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Nike Warns Coronavirus Is Presuring Sales in China

By Rich Smith - Feb 5, 2020 at 10:34AM

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Half of Nike's stores in China are now closed as the Chinese coronavirus continues to rage unchecked.

Nike (NKE -0.36%) announced late Tuesday that it has "temporarily closed ... approximately half of NIKE-owned stores" in China in response to the rapidly growing Chinese coronavirus, designated 2019-nCoV.  

The company's "partner stores" are experiencing "corresponding dynamics," suggesting similar closure rates there, and referring to competing retail stores, the company notes that "similar" closure rates are being seen among "others in the marketplace." Indeed, even stores that do remain open are "operating with reduced hours and experiencing lower than planned retail traffic in stores" as customers avoid going into public places and foot traffic drops off.

Collage of a microbe, the word coronavirus, and a Chinese flag

Image source: Getty Images.

Management notes that they "expect the situation to have a material impact on our operations in Greater China," an impact that was "not contemplated at the time we provided Q3 guidance during our Q2 fiscal year 2020 earnings call" -- implying that sales and earnings could now be lower than the predicted back in December. Management did not say precisely how big of an impact investors should expect, promising instead to give an update in Nike's Q3 earnings call that is scheduled for March 19.  

Presently, analysts are forecasting $10.35 billion in global sales for the footwear giant in Q3, and $0.70 in profit per diluted share, up 2.9% from last year's Q3.

At last report, an informational website operated by Johns Hopkins University had confirmed cases of coronavirus worldwide at 24,608 (up almost 19% from yesterday). 24,392 of those cases (99%) are contained to China, the virus's source. Biotech companies are scrambling to find a cure for the coronavirus, as 494 infected patients have already died, although even more -- 1,028 -- patients diagnosed with the disease have since recovered. 

Nike stock is down 1% this morning as of 10:30 a.m. EST.

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