How Coronavirus is Handicapping the Global Fashion Industry
Sunday, March 1, 2020
The coronavirus has caused the quarantine of more than 50 million people in China, alongside travel and visa restrictions to more than 70 countries.
Investment bank Jefferies estimates that Chinese buyers accounted for 40 percent of the 281 billion euros ($305 billion) spent on luxury goods globally last year. Chinese consumers are the fastest-growing luxury shopper demographic in the world, driving 80 percent of the past year’s sales growth in the luxury sector alone.
Roughly a third of Burberry stores in mainland China have been shut down. Capri, the owner of Michael Kors, Versace, and Jimmy Choo, said it was reducing its sales outlook for the quarter by $100 million after closing 150 of its 225 mainland China stores. Tapestry, which owns Coach, Kate Spade, and Stuart Weitzman, said it was expecting sales to drop as much as $250 million. Ralph Lauren temporarily shuttered 2/3 of its stores in China, stating that its fourth-quarter guidance will be negatively impacted by $55 million to $70 million in sales as well as $35 million to $45 million in operating income in Asia.
The outbreak has prompted adidas, which attributes roughly one-third of its sales to Asia, to close a “significant” number of stores in China. Since Lunar New Year on January 25, the brand had seen business activity drop roughly 85% when compared to the same period a year earlier.
In letters to their investors, PUMA indicated that the virus negatively impacted their business since the beginning of February. This was especially true in China where more than half of both own and operated and partner stores were/still are temporarily closed due to restrictions of the local authorities. As a result, PUMA anticipates a negative forecast for the first three months of the year.
Nike has closed half of its stores in China, and the ones that are still opened are operating with reduced hours. CEO John Donahoe told CNBC that nearly 18% of Nike’s sales came from the greater China region in the most recent quarter.
The coronavirus has led to the postponement or cancellation of a number of fashion shows for fall 2020. In China, specifically, both Shanghai and Beijing Fashion Weeks — which were slated to run concurrently the last week of March with new offerings from brands like Burberry and Chanel — have been postponed.
While other shows in Paris and Milan still took place, they have not been the usual festive affairs. Chinese fashion brands Masha Ma, Shiatzy Chen, Uma Wang, Jarel Zhang, Calvin Luo, Maison Mai, Angel Chen, and Ricostru all cancelled planned events. In Milan, fashion house Armani held its runway presentation behind closed doors, noting the choice was was made in order to”support national efforts in safeguarding public health,” and to protect the invited guests by stopping them from attending “crowded spaces.”
On the other side of the world, Seoul Fashion Week was cancelled after a number of designers pulled out of the event. An official statement from the Seoul Metropolitan Government noted: “We have internally decided to cancel the 2020 Fall-Winter Seoul Fashion Week and will notify the concerned parties of the decision in a few days.”
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