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Adidas Expects Coronavirus to Take $1 Billion Out of Its China Sales

By Daniel B. Kline - Mar 11, 2020 at 10:08AM

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The footwear and apparel company offered investors generally upbeat guidance for 2020, but admitted that it wasn't trying to fully factor in the looming impact of COVID-19.

The spreading COVID-19 coronavirus epidemic has disrupted the economies of a number of countries, with China among those hardest-hit. And while there are signs that the crisis is starting to abate in that country, the business impact of the outbreak will be felt there for months to come.

That's why Adidas (OTC: ADDY.Y) has essentially left its 2020 forecast open. The company says it expects its revenues will grow by 6% to 8% in 2020 -- but acknowledges that its numbers have not factored in the potential headwinds of the coronavirus epidemic.

Adidas sneakers.

Adidas has seen sales fall in China due to coronavirus. Image source: Adidas.

What is Adidas saying about coronavirus?

In its fourth-quarter earnings release, which it delivered Wednesday, Adidas laid out what it has seen so far in China.

The company has been experiencing a material negative impact on its operations due to the outbreak of the coronavirus since then. As a result of a significant number of store closures -- both own- and partner-operated -- and a pronounced traffic reduction within the remaining store fleet, revenues in Greater China have been around 80% below the prior-year level between Chinese New Year on January 25 and the end of February.

The sneaker and apparel maker did say that it has since seen a slight improvement with "stores and warehouses gradually opening and consumer traffic slowly picking up."

What does this mean for the bottom line?

Adidas said that it expects its Greater China revenues for Q1 2020 to be 800 million euros to 1.0 billion euros (roughly $900 million to $1.1 billion) lower than they were in Q1 2019.

The company also acknowledged that it could face supply chain issues that impact other countries, though it noted that its factories are up and running. Adidas also said that the COVID-19 outbreak's impact in other countries could be a drag on its results, but again chose to not make any more-specific predictions.

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