Starbucks, Nike, McDonald's... Consumer Goods Shutdown Wave Sweeps China

[Image source=EPA Yonhap News]

[Asia Economy Beijing=Special Correspondent Sunmi Park] The impact of the novel coronavirus infection in China is spreading beyond factory shutdowns to the distribution industry. As clothing and food and beverage companies are successively temporarily closing their stores, a crisis has arisen for the performance of related companies. The deterioration of first-quarter earnings for global consumer goods companies targeting the massive consumer market of 1.4 billion people has become inevitable.

According to major foreign media reports on the 6th, the American sports brand Nike has already closed half of its directly operated stores in China. Although the store closures are temporary, it is impossible to predict when the novel coronavirus outbreak will subside, so the reopening time cannot be forecasted. Nike has reduced operating hours at some stores that remain open. The German sports brand Adidas also announced that it would suspend operations at a significant number of its more than 12,000 stores in China due to concerns over the spread of the novel coronavirus. Additionally, the American jeans brand Levi's has closed half of its stores in China, and global clothing brands with many stores in China such as Hugo Boss, Uniqlo, and H&M have also temporarily ceased operations.

Fast food and food and beverage industries are also closing stores in China one after another. Starbucks has already closed more than half of its approximately 4,300 stores across China last week, and McDonald's has also closed about 300 stores nationwide in China. China's representative restaurant chain Haidilao has closed all its stores in China.

With store closures making operations impossible, the deterioration of these companies' performance has become inevitable. Starbucks' sales in China account for 10% of its total revenue, and Nike generates 19% of its sales from China. John Donahoe, CEO of Nike, expressed concern, saying, "Nike's business in China has been significantly affected in the short term due to the novel coronavirus."

However, it is currently impossible to predict when work will resume. According to a survey conducted by Zhaopin.com, China's largest job search site, targeting 1,644 companies, about 70% of companies responded that they would be able to resume work next week. Already, 54% of companies started returning to work after the official end of the Spring Festival holiday on the 2nd, and an additional 18.9% plan to return from the 10th. Most of the work is remote rather than normal work with all employees returning to the workplace. About 18% of respondent companies still answered that the timing of work resumption is uncertain.

Hong Kong's South China Morning Post (SCMP) reported on the 6th, "The successive closures of Chinese stores by consumer goods companies will reveal how much global companies have depended on China not only in manufacturing but also in the consumer goods sector," adding, "The warning signals are growing louder."

This content was produced with the assistance of AI translation services.