VF Corp reports temporary closure of 60% of Chinese stores due to coronavirus
As the coronavirus outbreak continues in China, American footwear and apparel group VF Corporation has announced that it has closed around 60% of its owned and partner-operated stores in the country, but is yet to provide a prediction of the impact the health crisis will have on its financial results.
The company, which owns the Vans, Timberland and The North Face brands, among others, emphasized that it is operating in accordance with local government guidelines and working to ensure “the health, safety and overall well-being” of its associates.
VF also pointed out that those of its stores that are still in operation in China are currently experiencing a significant downturn in traffic, a fact that will compound the impact of the temporary closures it has made.
China contributed 6% of VF Corp’s annual revenue of $13.8 billion in fiscal 2019, while the wider Asia Pacific region accounted for 12%.
The company also highlighted that, although it cannot yet gauge the impact that the coronavirus outbreak will have on its supply chain, some 16% of the group’s total cost of goods is sourced directly from mainland China, with 7% of this going to the U.S. market.
VF explained that the impact of the current situation in China was not taken into account when the company reported its adjusted outlook for fiscal 2020 last month. At the time, VF expected annual revenue to total $11.75 billion, while adjusted earnings per share were predicted to be approximately $3.30.
The company plans to provide an update regarding the operational and financial impact of the coronavirus outbreak during its fourth quarter conference call in May.
In the meantime, VF chairman, president and CEO Steve Rendle sought to reassure shareholders.
“While the coronavirus will impact our financial results in the Asia Pacific region in the near term, VF’s growth opportunity in China and across the Asia Pacific region is significant and the fundamentals of our business are strong,” he stated in a release. “VF is well positioned to navigate the impact of the coronavirus situation given the diversity of our business and operating model in other key geographies.”
As the number of confirmed cases of the novel coronavirus in China shoots past the 30,000 mark and the number of related deaths surpasses 600, the outbreak has also been leading to disruptions in worldwide trade and supply chains.
A number of global companies, including Burberry, Nike, Adidas, Skechers and Tapestry, have joined VF Corp in choosing to temporarily shutter their operations in China, leading to potentially significant losses of revenue.
Following VF Corp’s announcement, shares in the company fell 1.9% in premarket trading on Friday.
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