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How Nike, adidas and Puma are reacting to the state of emergency

Being a big sports brand in the time of Coronavirus

How Nike, adidas and Puma are reacting to the state of emergency Being a big sports brand in the time of Coronavirus

COVID-19, identified for the first time at the end of last year in Wuhan, China, was the dominant and transversal theme that involved executives and investors who wanted to know what impact the virus would have on their financial data and above all on corporate earnings publications, which are usually made official between December and January of the following year. As we speak, there have already been 101,000 coronavirus cases and more than 3,400 deaths, which is why many companies are now forced to review their plans, considering the effect that the virus is having from production chains to the consumer of each region of the world.

If for Italian companies it is still too early to assess, at an economic level, the tragic impact that this long stop will have, the largest sportswear brands in the world such as Nike, adidas and Puma, have instead already had the opportunity to touch with a huge drop in sales, especially as regards the eastern market, where the coronavirus has already reached its maximum expansion point towards the end of 2019. adidas, like Puma, make almost a third of its sales in Asia, which in recent years it has represented an important growing market for the sporting goods industry. Worsening their situation is also the fact that China is also the main production country for both companies.

Puma, a German company owned by Rudolf Dassler said that he did not expect his business to return to normal in the short term, despite encouraging signs that came from the Chinese state's ministry of health in late 2019, but neither that the markets Asians such as Singapore, Malaysia, Japan and South Korea, where Chinese tourists often travel to shop, would have recorded such a sharp drop in sales, marking a significant break also towards the European market. Nonetheless, Puma said that most of its factories in China have already returned to function and that the logistics have already returned to a large extent operational, with a consequent, minimal delay on the global supply process.

A different story regarding adidas, which canceled all bulk shipments in February and said it planned to eliminate excess inventory for the rest of 2020. While most factories in China are back on track, its distribution chain suffered interruptions, without particularly affecting the general financial statements of the company. Adidas CEO Kasper Rorsted said the company closed 2019 at an all-time high: "The company has never been stronger although it has noted that the coronavirus epidemic has led to a substantial slowdown in China. That's why we are projecting around € 1 billion in revenue in the first quarter to the eastern market alone"he said. "We expect other regions to grow, but obviously China, being 20% ​​of our business, has a substantial impact on all our business." A move that seems to take inspiration from the first half of 2019, when adidas decided to reinvest its profits in channels other than adidas Originals, which has long been able to support itself, but on which the adidas group does not want to depend by.

Nike, on the other hand, pays attention to itself: almost two weeks ago, however, the European headquarters in Hilversum, the Netherlands, remained closed two days due to an employee who tested positive for covid-19. The entire headquarters, where about 2,000 employees from 80 countries work, would have been disinfected overnight but despite this, starting from February 28, the Dutch health authorities have reported another 10 coronavirus infections. Nike, which in the meantime recorded a -4.90% on the stock market and a loss of 17 billion dollars, closed about half of its stores in China and leaving the remaining ones open on reduced hours, however, they recorded traffic to the detail below expectations. This is a not insignificant hole, given that the Asian market has brought the Beaverton brand $ 800 million a year over the past four years.

''The dynamics continue to evolve and we, depending on how they develop, will give updates on the operational and financial impacts on the financial statements of the third quarter'', said John Donahoe, president and CEO of the company, continuing ''In the short term we expect the situation to have a devastating impact on our operations in China. However, the brand and its commercial momentum towards the Chinese consumer remain strong, as evidenced by the continuous growth in digital activities''.

Nike has also postponed many of the expected drops (which included two Air Jordan 5 colorways, one Air Jordan 4, one 11 low, one 6 and one 13) from April 25 until at least May 30, making us assume that the improvement of the situation that involves us may not have a short course, thus leading Nike to have a prospect of full warehouses with a consequent temporary block of production.