Adidas and Puma expect a significant hit to financial performance in China amidst the Coronavirus crisis

According
to Wednesday’s statement, German sportswear manufacturers Puma (ETR: PUM) and
Adidas (ETR: ADS) anticipate a significant hit to sales in China ascribed to
the rapidly spreading Coronavirus. The manufacturers appreciated that the early
signs of improvement have started to show in China, however, the impact, as per
the companies, is now switched to other markets.

Puma
and Adidas were reported challenged in the stock market in the past few weeks.
Following Wednesday’s statement, Adidas was seen trading 6.3% down while a 3.8%
drop was noted in Puma. At €203.85 per share, Adidas recorded a new low in the
past 12 months.

Adidas
Estimates €1 Billion Hit To Quarterly Revenue In Mainland China

Adidas
estimated a massive €1 billion hit to its quarterly revenue
in Q1 in mainland China. In terms of operating profit, the company said that a
decline worth €400 million to €500 million can be expected.

Puma,
on the other hand, declared that it sees Coronavirus driven challenges to keep
its financial performance under pressure for a longer period than previously
thought. Despite mainland China starting to show signs of recovery, the company
withdrew its February 19^th guidance for 2020. Puma said it had
assumed in its previous guidance that the impact of the virus on its business
will be short-lived. According to Puma:

“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.”

Adidas
And Puma Generate Over 3^rd Of Total Annual Sales In Asia

As
per the data, the aforementioned German sportswear companies are known to
generate over a third of their total annual sales in Asia. In the past few
years, Asia has emerged as a rapidly growing market with the largest demand for
sports goods. The region also serves as the primary location for production for
both of the aforementioned companies.

So
far, Coronavirus
has affected around 1,20,000 people worldwide and caused 4,300 deaths.

At
the time of writing, Adidas is exchanging hands at €209.0 per share in the
stock market that translates to around 30% decline in 2020 so far. At €58.0 per
share, Puma, on the other hand, has lost around 20% this year.

In
terms of market cap, Adidas is a significantly bigger brand with a market value
of €41.84 billion while Puma’s value is capped at €8.59 billion.