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From Starbucks to FedEx, Coronavirus Upends Businesses That Depend on China From Starbucks to FedEx, Coronavirus Upends Businesses That Depend on China
(2 months later)
The coronavirus outbreak in China has rattled the global economy, disrupting virtually every major industry, from food, fashion and entertainment to automobiles and technology.The coronavirus outbreak in China has rattled the global economy, disrupting virtually every major industry, from food, fashion and entertainment to automobiles and technology.
And more than two weeks into the crisis, there is no sign that the economic impact is about to ease up.And more than two weeks into the crisis, there is no sign that the economic impact is about to ease up.
Much of China was supposed to have reopened by now. But the country’s empty streets, quiet factories and legions of idle workers suggest that weeks or months may pass before this motor of global growth is running at full speed.Much of China was supposed to have reopened by now. But the country’s empty streets, quiet factories and legions of idle workers suggest that weeks or months may pass before this motor of global growth is running at full speed.
Over the years, companies as varied as Disney, Nike, McDonald’s and Hyundai have come to rely on China’s efficient factories and increasingly affluent consumers. Now the virus is forcing companies to restrict travel to China or temporarily shut stores, offices, restaurants and theme parks. And the disruption to Chinese manufacturers has rippled through global supply chains, making it difficult for companies to obtain parts for everything from video-game consoles to cars.Over the years, companies as varied as Disney, Nike, McDonald’s and Hyundai have come to rely on China’s efficient factories and increasingly affluent consumers. Now the virus is forcing companies to restrict travel to China or temporarily shut stores, offices, restaurants and theme parks. And the disruption to Chinese manufacturers has rippled through global supply chains, making it difficult for companies to obtain parts for everything from video-game consoles to cars.
It’s too early to assess the full financial impact of the outbreak. But over the last few weeks, big companies have revealed, with varying degrees of specificity, how the virus has affected them.It’s too early to assess the full financial impact of the outbreak. But over the last few weeks, big companies have revealed, with varying degrees of specificity, how the virus has affected them.
Here’s what we know so far.Here’s what we know so far.
Under Armour told investors on Tuesday that its revenues in the first few months of 2020 — and potentially beyond — would take a hit of $50 million to $60 million because of the outbreak.Under Armour told investors on Tuesday that its revenues in the first few months of 2020 — and potentially beyond — would take a hit of $50 million to $60 million because of the outbreak.
The Asia-Pacific region made up about 12 percent of Under Armour’s total sales last year and has been one of its faster-growing markets. “Given the significant level of uncertainty with this dynamic and evolving situation, full-year results could be further materially impacted,” the company said.The Asia-Pacific region made up about 12 percent of Under Armour’s total sales last year and has been one of its faster-growing markets. “Given the significant level of uncertainty with this dynamic and evolving situation, full-year results could be further materially impacted,” the company said.
FedEx has reached an agreement with its pilots’ union, the Air Line Pilots Association, allowing crew members to decline trips to China.FedEx has reached an agreement with its pilots’ union, the Air Line Pilots Association, allowing crew members to decline trips to China.
Another union representing pilots, the Independent Pilots Association, made a similar arrangement with UPS in a “Coronavirus Letter of Agreement.” That deal allows UPS pilots to take a leave of absence for trips involving “a flight segment into, or out of, mainland China,” the union’s president, Robert Travis, said.Another union representing pilots, the Independent Pilots Association, made a similar arrangement with UPS in a “Coronavirus Letter of Agreement.” That deal allows UPS pilots to take a leave of absence for trips involving “a flight segment into, or out of, mainland China,” the union’s president, Robert Travis, said.
Disney has offered one of the more detailed assessments of how the coronavirus is affecting business. For more than a week, its theme parks in Shanghai and Hong Kong have been shut. The closings are expected to reduce the company’s operating income by $175 million in the second quarter, Christine McCarthy, the chief financial officer, said on an earnings call.Disney has offered one of the more detailed assessments of how the coronavirus is affecting business. For more than a week, its theme parks in Shanghai and Hong Kong have been shut. The closings are expected to reduce the company’s operating income by $175 million in the second quarter, Christine McCarthy, the chief financial officer, said on an earnings call.
The Canadian film company Imax was forced to postpone the release of five films it had planned to showcase in China during the Lunar New Year holiday period.The Canadian film company Imax was forced to postpone the release of five films it had planned to showcase in China during the Lunar New Year holiday period.
In Japan, Nintendo, which makes video games and gaming devices, said shipments of its Switch game console to Japanese customers would be delayed.In Japan, Nintendo, which makes video games and gaming devices, said shipments of its Switch game console to Japanese customers would be delayed.
And last week, officials in the Chinese city of Macau asked its 41 casinos to close for half a month. The move will hit American casino operators in the region.And last week, officials in the Chinese city of Macau asked its 41 casinos to close for half a month. The move will hit American casino operators in the region.
Wynn Resorts is losing $2.4 million to $2.6 million every day that its casino in Macau remains closed because of the coronavirus, the company’s chief executive said.Wynn Resorts is losing $2.4 million to $2.6 million every day that its casino in Macau remains closed because of the coronavirus, the company’s chief executive said.
Tim Cook, the chief executive of Apple, told analysts in January that its suppliers could be disrupted and that traffic to its stores in China had dropped.Tim Cook, the chief executive of Apple, told analysts in January that its suppliers could be disrupted and that traffic to its stores in China had dropped.
Apple has a large sales presence in China and assembles most of its products there. Mr. Cook said that some Apple suppliers would remain closed and that traffic into its stores in the country had fallen off.Apple has a large sales presence in China and assembles most of its products there. Mr. Cook said that some Apple suppliers would remain closed and that traffic into its stores in the country had fallen off.
Qualcomm, which makes smartphone chips, is also hurting. Last year, nearly half its revenue came from China, a major hub for smartphone manufacturing and sales.Qualcomm, which makes smartphone chips, is also hurting. Last year, nearly half its revenue came from China, a major hub for smartphone manufacturing and sales.
The company’s chief financial officer, Akash Palkhiwala, told investors last week that the company had reduced the low end of its earnings guidance for the next three months because of the uncertainty created by the outbreak.The company’s chief financial officer, Akash Palkhiwala, told investors last week that the company had reduced the low end of its earnings guidance for the next three months because of the uncertainty created by the outbreak.
This month’s Mobile World Congress in Barcelona, Spain, one of the tech industry’s biggest trade shows, is putting special safety measures in place, including prohibiting any visitors from Hubei Province in China from attending. Several big companies, including Amazon and Sony, are choosing to stay away.This month’s Mobile World Congress in Barcelona, Spain, one of the tech industry’s biggest trade shows, is putting special safety measures in place, including prohibiting any visitors from Hubei Province in China from attending. Several big companies, including Amazon and Sony, are choosing to stay away.
Many auto plants have shut down in China because of the virus, including factories run by Tesla, Ford Motor and Nissan.Many auto plants have shut down in China because of the virus, including factories run by Tesla, Ford Motor and Nissan.
On Monday, Nissan of Japan said it would shut down its plant in Kyushu, Japan, for four days beginning later this week because of “supply shortages of parts from China.”On Monday, Nissan of Japan said it would shut down its plant in Kyushu, Japan, for four days beginning later this week because of “supply shortages of parts from China.”
Hyundai, the world’s fifth-largest automaker, said last week that it would temporarily stop production lines at its factories in South Korea because of shortages of Chinese parts.Hyundai, the world’s fifth-largest automaker, said last week that it would temporarily stop production lines at its factories in South Korea because of shortages of Chinese parts.
Auto companies had hoped to restart production on Monday, but an increasing number have pushed that off until next Monday. Volkswagen on Saturday cited problems with “the nationwide restarting of supply chains as well as limited travel options for our production employees.”Auto companies had hoped to restart production on Monday, but an increasing number have pushed that off until next Monday. Volkswagen on Saturday cited problems with “the nationwide restarting of supply chains as well as limited travel options for our production employees.”
Fiat Chrysler warned that the outbreak could disrupt production at one of its European plants in the next few weeks, Reuters reported. But the company’s chief executive said it wasn’t changing its financial guidance for 2020.Fiat Chrysler warned that the outbreak could disrupt production at one of its European plants in the next few weeks, Reuters reported. But the company’s chief executive said it wasn’t changing its financial guidance for 2020.
Updated May 28, 2020
States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
More than 40 million people — the equivalent of 1 in 4 U.S. workers — have filed for unemployment benefits since the pandemic took hold. One in five who were working in February reported losing a job or being furloughed in March or the beginning of April, data from a Federal Reserve survey released on May 14 showed, and that pain was highly concentrated among low earners. Fully 39 percent of former workers living in a household earning $40,000 or less lost work, compared with 13 percent in those making more than $100,000, a Fed official said.
There is an uptick in people reporting symptoms of chilblains, which are painful red or purple lesions that typically appear in the winter on fingers or toes. The lesions are emerging as yet another symptom of infection with the new coronavirus. Chilblains are caused by inflammation in small blood vessels in reaction to cold or damp conditions, but they are usually common in the coldest winter months. Federal health officials do not include toe lesions in the list of coronavirus symptoms, but some dermatologists are pushing for a change, saying so-called Covid toe should be sufficient grounds for testing.
Yes, but make sure you keep six feet of distance between you and people who don’t live in your home. Even if you just hang out in a park, rather than go for a jog or a walk, getting some fresh air, and hopefully sunshine, is a good idea.
Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.
The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
Charity Navigator, which evaluates charities using a numbers-based system, has a running list of nonprofits working in communities affected by the outbreak. You can give blood through the American Red Cross, and World Central Kitchen has stepped in to distribute meals in major cities.
Over the last couple of weeks, a series of major airlines have canceled flights to China, including Delta, United and American. But the airlines have said little about how the cancellations will affect their bottom lines. Analysts expect the impact to be relatively small.Over the last couple of weeks, a series of major airlines have canceled flights to China, including Delta, United and American. But the airlines have said little about how the cancellations will affect their bottom lines. Analysts expect the impact to be relatively small.
United draws only about 4 percent of its revenue from service to China, which accounts for just 3 percent of Delta’s revenue and 2 percent at American, said Helane Becker, an airline analyst with Cowen Research.United draws only about 4 percent of its revenue from service to China, which accounts for just 3 percent of Delta’s revenue and 2 percent at American, said Helane Becker, an airline analyst with Cowen Research.
Also cutting back sharply is Air China, which flies the most passengers nonstop between the United States and China. On Thursday, it was granted permission to significantly limit service between the two countries, the Transportation Department said.Also cutting back sharply is Air China, which flies the most passengers nonstop between the United States and China. On Thursday, it was granted permission to significantly limit service between the two countries, the Transportation Department said.
Air China intends to operate seven flights a week, in both directions. In 2018, it operated an average 129 flights a week into and out of the United States, according to federal data.Air China intends to operate seven flights a week, in both directions. In 2018, it operated an average 129 flights a week into and out of the United States, according to federal data.
The spread of the virus has also taken a toll on the cruise industry. On Friday, Royal Caribbean barred all people holding Chinese, Hong Kong or Macau passports from boarding its ships. The vast majority of those passengers would be on ships leaving China, which account for only 6 percent of the company’s business, according to Rob Zeiger, a spokesman for Royal Caribbean.The spread of the virus has also taken a toll on the cruise industry. On Friday, Royal Caribbean barred all people holding Chinese, Hong Kong or Macau passports from boarding its ships. The vast majority of those passengers would be on ships leaving China, which account for only 6 percent of the company’s business, according to Rob Zeiger, a spokesman for Royal Caribbean.
Several hundred of the approximately 3,300 McDonald’s restaurants in China have closed. But the company’s chief executive, Chris Kempczinski, said the overall impact on profits would be “fairly small” if the virus stayed contained.Several hundred of the approximately 3,300 McDonald’s restaurants in China have closed. But the company’s chief executive, Chris Kempczinski, said the overall impact on profits would be “fairly small” if the virus stayed contained.
Starbucks has closed more than half its 4,300 stores in China and delayed a planned update to its 2020 financial forecast, saying it expects a material but temporary hit.Starbucks has closed more than half its 4,300 stores in China and delayed a planned update to its 2020 financial forecast, saying it expects a material but temporary hit.
And Yum Brands, the operator of the KFC and Pizza Hut franchises in China, said nearly one-third of its restaurants had been closed because of the outbreak. The remaining stores have seen a major drop in sales.And Yum Brands, the operator of the KFC and Pizza Hut franchises in China, said nearly one-third of its restaurants had been closed because of the outbreak. The remaining stores have seen a major drop in sales.
About half the Nike stores in China have shut down, and those that remain open have shortened hours, the company said. Nike has not released a numerical estimate of the financial repercussions, but told investors that it expected “the situation to have a material impact on our operations in greater China.”About half the Nike stores in China have shut down, and those that remain open have shortened hours, the company said. Nike has not released a numerical estimate of the financial repercussions, but told investors that it expected “the situation to have a material impact on our operations in greater China.”
Canada Goose Holdings said the impact would be substantial enough that it had to lower its profit outlook for the year, saying customer traffic in China and in “international shopping destinations in North America and Europe” has been affected. “No supply chain interruptions have occurred,” the company said in a statement on Friday.Canada Goose Holdings said the impact would be substantial enough that it had to lower its profit outlook for the year, saying customer traffic in China and in “international shopping destinations in North America and Europe” has been affected. “No supply chain interruptions have occurred,” the company said in a statement on Friday.
The VF Corporation, which owns brands like Timberland and the North Face, announced it would temporarily close about 60 percent of its stores in China. And it said traffic had slipped at stores that are currently open.The VF Corporation, which owns brands like Timberland and the North Face, announced it would temporarily close about 60 percent of its stores in China. And it said traffic had slipped at stores that are currently open.
Burberry warned investors that the outbreak was having a “material negative effect on luxury demand.” Twenty-four of its 64 stores in mainland China are closed, and those that remain open, with reduced operating hours, have fewer shoppers than usual, the company said.Tapestry, the American luxury giant that owns Kate Spade, Coach and Stuart Weitzman, said the outbreak could reduce its sales by up to $250 million in the second half of the year.Burberry warned investors that the outbreak was having a “material negative effect on luxury demand.” Twenty-four of its 64 stores in mainland China are closed, and those that remain open, with reduced operating hours, have fewer shoppers than usual, the company said.Tapestry, the American luxury giant that owns Kate Spade, Coach and Stuart Weitzman, said the outbreak could reduce its sales by up to $250 million in the second half of the year.
And Estée Lauder, the luxury cosmetics company, warned that the outbreak would hurt its financial results “in the near term,” predicting that sales in the third quarter of 2020 would be the most affected. The spread of the virus has slowed air travel and tourism, reducing store traffic in key global shopping areas, it told investors.And Estée Lauder, the luxury cosmetics company, warned that the outbreak would hurt its financial results “in the near term,” predicting that sales in the third quarter of 2020 would be the most affected. The spread of the virus has slowed air travel and tourism, reducing store traffic in key global shopping areas, it told investors.
Reporting was contributed by Ian Austen, Niraj Chokshi, Lizzie Paton and Carlos Tejada.Reporting was contributed by Ian Austen, Niraj Chokshi, Lizzie Paton and Carlos Tejada.