PUMA continues to closely monitor the development around COVID-19. The well being of our employees and partners is our highest priority in this situation. All our offices around the world are open. The office in Shanghai re-opened after the officially extended holiday period for Chinese New Year. In all our facilities, we are taking precautionary measures. We have asked all employees who are in or have been to any of the officially defined risk areas to work from home for a period of two weeks.
COVID-19 has also negatively impacted our business since the beginning of February both in terms of sales and sourcing.
Impact on Sourcing
China accounts for less than 20% of our international sourcing volume. Factories outside China have not been impacted. Within China, all of our Tier 1 (finished product) supplier factories are open again and are operating at 80%-100% of capacity. Almost all of our Tier 2 (material) factories are also up and running. PUMA’s outbound logistics are largely in operation with all sea ports now open and most of our transportation on land – from the factories to the sea ports – functioning normally again. Therefore, our global supply chain is currently not at risk apart from minor delays.
Impact on Sales
In China, where most of both owned and operated as well as partner stores were temporarily closed in February due to restrictions imposed by local authorities, sales have been severely affected. There are now early signs of improvement. Most of our stores in China and those of our partners are now open again. Traffic that had initially been extremely low picked up over the weekend. Other Asian markets such as Singapore, Malaysia, Japan and South Korea, which typically benefit from Chinese tourists, continue to see heavy negative effects on sales. Additionally, the virus is spreading into other parts of the world. Despite the spread of COVID-19 in Europe, almost all our stores there are still open. Those in Northern Italy operate under reduced opening hours as enforced by the authorities. Across Europe, we register significantly lower footfall traffic.
The outlook we gave on February 19 for the full year 2020 was based on the assumption that the situation regarding the COVID-19 virus would normalize in the short term. Given the duration of the situation in China, the negative impact in other Asian countries and now also the spread to Europe and the US, we unfortunately have to conclude that a short-term normalization will not occur.
The development over the coming weeks and months is impossible to predict and we currently cannot quantify the negative effect this could have on our full-year revenue and earnings
We will of course manage this situation as best we can short-term, but at the same time continue to work on strengthening our brand, so we can continue our momentum with good growth in both revenue and earnings when the situation normalizes.