A week of corporate coronavirus warnings starts to quantify the economic toll of China’s outbreak

February 21, 2020, 9:46 AM UTC

Supply lines have been disrupted, consumption has dropped, and demand for services has diminished. As containment measures taken against the spread of Covid-19 in China weigh on the global economy, international business is beginning to quantify the economic blow the coronavirus is set to deliver.

According to CB Insights, there were just six mentions of coronavirus on Q1 earnings calls as of February 12, but, as we get deeper into earnings season, a growing number of companies are issuing warnings related to the outbreak.


On February 13, Alibaba posted strong results for the quarter ending December 2019, with revenues rising 40% in the three-month period. The report made short mention of the coronavirus, stating the company had “mobilized Alibaba ecosystem’s powerful forces” to support the fight against the outbreak and will “support our merchants” during this time.

On a call with analysts, however, CEO Daniel Zhang characterized the Covid-19 epidemic as a “black swan event” that “will present near-term challenges to the development of Alibaba’s business across the board.”


On Monday, Apple warned that it no longer expects to meet the revenue guidance it issued for the quarter ending in March for two reasons: first, “iPhone supply will be temporarily restrained” and second, demand for Apple products in China has been “affected.” Apple said its manufacturing sites in China have all re-opened following the prolonged coronavirus shutdown but “are ramping up more slowly than we had anticipated,” which will dent iPhone revenue worldwide. “The situation is evolving, and we will provide more information during our next earnings call in April,” Apple said.

Analysts remain upbeat, however, even when downgrading forecasts for Q2. “We assume that, as with every other company operating in China, the situation on the ground continues to evolve for Apple. We are reducing our forecasts for both the March and June quarters but we see this as a temporary issue for Apple,” Goldman Sachs said in a note.

“We assume that lost demand is temporary and that consumers planning to replace Apple products will still do so when conditions return to normal.”


German sports brand Adidas said on Wednesday that sales in China had dropped 85% in the period since January 25, when compared to sales last year. Adidas has closed temporarily a “significant number” of its stores in China and reported a “pronounced” reduction in customers at stores that have remained open. Besides slumping demand, output at Adidas’s Chinese factories—which produced a fifth of the brand’s footwear in 2018—have been impacted by the outbreak. “We have experienced a material negative impact from the coronavirus on our operations in China,” Adidas said.


Puma has temporarily closed more than half its China stores and warned it expected a negative impact on revenue and profits in the first quarter. The sportswear brand said it still expects to hit its 2020 targets and that the situation will “normalize in the short term.” However, CEO Bjorn Gulden warned that Puma would have to reconsider its guidance if stores remain closed for another month.


Danish shipping giant Maersk on Thursday released its annual report for 2019. Revenue and profit growth was severely impacted by a change in accounting practices, but the company also warned it expected a “weak start to the year” as factories remain on lockdown due to the coronavirus epidemic. Maersk has cut 50 sailings from Chinese ports since January, and said the outlook for 2020 was subject to “significant uncertainties.” On an analysts call, AP Moller-Maersk CEO Søren Skou said “the next two to three weeks will really tell us what trend we’re on.”

According to the Wall Street Journal, Maersk reported a revenue fall of 5.6% to $9.67 billion, missing expectations of $9.94 billion, as its shipping unit lowered capacity to adjust to market conditions.

Air France-KLM

Also on Thursday, Air France-KLM warned the outbreak could wipe out up to $216 million in revenue between February and April, as the airline has suspended flights to China. Meanwhile the International Air Transport Association said that global air travel would see its first passenger demand decline in 17 years, contracting 0.6% in 2020, due to the coronavirus outbreak. The retraction could cost airlines a total $30 billion in revenue.

Proctor & Gamble

P&G CFO Jon Moeller told attendees at the company’s Consumer Analyst Group of New York (CAGNY) conference on Thursday that the coronavirus had disrupted supply for 17,600 different product items and laid out the impact the outbreak was having on the company’s operations.

“China is our second largest market—sales and profit. Store traffic is down considerably, with many stores closed or operating with reduced hours. Some of the demand has shifted online but supply of delivery operators and labor is limited…The operating challenges change with the hour, and of course the path of the virus is unknown, making it very difficult to provide precise estimates of impact.”

That being said, Moeller assured attendees that P&G’s guidance ranges for the company’s top and bottom lines in fiscal 2020 remain accurate.

Looking ahead

It’s no surprise that firms are citing the coronavirus as they assess their financial performance. “It would be difficult to see any companies that would not see some impact from the Covid-19 outbreak due to the disruptions from having large groups of populations staying at home in Asia,” said Lorraine Tan, Asia regional director of equity research at Morningstar. The epidemic has hit supply chains, consumer confidence and transportation, Tan said—a decline that will, in turn, weigh on financial services.

But for now, there are at least loose limits to the fallout. “[W]e continue to expect the impact to be confined to 2020 earnings,” Tan said.

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