11 Mar Puma Withdraws Guidance Due To Coronavirus Uncertainty
Puma said it no longer expects its business will return to normal soon, despite encouraging signs coming out of China, adding it was abandoning the 2020 guidance it gave on February 19 that had assumed the crisis would be short-lived.
Puma in a statement continues to closely monitor the development around COVID-19.
Puma said, “The wellbeing of our employees and partners is our highest priority in this situation.” Puma said all its offices around the world are open. The office in Shanghai re-opened after the officially extended holiday period for the Chinese New Year. In all facilities, Puma said it is taking precautionary measures and has asked all employees who are in or have been to any of the officially defined risk areas to work from home for a period of two weeks.
COVID-19 has also negatively impacted Puma’s business since the beginning of February both in terms of sales and sourcing.
Impact on Sourcing
Puma said in its statement, “China accounts for less than 20 percent of our international sourcing volume. Factories outside China have not been impacted. Within China, all of our Tier 1 (finished product) supplier factories are open again and are operating at 80 percent-100 percent of capacity. Almost all of our Tier 2 (material) factories are also up and running. PUMA’s outbound logistics are largely in operation with all seaports now open and most of our transportation on land – from the factories to the seaports – functioning normally again. Therefore, our global supply chain is currently not at risk apart from minor delays.”
Impact on Sales
Puma said, “In China, where most of both owned and operated, as well as partner stores, were temporarily closed in February due to restrictions imposed by local authorities, sales have been severely affected. There are now early signs of improvement. Most of our stores in China and those of our partners are now open again. Traffic that had initially been extremely low picked up over the weekend. Other Asian markets such as Singapore, Malaysia, Japan, and South Korea, which typically benefit from Chinese tourists, continue to see heavy negative effects on sales. Additionally, the virus is spreading into other parts of the world. Despite the spread of COVID-19 in Europe, almost all our stores there are still open. Those in Northern Italy operate under reduced opening hours as enforced by the authorities. Across Europe, we register significantly lower footfall traffic.”
Puma wrote, “The outlook we gave on February 19 for the full-year 2020 was based on the assumption that the situation regarding the COVID-19 virus would normalize in the short term. 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. The development over the coming weeks and months is impossible to predict, and we currently cannot quantify the negative effect this could have on our full-year revenue and earnings. We will, of course, manage this situation as best we can short-term, but at the same time continue to work on strengthening our brand so we can continue our momentum with good growth in both revenue and earnings when the situation normalizes.”