Nike is joining the likes of Apple and other retailers that are temporarily closing stores in China due to the coronavirus outbreak, Portland Business Journal reports. The company will be closing approximately half of its stores in the region. The remaining locations will operate under reduced hours.
“First and foremost, our thoughts are with the people affected and we remain focused on the health and safety of our teammates and partners,” said Nike CEO John Donahoe. “Despite this difficult situation, Nike’s long-term opportunity to continue to serve consumers in Greater China with inspiration and innovation remains exceedingly strong. At the same time, we continue to have extraordinary brand and business momentum in all other geographies.”
The closure is expected to have a material impact on Nike’s operations in greater China, as sales and earnings projections will be updated on the next quarterly earnings call.
“We view this as a near-term headwind, with longer-term prospects in China — 16 percent of total sales — still very promising,” said Poonam Goyal, senior U.S. retail analyst for Bloomberg Intelligence. “The recent launch of the Nike app (in China) can provide an alternative to store sales, boosting digital revenue even more.”
Edward Jones senior research analyst Brian Yarbrough points out that most people in China aren’t out shopping, but thankfully, Nike experiences a multitude of online sales in the area.
China was Nike’s third-largest geographic market in its most recent fiscal year with $6.2 billion in sales. The sportswear company also has 11 contract factories in the country, which produce approximately 23 percent of its footwear and 27 percent of its apparel. It remains to be seen if Nike has decided to temporarily close these factories.
- Source: Portland Business Journal