- Prachi Singh
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Following the coronavirus outbreak in China, Columbia Sportswear Company
has announced that 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, it expects the results to be significantly
affected.
“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,” said the
company’s Chairman, President and Chief Executive Officer Tim Boyle.
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 of Columbia
Sportswear. While stores have begun to reopen in China, approximately half
of company-owned and partner stores there remain temporarily closed and
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, the company
expects a continued unfavourable impact on sales in our Asia-direct
business.
The company further added that the COVID-19 outbreak is also impacting
its supply chain. While only a low-double-digit percent of our finished
goods are manufactured in China, the company’s contract manufacturers
source a large portion of raw materials from China. Temporary factory
closures and the pace of workers returning to work have impacted contract
manufacturers’ ability to source certain raw materials and to produce and
fulfil finished goods in a timely manner. The outbreak is also impacting
distribution and logistics providers’ ability to operate in the normal
course of business and the company expects potential order fulfilment
delays to impact future seasons.
Picture:Columbia Sportswear website
