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Puma says short-term normalization will not occur

Mar 12, 2020 Germany
Puma says short-term normalization will not occur
The Germany-based sportswear no longer expects a short-term normalization of the Covid-19 situation despite first encouraging signs coming out of China
Puma confirmed that all offices around the world are open, including the one in Shanghai, which re-opened after the officially extended holiday period for Chinese New Year. Employees who are in or have been to any of the officially defined risk areas were asked to work from home for a period of two weeks.

Covid-19 has also negatively impacted Puma's business since the beginning of February both in terms of sales and sourcing, as the company explained.

Impact on Sourcing

China accounts for less than 20% of Puma's international sourcing volume. Factories outside China have not been impacted, according to the sportswear brand. Within China, all of Puma's Tier 1 (finished product) supplier factories are open again and are operating at 80%-100% of capacity. Almost all of Tier 2 (material) factories are also up and running. Puma’s outbound logistics are largely in operation with all sea ports now open and most of transportation on land - from the factories to the seaports - functioning normally again. Therefore, the brand concluded that the "global supply chain is currently not at risk apart from minor delays".

Impact on Sales

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. There are now early signs of improvement. Most of the stores in China are now open again and traffic that had initially been extremely low picked up over the weekend. Other Asian markets such as Singapore, Malaysia, Japan and South Korea, which typically benefit from Chinese tourists, continue to see heavy negative effects on sales. Additionally, the virus is spreading into other parts of the world. Despite the spread of Covid-19 in Europe, almost all Puma's local stores are still open. In Northern Italy operate under reduced opening hours as enforced by the authorities.

Outlook

The company has made an update to the market back in February and the outlook for the full year 2020 given at the time was based on the assumption that the situation regarding the Covid-19 virus would normalize in the short term. Given the duration of the situation in China, the negative impact in other Asian countries and now also the spread to Europe and the US, Puma concluded that short-term normalization will not occur. With the development over the coming weeks and months impossible to predict the brand says they are in no position to quantify the negative effect this could have on their full-year revenue and earnings,

Image credits: hypebeast.com

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