- The coronavirus outbreak is taking a toll on the economy in China and beyond.
- Certain sectors and companies are more exposed to risk than others.
- Business Insider contacted numerous retailers to get a sense of how the coronavirus is affecting their international operations and supply chains.
- Visit Business Insider’s homepage for more stories.
The coronavirus has spread far beyond China, impacting retailers around the globe.
So far, international companies have had to contend with shuttering stores in affected areas, accommodating sick and worried employees, and dealing with supply chain disruptions.
Business Insider contacted a slew of consumer companies to find out how they were contending with the outbreak.
Here’s a look at how different big-box stores, luxury brands, and fast-food chains are responding to the coronavirus:
After a Walmart employee in Kentucky tested positive for COVID-19, Walmart executives sent out an email outlining a new emergency leave plan for all US-based workers. The retailer will waive its regular attendance policy through the end of April.
In a March 10 email to all US employees, the company announced that Walmart employees who contract the coronavirus will now receive up to two weeks of pay. After two weeks, both full-time and part-time hourly associates who are still unable to work are eligible for up to 26 weeks in pay.
The outbreak has posed a major problem for Burberry and other luxury fashion brands.
“The outbreak of the coronavirus in mainland China is having a material negative effect on luxury demand,” Burberry CEO Marco Gobbetti said in a statement the retailer provided to Business Insider in February. “While we cannot currently predict how long this situation will last, we remain confident in our strategy.”
Twenty-four of its 64 stores in mainland China are closed, while the 40 remaining locations are running under “reduced hours” with “significant footfall declines.”
Gobbetti went on to say in the statement that the company was “taking mitigating actions and every precaution to help ensure the safety and well-being of our employees.”
According to Seth Basham, the managing director of equity research at Wedbush Securities, Home Depot – and its North Carolina-based rival Lowe’s – sources about 30% of its products from China.
“This is a fluid situation that we’re watching closely,” a Home Depot representative said in a statement to Business Insider. “We’re in constant touch with our suppliers and are making contingency plans to ensure minimal impact to our supply chain.”
Basham said “consumer uncertainty” could also prompt shoppers to “delay bigger-ticket home improvement projects,” thus harming the home-improvement sector.
On the product front, the Hill reported that the home improvement company “is limiting online purchases of face masks to 10 per customer.”
McDonald’s employees have pushed the fast-food giant to bolster its paid sick leave policy in the wake of the coronavirus epidemic.
In a call on March 10, employees and members of the advocacy group Fight for $15 called for paid sick leave, as well as proper sanitation training and paid time off in the event of store closures.
A McDonald’s spokesperson told Business Insider it’s the company’s “expectation that crewmembers stay home when they are sick.” While policies differ depending on state and restaurant ownership, McDonald’s has decided to pay employees of corporate-owned establishments if they are required to quarantine.
McDonald’s also announced it would cancel its Worldwide Convention in Orlando and instead convene managing directors and franchisees online.
In a video announcement on March 6, Kempczinski said the decision “was not made lightly” and came after consulting with a wide swath of McDonald’s leadership as well as considering global travel restrictions and updates from the World Health Organizations.
“While I wish our system can come together in person this year, I can promise you this – we can do something truly special,” he said in the video. “We will look to change the format to a digital experience and host the most inclusive Worldwide Convention in our history.”
Walgreens Boots Alliance
Walgreens Boots Alliance is noticing an uptick in demand for products like face masks and bottles of hand sanitizer in many of its locations. A company spokesperson told CNN that the epidemic may lead to a shortage of hand sanitizer.
“We’re continually working with our supplier partners to help ensure we can meet the needs of our customers,” a Walgreens representative told Business Insider.
The spokesperson added that the company – which acquired a 40% minority stake in the Chinese pharmacy chain Sinopharm Holding GuoDa Drugstores Co. back in 2018 – was taking steps to protect employees.
“Working closely with our clinical and safety offices, we continuously share information with our pharmacy team members to help address patient questions based on the latest information available from public health officials and the CDC,” the person said.
Starbucks announced on Wednesday that it will offer “catastrophe pay” for employees in the case of a possible quarantine. The chain will join companies like Darden Restaurants and Walmart that also updated their policies this week.
“As we navigate COVID-19 together, what matters most is how we, as a company, care for you,” Starbucks president Rossann Williams wrote in a letter to partners on Wednesday. “I want you to know that here at Starbucks, you should never have to choose between work and taking care of yourself.”
Last week, CNN reported that a Starbucks employee fell ill with the coronavirus in Seattle. The company has also banned the use of reusable cups as a health measure.
Starbucks also warned investors of an estimated 50% decline in same-store sales in China as a result of mass closures in January and February at the height of the outbreak in the region, though it noted signs of recovery, according to CNBC.
In a recent statement released to coincide with Starbucks’ latest earnings, the coffee chain addressed concerns over the coronavirus outbreak.
The company’s president and CEO, Kevin Johnson, said the company’s “partners in China are navigating as health officials respond to the coronavirus.”
A Macy’s in Tacoma, Washington, has shut down following reports of an employee who tested positive for the virus, according to the New Tribune.
In a call with investors on February 25, Macy’s CFO Paula Price said that while it’s “too early to know” the full impact of the coronavirus, the company expected drops in international sales and delays in importing products sourced from China.
“We anticipate that there could be a small impact on international sales from tourism,” Price said. “We’re working with vendor partners to minimize any disruption.”
Also during the call, Macy’s CEO Jeff Gennette said that while the company had a corporate office in Hong Kong, it had continued to operate with normal hours since employees returned after the Lunar New Year holiday. Macy’s is, however, using policies like flexible schedules that it first developed during the SARS epidemic in 2002, he said.
As far as supply-chain lags, Gennette said the 2019 increases in Chinese tariffs had ultimately helped the retailer better understand vendor relations and subsequently aided during its monitoring of the coronavirus.
“We expect a slowdown of products coming from China, but nothing concerning yet,” he said. “This is an example of where the tariff situation over the last 18 months really gave us a clear line of sight into China and suppliers.”
KFC, Pizza Hut, Taco Bell, and other Yum China brands
Thanks in part to the coronavirus, shares of Yum Brands dropped 15.6% in February, the Motley Fool reported.
But Yum Brands itself doesn’t directly operate popular chains like KFC, Taco Bell, and Pizza Hut in China. Yum China spun off from its franchisor and former parent company in 2016. The Shanghai-based independent company has the exclusive right to run KFC, Taco Bell, and Pizza Hut franchises in China, and it also owns a slew of other brands.
In the company’s latest earnings call, CFO Ka Wai Yeung said the coronavirus epidemic – which broke out just before the Lunar New Year, a significant holiday shopping period in China – “caused significant interruptions to our business.”
“The impact comes from temporary closure of our restaurants as well as substantial decline in sales to the restaurant that remained open,” Yeung said.
The CFO went on to explain that “travel restriction, suspended festivities, and shortened operating hours” had also been pain points. As a bright spot, Yeung said “delivery is holding up well” for Yum China.
“Now to better serve our customer and protect our employees, we rolled out contactless delivery, which is very well received by our customers,” Yeung said. “In addition, we also rolled out order online, pick up in store, contactless services and saw some encouraging early results as well.”
On a February 27 call to investors, JCPenney CEO Jill Soltau said “it remains too early to quantify any potential financial impact to our business” as a result of the coronavirus.
“The coronavirus continues to be a fluid situation that we are of course watching closely,” Soltau said. “We have a diversified supply chain and no stores in China or the impacted countries. We do have associates in our international buying offices including Shanghai and Hong Kong and we are in constant contact with them.”
Similar to remarks made by Macy’s CEO Jeff Gennette earlier in the week, Soltau said the increase in Chinese tariffs in 2019 ultimately served as a silver lining in protecting against business losses in the face of the coronavirus.
“As we worked through the tariff situation, we found our self in a pretty good place there because our sourcing organization has worked to diversify away from China,” she said. “So that’s been a bit of comfort as we watch the news unfold, but we are very connected to our suppliers and associates and I don’t have any forecasts to share today.”
Wayfair reported quarter-to-date revenue growth well below expectations due to “some disruptions in the supply chain,” 50% of which includes goods sourced sourced from China, as first reported by Bloomberg at the end of February.
The company is forecasting sales increases of under 20% for the full quarter, which would be “the slowest growth in its history as a public company,” according to Bloomberg. However, Wayfair did not attribute its weak forecast to the impact of the coronavirus, despite heavily sourcing from affected areas.
On a call with investors on March 3, Kohl’s executives said that while it’s too early to tell whether coronavirus will have an impact on sales, the team is “actively monitoring” both the health of its employees and potential shifts to its supply chain.
“Our first concern is the well being of our employees, associates, and vendor partners,” Kohl’s CEO Michelle Gass said on the call. “The situation is fluid and we’re working closely with our partners on any changes to our supply chain.”
Gass added that China is not Kohl’s top sourcing market, as the company has “pursued a diversified supply chain” in recent years, which may protect the retailer from possible sales dips.
During Target’s 2020 financial community meeting and fourth-quarter and full-year 2019 earnings call, CFO Michael Fiddelke said that the company has not seen a large impact on the business from the coronavirus, adding that any adjustments made for Target’s future outlook have been slight.
“Like all of you, we’re monitoring this situation hour by hour as conditions evolve,” Target CEO Brian Cornell said in the call. “At Target, we’ve been prioritizing our team, starting by ensuring that all of our China-based team members have been able to work from home. More broadly, we spent considerable time focused on the best way to support our team members all around the world to make sure they stay healthy and safe.”
Target CEO Brian Cornell posted a message to customers on Tuesday that briefly explained the company’s new cleaning procedures. Target also posted a memo to its internal communications website that detailed an intricate process for cleaning its stores, the retailer confirmed to Business Insider.
Morgan Stanley analysts published a note on March 2, delving into the potential impact of the coronavirus on Victoria’s Secret.
The analysts wrote that parent company L Brands’ “management highlighted China is a critical source of raw materials for the overall business.” Certain lingerie and apparel items for Victoria’s Secret’s spring lineup are facing a delay of two to four weeks.
Ikea’s “primary focus” throughout the coronavirus crisis has remained the “safety of our co-workers and customers,” a spokesperson said in a statement shared with Business Insider.
The spokesperson said that all Ikea stores in mainland China were temporarily closed in late January, “in line with guidance from the Chinese government.” Online shopping services were still available to Chinese consumers.
“A gradual store reopening program from March 1 is underway and we will continue to monitor developments closely and adjust as needed,” the spokesperson said. “We are keeping a close eye on the evolving situation in Europe and remain in close contact with local health authorities to ensure an appropriate and timely response in line with their recommendations.”
Ikea also temporarily shuttered two Italian locations, in Brescia and Corsico, on February 29 and March 1 “following advice from the local authorities.”
Ikea said that its suppliers in China “are largely operational again,” although the furniture giant will keep monitoring developments to ensure that health and safety remain “a priority at all times.”
“As the situation is evolving, it is too early to clarify the total impact on our business in China and globally,” the spokesperson said. “But we are prepared and planning for multiple scenarios.”
What’s more, the Ikea spokesperson said that the company will continue to work with local authorities and the World Health Organization.
“Our thoughts remain with those directly affected by the disease and those working tirelessly to treat them,” the Ikea spokesperson told Business Insider.
Foto: A Nordstrom store. Source: Photo by: Jeffrey Greenberg/Universal Images Group via Getty Images
The Nordstrom family sent an email to customers on March 7 detailing updated protocols for coronavirus prevention, including placing hand sanitizer dispensers around its stores, as well as increasing the frequency of cleanings.
“We are confident our stores continue to be safe, and we remain open for business,” the email states.
Nordstrom CEO Erik Nordstrom told investors on March 3 that the company has assembled a team to monitor possible impact from coronavirus and is “assessing implications to traffic and the supply chain.”
Private label products account for about 10% of Nordstrom’s sales – 30% of which is sourced from China, he said on the call.
“At this time, we haven’t seen very much material change or disruption to the supply chain and we are having a lot of conversations with our vendors,” added Nordstrom CFO Anne Bramman. “Our private label business, relatively speaking, is pretty small.”
Foto: A Kroger store. Source: Reuters
Though several grocers have experienced runs on essential items in recent weeks, Kroger CEO Rodney McMullen said it’s too early to tell how the coronavirus may impact sales.
“Certainly we could see an increase in volume in certain categories,” he said on a call with investors on March 5. “All of our teams – our stores, our supply chain team, our procurement folks – are incredibly focused on staying in stock of our critical items.”
Kroger CFO Gary Millerchip added that the company is not especially concerned about possible supply chain issues given that a vast majority of the company’s items are sourced domestically. Instead, the company is focusing its efforts on employee and customer health and safety.
“From a business preparedness standpoint we have established an internal task force and developed an epidemic plan,” he said. “The health of our associates, customers and communities is our top priority.”
Foto: Adidas. Source: Reuters
The German sportswear company reported on Wednesday that it expects first-quarter sales to drop by $1.14 billion in greater China, CNBC reported.
In a statement to Business Insider, an Adidas representative said, “The safety and health of our people always comes first. Globally we implement applicable local, officially issued regulations and reserve the right to take further measures if necessary. To protect our employees, consumers and partners, we have taken a number of measures at all adidas sites including increased hygiene measures, corresponding recommendations to our employees or travel restrictions.”
Foto: Source: Rick Wilking/Reuters
On March 11, Lowe’s posted a note from CEO Marvin Ellison addressing precautions it is taking over the coronavirus pandemic.
Ellison wrote that the home improvement giant has established a task force to work with the CDC. It has also enacted a new leave policy for employees and boosted its sanitation regime.
“To help prevent the spread of the virus, we’re encouraging anyone who feels sick to stay home, and we’ve also put in place new temporary time-off guidelines to give our associates even greater flexibility and pay them for the time they need to stay home and get well,” Ellison wrote.
When it comes to customer orders, Ellison noted that Lowe’s will “continue to run all services as usual,” including installations, deliveries, and in-home consultations.
Foto: Source: REUTERS/David Mdzinarishvili
In a call with investors on March 12, Gap CFO Teri List-Stoll said the company is forecasting a $100 million decline in sales across its Chinese, Japanese, and European markets as a result of the coronavirus. In the US, however, List-Stoll said executives aren’t yet able to estimate the impact on business in the “early days” of the spread of the virus in North America.
“The situation remians highly fluid and we are of course monitoring events closely and considering contingency plans,” List-Stoll said, adding that the two biggest areas of concern are demand suppression and supply chain interruption.
Similar to many of its peers, Gap has recently worked to shift its supply chain away from China in light of the implementation of tariffs under the Trump administration. List-Stoll said Gap now sources 16% of its supply chain from the region, down from 21% previously.
Still, she said a significant amount of fabric procurement happens in China, though at this time all shipments “appear on schedule.”
Sonia Syngal, Gap’s recently appointed CEO and former head of Old Navy, said on the call that she feels the company is “better positioned than most” and noted it is keeping a firm eye on the impact of coronavirus in heavily infected areas.
“We’re leveraging business contuinity learnings that began with our Asia teams,” she said. “We will assess in hotspots like Washington and New York as we see it unfold in North America.”