In an update, Columbia Sportswear said it its 2020 results “to be significantly affected” by the coronavirus outbreak as the epidemic impacts both its business in the Asia region and its supply chain.
“Our first priority has been to take appropriate measures to ensure the health and safety of our employees and partners,” commented Chairman, President and Chief Executive Officer Tim Boyle, in a statement. “Thankfully, we have no reported incidents of our employees contracting the virus to date, and many of them are working remotely from home to help maintain business operations. While this outbreak will have a material impact on our near-term financial performance in China, we continue to believe China represents one of our largest long-term geographic opportunities. We believe our fortress balance sheet, including no long-term debt, and diversified global business model will enable us to overcome this present adversity and unlock the full potential of our brand portfolio in this market over time.”
In 2019, China represented approximately 5 percent of total net sales and the Asia-direct business, which includes Japan, China and Korea, represented approximately 15 percent of total net sales. While stores have begun to reopen in China, approximately half of the company’s owned and partner stores there remain temporarily closed. Stores that are open in China have experienced a material decline in traffic and corresponding sales. There has also been an impact of the COVID-19 outbreak in Japan and Korea. Until normality returns, Columbia said it expects a continued unfavorable impact on sales in its Asia-direct business.
Like many other companies, the COVID-19 outbreak is also impacting its supply chain. While only a low-double-digit percent of its finished goods are manufactured in China, Columbia said its contract manufacturers source a large portion of raw materials from China. Temporary factory closures and the pace of workers returning to work have impacted its contract manufacturers’ ability to source certain raw materials and to produce and fulfill finished goods in a timely manner. The outbreak is also impacting distribution and logistics providers’ ability to operate in the normal course of business. These supply chain impacts will likely affect the company’s ability to timely fulfill orders and meet consumer demand. Given that the company has already received substantially all of its Spring 2020 product, potential order fulfillment delays would impact future seasons.
As stated on February 6, 2020, Columbia said its full-year 2020 financial outlook provided at that time did not include the potential financial impact of the COVID-19 outbreak. The COVID-19 outbreak is ongoing, and its dynamic nature, including uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and actions that may be taken by governmental authorities to contain the outbreak or to treat its impact, makes it difficult to forecast any effects on its 2020 results. However, as of the date of this release, Columbia said it expects its 2020 results “to be significantly affected.”
Columbia said it will provide an update as to the impacts of the COVID-19 outbreak on its first-quarter earnings conference call scheduled for April 30, 2020.
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