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Puma Says China Operations Getting Back to Normal But Impact Remains Unknown

On Wednesday, Puma updated its financial outlook in light of the rapidly unfolding COVID-19 pandemic.

The German athletic firm said sales and sourcing have been negatively impacted since the beginning of February, when the coronavirus outbreak stalled activity across China.

“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,” Puma said in a statement.

Despite these challenges, Puma said the situation has been improving, noting that most of its stores in China are now open and traffic is picking up after an “extremely” slow weekend on March 6-7. Other markets like Singapore, Malaysia, Japan and South Korea are still experiencing a “heavy negative effect” on revenue largely due to the lack of Chinese tourists.

In Europe, Puma reported significantly lower foot traffic and has reduced opening hours in Northern Italy, as dictated by the local government. “Almost all” of the brand’s European stores remain open at this time. Puma has yet to follow other retailers that closed stores in the U.S. and Europe over the weekend as governments began heavily restricting travel and public gatherings to slow the spread of an outbreak that has sparked 153,517 confirmed cases and 5,735 deaths globally, according to the World Health Organization’s March 15 coronavirus situation report.

As China accounts for less than 20 percent of the brand’s sourcing, Puma doesn’t yet anticipate anything more than minor delays on the supply side. Now that most seaports are open, Puma said, its chain of logistics has normalized again.

“Within China, all of our Tier 1 (finished product) supplier factories are open again and are operating at 80 percent to 90 percent of capacity,” Puma said. “Almost all of our Tier 2 (material) factories are also up and running.”

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Yet, Puma cautioned investors that the outlook it initially gave in February still needed to be amended to take into account “the duration of the situation in China,” negative impacts in Asia and the spread of COVID-19 to Europe and the United States.

As such, Puma said that it was impossible to predict the negative effect it may have on 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,” the company said.

Puma continues to monitor the global health crisis for the well-being of its employees and partners, keeping its offices open but asking staff in risk areas to work from home.

Additional reporting by Jessica Binns.