
