In an update on how the coronavirus has impacted their business, Columbia Sportswear said there will be near-term effects but that China remains one of the company’s strongest long-term markets.
Chairman, president and CEO Tim Boyle credited the company’s fortress balance sheet, which includes no long-term debt, and diversified global business model with enabling them to overcome the current challenges.
“While this outbreak will have a material impact on our near-term financial performance in China,” he said, “we continue to believe China represents one of our largest long-term geographic opportunities.”
According to the company, last year China represented around 5% of total net sales; the Asia-direct business (Japan, China and Korea), represented around 15%. Stores have begun to reopen in China, though about half of owned and partner stores there remain temporarily closed. Those that have reopened are experiencing a drop in traffic and sales, and stores in Japan and Korea are experiencing slowdowns as well.
As with many other companies, Columbia said, the outbreak is impacting their supply chain. Although only a low-double-digit percent of finished goods are made in China, the brand’s contract manufacturers source a large portion of raw materials from the country. Factory closures and the slow return of workers has affected their ability to source some raw materials, which prevents the timely production of finished goods. This and other supply chain impacts will likely affect the company’s ability to promptly meet upcoming consumer demand.
As the company has already received substantially all of its Spring 2020 product, potential order fulfillment delays are expected to impact future seasons.
Mr Boyle began the statement by saying the company’s number one priority is the health and safety of employees and partners. “Thankfully, we have no reported incidents of our employees contracting the virus to date,” he said, “and many of them are working remotely from home to help maintain business operations.”
Source: Sports Textiles
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