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Consumer & Retail Faces Widespread Risk from COVID-19
December 7, 2020
15+ min read
Interested in staying up-to-date on COVID-19’s impact across sectors? Visit our Coronavirus Impact Tracker for daily updates pulled from earnings calls, press releases, 8ks, and more.
As COVID-19 rapidly spread throughout the world in March and worldwide lockdown measures increased, retailers and non-essential businesses across the globe were forced to shutter stores and reduce hours. With shelter-in-place and social distancing orders implemented in countless cities, we saw decreased consumer foot traffic and attention shifted away from the supply chain and onto the impact of store closures and consumer demand.
The entire Consumer & Retail sector is cautious and uncertain about 2020, with many consumer discretionary brands pulling guidance. One thing remains clear, due to the fast-paced and fluid nature of this crisis, companies are finding it difficult to quantify the impact. Who believes they have increased risks? How have consumer staples brands reacted to an increase in demand for necessary goods?
- Many have chosen to withdraw annual guidance due to the uncertain and unpredictable nature of COVID-19’s business impacts
- Reports of a bounce-back in demand in Chinese markets and growth in online sales show signs of potential recovery
- As fears mounted, stores providing essential goods showed increased sales during the first half of March, with sales tapering as stay-at-home orders were implemented later in the month
- Companies are emphasizing the health and wellness of their employees above all in light of this public health crisis
Here are the highlights. [Note: We are updating this post and our compilation post to reflect the most recent commentary. Last updated 4/3]
H&M Hennes & Mauritz AB (Earnings Call – 4/3)
In the second half of the quarter, growth was held back by the rapid outbreak of coronavirus particularly in China where sales declined by 84% in February. Excluding China, Hong Kong, Singapore, Macau, Japan, and Taiwan, sales increased by 7% in local currencies.
Now turning to the current quarter, naturally, the corona situation is having a huge negative effect on our second quarter. As of 31st of March, 3,778 of our 5,065 stores were temporarily closed in a total of 54 markets. Since mid-March, all our stores have been closed in several of our largest markets, including Germany, the US, the UK, France, Italy and Spain. Because of the pandemic, demand has weakened in many other markets too. Net sales in the month of March decreased by 46% in local currencies. In China, however, we are seeing a gradual recovery.
Our digital channels remain open in 47 of 51 markets, and in March our online sales grew by 17% in local currencies. With each day that we must keep stores closed, the situation is getting tougher. To lessen the negative impact, we are taking a range of forceful measures in areas such as purchasing, investments, rents, and staffing. All parts of the business are included and all costs are being reviewed. We are adjusting our purchases and our buying plans. Inventory is expected to increase temporarily but we expect levels to start normalizing again once the demand is coming back.
Carrier Global Corporation (8K – 4/3)
On April 3, 2020, the Company announced that it is withdrawing its full year 2020 outlook for sales, adjusted operating profit, and free cash flow (“2020 Outlook”) due to the impact of the COVID-19 virus.
The Company first provided its 2020 Outlook on February 10, 2020, and it reflected the limited, known impact of COVID-19 at that time. Due to the global economic slowdown, social distancing efforts and shelter-in-place directives, and the uncertainty associated with when the coronavirus restrictions will be lifted, the Company is withdrawing its 2020 Outlook. The Company expects to provide an update regarding the impact of COVID-19 on its business as well as the Company’s mitigation plan during its first-quarter earnings call.
Constellation Brands (Earnings Call – 4/3)
Moving to our full-year fiscal ’21 P&L and cash flow targets. Given the unprecedented COVID-19 events that began to abruptly and dramatically impact consumers in the marketplace almost concurrently with the start of our fiscal year, and given the related uncertainty, volatility, and fast-moving developments that have evolved over the month of March, we do not believe it is prudent or appropriate to provide formal financial guidance for fiscal ’21 at this time. With that being said, we thought it would be helpful to highlight some of our key financial targets assuming a normalized impact for fiscal ’21 prior to COVID-19, as a reference as you think through your modeling and scenario work given the changing marketplace dynamics.
Walgreens Boots Alliance (Earnings Call – 4/2)
Now I would like to provide some context around the potential impacts of the COVID-19 pandemic. Clearly, the full impact of COVID-19 won’t be known for months. However, what’s important right now is that we are proactively managing the immediate challenges and playing an important role for our customers. However, the situation is quite fluid, and we expect considerable volatility as the situation evolves over the coming weeks and months.
At present, we’re seeing a number of puts and takes. In the U.S., we saw very strong sales in the first three weeks of March as customers accelerated their purchases across multiple categories. However, we are now seeing declining sales trends, especially in quarantined areas. While it is difficult to predict future sales, realistically we expect to see future destocking by our customers and short-term sales may be negatively impacted by lower foot traffic. This is particularly evident in discretionary categories such as beauty and photo as customers redirect spending to everyday essential categories.
Let me talk you through what we saw in March. While we have not yet closed the books for March, we do have good visibility of our sales performance. In Walgreens, comp retail sales grew by around 14% in the month led by 32% growth in health and wellness and 28% growth from our grocery category partially offset by declines in discretionary categories such as beauty and seasonal.
But there were two very distinct periods in March. We delivered comp sales growth of 26% in the first 21 days of the month; however, post-March 21, the comp sales trends turned negative, with the last week of the month running at a mid-teens rate of decline. Obviously, if this trend continues for an extended period, it will quickly offset the sales uplift seen in the first 21 days of March.
Prescriptions saw similar trends, though less pronounced, with declines post-March 21 reflecting the pull-forward of scripts into the earlier part of the month and lower foot traffic.
In the UK, we also saw strong initial sales trends, but the UK is now effectively on lockdown and this has led to a significant decline in High Street footfall. Again, we are seeing a similar trend in discretionary items with a significant decline in our beauty business, and we have deferred key growth initiatives. For the moment, we’ve halted new product launches and we’ve postponed the planned rollout of our Beauty Halls to new locations.
In March, our UK sales declined by around 8%. Mid-single digit growth in pharmacy did not offset a mid-teens decline in retail sales, but it is the exit trends that are concerning. Retail sales declined by 65% over the last 10 days as High Street foot traffic reduced significantly and consumers diverted spending away from discretionary products. That being said, we are confident that this is a temporary situation and we would expect to see some stabilization of sales trends over time given that our pharmacies are designated essential services and are therefore among the few retail locations remaining open.
Stanley Black & Decker Inc (8K – 4/2)
As a result of the challenging and uncertain macro environment, the Company is withdrawing its previously announced guidance for 2020. The Company anticipates that COVID-19 driven demand disruptions will negatively impact results in 2020 and will provide an updated outlook in its first-quarter earnings release.
CarMax (8K – 4/2)
The global outbreak of COVID-19 has led to severe disruptions in general economic activities, particularly retail operations, as businesses and federal, state, and local governments take increasingly broad actions to mitigate this public health crisis. We have experienced significant disruption to our business, both in terms of disruption of our operations and the adverse effect on overall economic conditions. We have closed or limited operations at many of our retail and wholesale locations over the past few weeks and the ultimate scope and duration of these closures are not known. For stores that remain open, consumer demand has progressively deteriorated. These conditions may significantly negatively impact all aspects of our business, including used vehicle sales operations, wholesale vehicle auctions, used vehicle financing, extended protection plan sales, inventory acquisition, and retail service. The unexpected deterioration in economic conditions may also lead to future credit losses in our portfolio of auto loans receivable that are not incorporated in the existing allowance for loan losses. Our business is also dependent on the continued health and productivity of our associates, including store, region and corporate management teams, throughout this crisis. Individually and collectively, the consequences of the COVID-19 outbreak could have a material adverse effect on our business, sales, results of operations, and financial condition.
Lamb Weston Holdings (8K – 4/1)
The recent COVID-19 pandemic has disrupted our business. While its effect on global consumer demand for frozen potato products through our fiscal third quarter was limited, the pandemic’s effect on our future financial results is uncertain. Several governments around the world have enacted severe social and business restrictions, including closing or partially closing restaurants or other foodservice operations, which is impacting the demand for our products. While the near-term impact of the COVID-19 pandemic on consumer demand and sales volume is likely to be material, we believe that net cash generated from operating activities, cash on hand, borrowings under our revolving credit facility, and available capital through access to capital markets will be adequate to meet our liquidity and capital requirements, including dividends declared, for at least the next twelve months. As noted below, we plan to defer certain capital expenditures and we have temporarily suspended share repurchases in the near term to provide us with additional liquidity.
Kroger (8K – 4/1)
“We are seeing strong sales and are at the same time investing in our business to support our customers and associates through the current uncertainty,” said Gary Millerchip, Kroger’s chief financial officer.
As a result of recent trends, Kroger expects first-quarter identical sales excluding fuel and adjusted EPS to be better than the annual growth rate provided in guidance for the full year 2020.
Looking towards the rest of the year, Kroger expects volatility in sales throughout the year as the impact of COVID-19 on the consumer evolves and anticipates the following to have an impact on full-year results:
– Continued investments to help our customers and associates through the COVID-19 pandemic.
– Delay of certain cost-saving initiatives to focus all resources where they are needed most in the short term – to address the impact of COVID-19. The Company has plans in place to resume these initiatives quickly when the timing is right.
– Uncertainty surrounding the longer-term impact of COVID-19, including the length of travel and other restrictions, on food and grocery sales, fuel, and alternative profit streams.
– Potential long-term shift in customer behavior toward eating more food at home.
In light of all these factors, Kroger leadership believes maintaining current guidance is prudent at this time and is therefore reconfirming guidance for full-year 2020.
McCormick (10Q – 4/1)
As previously indicated, a key priority for McCormick as we navigate through the global COVID-19 pandemic is to keep our brands and our customers’ brands in supply. As of the date of this filing, there has been no material impact on our ability to manufacture or distribute our products. We are partnering with our customers to monitor consumer demand changes and address the expected shift to at-home consumption versus away from home. We estimate that away-from-home consumption has historically represented approximately 20% of our consolidated sales. We expect the government-mandated closure of dine-in restaurants in many of our markets will reduce demand in our flavor solutions segment in the near term and, subsequent to the end of our first quarter, we have seen reduced demand from our foodservice customers as COVID-19 measures have eliminated dine-in services and limited restaurants to carry-out or delivery only. We expect this will have a significant negative impact on our near-term performance–particularly in our EMEA region–as more people stay at home and away-from-home options remain, or grow even more, limited. We anticipate that the near-term effects of COVID-19 will increase at-home consumption, and related demand, from customers in our consumer segment as well as from customers in our flavor solutions segment that use our products to flavor their own brands for at-home consumption.
Conagra Brands (Earning Call – 3/31)
And from a financial standpoint, the third-quarter results are in line with the expectations we provided at CAGNY. As we previously described, industry softness, which started in December in foodservice and pivoted to retail in January, put pressure on consumption trends in several of our key categories, which more than offset share gains. As expected, consumption trends recovered in February prior to the COVID-19 impact. It’s important to keep in mind that our third quarter ended on February 23. At that time, there were very few reported cases in the U.S. and, notably, no widespread change in behavior. As we all know, that has changed significantly in recent weeks. From the second week of our fiscal fourth quarter-to-date, we’ve experienced the unprecedented impact of COVID-19 as consumers have stocked up on food and shift rapidly to eating more at home. Given the quality of our brands and the categories we participate in, Conagra is well-positioned to serve consumers during this time of disruption and extraordinary demand. Our team is hard at work in close coordination with our customers to ensure that consumers have access to the food they need to stay safe at home.
At this point, the magnitude and duration of the COVID-19 impact is still uncertain. However, I can tell you that we expect to exceed our prior full-year guidance for total company sales and profit metrics, assuming the end-to-end supply chain continues to operate effectively. We will provide more detail on the impact of COVID-19 in a moment. But first, we would like to walk you through the highlights of the third quarter.
Dollar Tree (8K – 3/31)
In March, directly related to COVID-19 concerns, both Dollar Tree and Family Dollar stores began to experience a material pick-up in-store traffic and sales related to essential products, including cleaning supplies and sanitizer, household products, paper goods, food, and over-the-counter medicine.
“Customers rely on Dollar Tree and Family Dollar as an essential retailer for their daily shopping needs. Understandably, they are very concerned about the recent global spread of the coronavirus. Our stores experienced an unprecedented spike in demand for certain products,” stated Gary Philbin, Chief Executive Officer.
Recently, the Company issued three press releases related to the current macro-environment:
- March 18 – Modifying store hours to close all stores at 8:00 p.m. local time to provide store teams adequate time to exercise enhanced cleaning protocols and to replenish store shelves;
- March 19 – Communicating the Company’s plans to hire 25,000 motivated individuals to support its stores and distribution centers; and
- March 25 – Rewarding hourly-paid store and distribution associates with an estimated total of $30 million in wage premiums for at least a four-week period in recognition of the team’s extraordinary efforts. Additionally, the Company is dedicating the first operating hour each morning in all 15,000-plus stores to serving at-risk customers.
Target (10K – 3/27)
The temporary closure of our stores, online businesses, distribution centers, and offices are expected to have an adverse impact on our results of operations, financial position, and liquidity. For example, although our day-to-day operations have been disrupted, we have incurred and may continue to incur labor costs during these closures. In addition, after some or all of our stores re-open, any significant reduction in our customers’ willingness to shop our stores, the levels of our customers’ spending at our stores or our Associates’ willingness to staff our stores and distribution centers, as a result of health concerns related to COVID-19 or its impact on the economy and consumer discretionary spending may impact our business operations, financial performance, and liquidity. The extent of the impact of COVID-19 on our business is highly uncertain and difficult to predict, as information is rapidly evolving with respect to the duration and severity of the pandemic and the response to contain it.
Lululemon Athletica Inc (Earnings Call – 3/26)
In North America and Europe, our stores have been closed since March 16. Stores in New Zealand are closed at this time, while Australia is operating on reduced hours. In China, all of our stores except our location in Wuhan are open, with most operating on regular schedules. Our stores also remain open in other Asian markets except for Malaysia where our two locations are currently closed. In addition, we are closely monitoring our supply chain and staying in constant contact with our vendors as they too navigate this situation. Given the rapidly-changing nature of current events, we have decided not to provide financial guidance at this time…
In addition, we have early learnings from China which show us that our business will bounce back. We are not yet back to pre-closing volumes, but the business is getting stronger week by week.
The Hershey Co (8K – 3/25)
At the time of our 2019 Form 10-K disclosure regarding COVID-19 (included within Management’s Discussion and Analysis of Financial Condition and Results of Operations), we believed this outbreak would be limited to our China business. However, policies and initiatives to reduce the global transmission of COVID-19 have significantly increased. These initiatives include reduced or eliminated food services, reduced travel, the closure of retailing establishments, the cancellation of major sporting and entertainment events, the promotion of social distancing, and the adoption of remote working policies. In response to the COVID-19 pandemic, the Company has temporarily closed its Hershey’s Chocolate World stores in Hershey, Pennsylvania, New York City, and Las Vegas, Nevada.
The COVID-19 pandemic is a highly fluid situation and it is not currently possible for us to reasonably estimate the impact it may have on our financial and operating results. We continue to monitor the situation and expect to provide additional details during our first-quarter 2020 earnings call.
Nike Inc (Earnings Call – 3/24)
Today, nearly 80% of our stores in China have reopened with more coming back online every day. In fact, just last week, we reopened our first store in the Wuhan area, and the results are encouraging. Our digital business in China has accelerated even further over the past months, and we are now seeing double-digit increases in retail traffic week-over-week with some stores having already returned to prior-year levels…
In addition to Greater China, we’ve applied that playbook in Japan and South Korea over the past two months, and we’re seeing early momentum in those markets as well. And with COVID-19 now spreading across Europe and the US, we are applying the same playbook. We have prioritized the health and safety of our teammates and we have closed our stores…
Gross margin declined by 80 basis points in Q3 as higher average selling prices and better off-price margin were offset by the impact of COVID-19 primarily in Greater China as we managed inventory sell-through in that market…
As we look ahead, we will not be providing financial guidance for Q4 due to the uncertainty resulting from the spread of COVID-19.
VF Corp (8K – 3/23)
As a result of the disruption and uncertainty caused by the COVID-19 coronavirus outbreak, on March 23, 2020, the Company issued a press release announcing the partial drawdown of the revolving credit facility and withdrawal of its adjusted fiscal 2020 outlook provided on January 23, 2020. The Company is not providing an updated outlook at this time.
Best Buy Co (8K – 3/23)
As previously disclosed, Best Buy Co., Inc. (“Best Buy” or the “Company”) is a party to a $1.25 billion five-year senior unsecured revolving credit facility agreement (the “Facility”) with a syndicate of banks pursuant to the Credit Agreement, dated April 17, 2018 (the “Credit Agreement”). A copy of the Credit Agreement is filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 20, 2018. The material terms of the Facility are also described in Note 6 of the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2019. As of February 1, 2020, the Company had no outstanding borrowings under the Facility.
On March 19, 2020, the Company drew the full amount of the $1.25 billion Facility. The interest rate for this draw under the Facility is variable at the 7-day LIBOR plus a variable margin rate of 1.015%. The proceeds from the Facility will be included in Cash and cash equivalents on the Company’s Consolidated Balance Sheets. The Company elected to draw on the Facility to increase its cash position and maximize flexibility in light of the current uncertainty surrounding the impact of COVID-19.
Item 7.01 Regulation FD Disclosure.
On March 21, 2020, the Company issued a news release providing a business update related to COVID-19. The Company also announced the withdrawal of all fiscal 2021 financial guidance previously issued on February 27, 2020, for both the first quarter and full-year due to the increased uncertainty surrounding the impact of COVID-19. The Company is not providing an updated outlook at this time and has suspended all share repurchases.
Deere & Co (8K – 3/23)
Deere & Company (the “Company”) is providing an update regarding the ongoing COVID-19 coronavirus pandemic (referred to as “COVID-19”). The ultimate magnitude of COVID-19, including the extent of its impact on Deere & Company’s financial and operational results, which could be material, will be determined by the length of time that the pandemic continues, its effect on the demand for the Company’s products and services and the supply chain, as well as the effect of governmental regulations imposed in response to the pandemic.
As a U.S. federally-designated essential critical infrastructure business, the Company will continue its domestic operations and plans to continue to operate in other parts of the world to the extent possible. These operations, however, may be affected by issues such as remote working arrangements, adherence to social distancing guidelines, and other COVID-19-related challenges. Presently, certain of the Company’s facilities are reducing operations and, in some cases, are temporarily shutting down operations due to the effects of the coronavirus.
Challenges associated with COVID-19 that have affected, and may continue to affect, the Company include the following: availability of the Company’s employees; employees’ working arrangements; the supply chain and the ability to receive goods on a timely basis and at anticipated costs; logistics costs; the normal operations of Company facilities, including temporary closures as mandated or otherwise made necessary by governmental authorities; as well as demand for the Company’s products.
As a result of these factors, Deere & Company is withdrawing the financial outlook for 2020 provided in its Form 8-K filed on February 21, 2020, and its Form 10-Q filed on February 27, 2020, and its subsidiary, John Deere Capital Corporation, is withdrawing the financial outlook for 2020 provided in its Form 10-Q filed on February 27, 2020. Further updates will be provided in the Company’s second-quarter earnings announcement and conference call scheduled for May 22, 2020.
Ross Stores Inc (8K – 3/20)
“We want to emphasize that in these unprecedented times, the safety and well-being of our customers and associates will always be of the utmost importance to us. As previously announced, we have already closed numerous stores based on government directives and reduced store hours across the country. Today, we decided to close all locations to help prevent the ongoing spread of the coronavirus.”
Tiffany & Co (8K – 3/20)
Mr. Bogliolo also said, “Our primary focus now is on preparing our Company, business and communities for the COVID-19 pandemic and the return to normal operations. The health and well-being of our employees and customers are critical and we continue to adopt recommended safeguards and plans at our stores, offices and factories as circumstances change. We have had to temporarily close or shorten the operating hours of certain stores around the globe. For example, in the Chinese Mainland, since January 24, 2020, we have lost approximately half of our total normal retail trading days as a result of closures or shortened hours of operations. Our agile teams are aligned to continually assess the dynamic conditions resulting from the global outbreak to determine our near-term actions.”
TJX Companies Inc (8K – 3/19)
Effective today the Company is closing all of its stores in the United States, Canada, Europe, and Australia for two weeks. In certain regions, including Germany, Poland, Austria, Ireland, and the Netherlands, and a number of U.S. and Canadian locations, the Company had previously closed stores based on several factors, including government or health department requirements. The Company is also closing its online businesses tjmaxx.com, marshalls.com, and sierra.com. Further, the Company is temporarily closing its distribution centers and offices, with Associates working remotely when they can. We know our Associates are very concerned for their health and financial well-being, and we plan to pay our store, distribution center and office Associates for two weeks during these closures.
To further strengthen its financial position and balance sheet, and maintain financial liquidity and flexibility, the Company is taking the following actions:
- Drawing down $1 billion from its revolving credit facilities.
- Suspending its share repurchase program.
- Evaluating its dividend program.
- Reviewing all operating expenses.
- Reducing capital expenditures.
The Company also announced today that it is withdrawing its first quarter and full-year Fiscal 2021 financial guidance given on its February 26, 2020 earnings conference call. The Company is not providing an updated outlook at this time.
L Brands (8k – 3/19)
With the wellbeing of its customers, associates, and communities as its top priority, and to help limit the spread of the Coronavirus, the Company will temporarily close all Bath & Body Works, Victoria’s Secret, and PINK stores in the United States and Canada, effective March 17 through March 29, 2020. Additionally, home office associates have been asked to work from home if possible. All employees will continue to receive pay and benefits during the temporary closure period. These decisions will be re-evaluated as new information becomes available regarding the COVID-19 pandemic.
Subsequent to the issuance of the press release, the Company made the decision to suspend all new e-commerce orders for Victoria’s Secret and PINK through March 29, 2020. The Bath & Body Works e-commerce business will continue to operate with prioritization on soaps and hand sanitizers. This business is fulfilled by a third party whose ability to continue to perform these services may be affected by developing circumstances.
First Quarter 2020 Earnings Guidance Update
Due to the heightened uncertainty relating to the potential impacts of COVID-19 on the Company’s business operations, including its duration and its impact on the overall demand for merchandise, the Company is withdrawing the first quarter 2020 earnings guidance issued on February 26, 2020. The Company is not providing an updated outlook at this time.
Estee Lauder Companies Inc (8K – 3/18)
Our guidance on February 6, 2020, for the fiscal 2020 second half and full-year ending June 30, 2020 reflected the best information available to us at the time, as well as our best estimates about the pace of recovery of our then-impacted businesses. However, most retail stores in North America and Europe are now closing, and our global business is more broadly impacted by COVID-19 than we initially expected. As a result, we are withdrawing the previous guidance that we no longer expect to meet. We expect to provide an update regarding the impacts of COVID-19 on our business and our recovery plans when we report our next earnings scheduled for May 1, 2020.
Nordstrom (8k – 3/17)
The Company issued its fiscal 2020 guidance on March 3, 2020, which did not include the impact of COVID-19. Due to heightened uncertainty relating to the impacts of COVID-19 on the Company’s business operations, including the duration and impact on overall customer demand, the Company is withdrawing its 2020 guidance.
- While February sales were in-line with expectations, the Company experienced a broad-based deceleration in customer demand over the past couple of weeks, particularly in markets most affected by the virus.
- With more than 100 years of managing through multiple business cycles, Nordstrom remains flexible and agile in making appropriate adjustments to its operational and capital allocation plans. The Company continues to maintain a strong focus on inventory discipline and expense management and remains committed to executing its savings plan of $200 to $250 million in fiscal 2020.
- In light of the current economic uncertainty, Nordstrom is making further reductions to its expense and capital expenditure plans and is currently suspending share repurchases.
lululemon (PR – 3/16)
VANCOUVER, British Columbia–(BUSINESS WIRE)– lululemon today provided an update on its global store operations in response to the continued spread of COVID-19.
In light of the rapidly changing developments, lululemon announced the closure of all stores in North America and Europe, from March 16 through March 27. Guests can continue to shop on lululemon.com.
Brown-Forman (PR – 3/16)
LOUISVILLE, Ky.–(BUSINESS WIRE)– To help prevent the spread of COVID-19 (coronavirus), Brown-Forman (NYSE: BFA) (NYSE: BFB) is temporarily suspending tours, tastings, and retail shops at all of its cooperage, distillery, and winery locations. Our goal is to minimize the risk to employees and guests and help lower the probability of the spread of the virus to our employees, their families, and the communities where we operate.
Shaw Communications (PR – 3/16)
CALGARY, Alberta, March 15, 2020 (GLOBE NEWSWIRE) — Shaw Communications today announced it is temporarily closing its 116 corporate Freedom Mobile and Shaw’s 43 retail stores through March 27, as a response to the threat of the COVID-19 virus.
The announcement affects corporate Freedom Mobile and Shaw retail stores across Canada.
VF Corp (8K – 3/16)
DENVER–(BUSINESS WIRE)– In response to the global COVID-19 coronavirus outbreak, VF Corporation (NYSE: VFC) today announced the temporary closure of all owned retail stores across North America, effective March 16 through April 5. All retail employees at these locations will continue to receive full pay and benefits during the temporary closure period.
In addition to its retail fleet, VF has closed its corporate and brand offices in North America until April 5 and is enabling all office employees to work remotely. The temporary closure of both offices and retail locations may be extended depending on the overall state of the COVID-19 situation.
ULTA (Earnings Call – 3/12)
Question – Irwin Bernard Boruchow: So I guess my question, going back to the corona impact on the business. Maybe just at a higher level for Mary or Scott. Can you maybe talk about what percent of your makeup transactions do you believe carry some kind of in-store trial components and maybe combine them with the service component of what you guys offer? And I guess where I’m going with that is I’m just trying to understand important customer trial and in-store behavior is to the sales model.
Answer – Mary N. Dillon: Yes. I mean it’s a good question. I would say, certainly, services in total are much, much — it’s a very small part of our business compared to what we saw at retail, right? So in general — and most of that is hair services. So the thing is that — and that part of the business, we’re going to continue as planned.
Certainly, the notion of being able to try things is an important asset of how we serve up beauty, but it doesn’t happen in every transaction. It really just doesn’t. And also, we have the ability for our associates to still help our guests in multiple ways, right? So they can take a tester, sanitize it, put out somebody’s hand to show them a color. We can use our GLAM STREET — our GLAM LAB app, which is really very realistic. And so it’s early stages, but we don’t really think that’s something that is going to prevent people from making great transactions and decisions. We’re going to do everything we can. We’ve got a skin match tool also on our apps. So we’ve got tools that we think will allow that kind of consumer behavior. But we’ll — as we look at this, we’ll learn more and quantify more. But if — I mean there’s no question it’s the right decision to make right now in the short term, and your question is a good one about — and this may not last for that long. We’ll just have to see. But we’ll do our level best to make the shopping experience online and in-store for our guests just as immersive as we can, if that makes sense. But we feel like it’s fine, it’s going to be the right thing to do, and guests would expect it
CVS (Barclays Global Healthcare Conference – 3/12)
Question – Steven James Valiquette: So let’s start with comments around coronavirus. So obviously, this is very topical for investors right now. So let’s talk about how this might impact the various parts of your business the way you see it right now, and if it’s possible, to segment it into Retail and Long-term Care Pharmacy versus PBM versus managed care. But let’s start with coronavirus.
Answer – Eva C. Boratto: Yes. Thanks, Steve. This is Eva, and a pleasure virtually meeting with everyone here. I would say overall the financial impact is difficult to quantify at this point. Things are fluid, and we’re continuing to monitor the status of the situation and the cases that are identified. I think, first and foremost, the health and safety of our customers, our members, and our colleagues is a key priority for us, and we’re taking all of the necessary steps to ensure business continuity and their well-being.
So just to give you some color, each of our business leaders is working to ensure business continuity plans are in order to meet the needs of our customers. In terms of that, as we think about pharmacy supply, we’ve experienced no disruption at this point. We’re in close contact with all of our suppliers. And what they’ve shared with us is they tend to carry, on average, 3 to 6 months of inventory. And I would say, given our size and scale and the power of Red Oak, and the diversity of our suppliers, we think we’re in very good shape at this point.
We also are able to have, I’ll say, additional information around API sourcing and what have you to enable us to be proactive on that front. As you look at what we’ve done to ensure consistency of care, everyone probably saw our announcement of offering $0 copay telemedicine for visits for any medical reason, not just specific to COVID-19, with the goal of eliminating potential exposure in the physician offices or with others. We have waived our out-of-pocket costs for all diagnostic testing related to COVID-19 for all of our Aetna plan members.
And finally, as you look at the front store of our business. Clearly, we’ve seen an increase in utilization in certain categories, particularly around cleaning supplies, masks, sanitizers, those types of categories. And overall from a supply perspective, our front store supply remains strong. We have had challenges. I’d say we’re essentially out of stock on masks. And you could see on sanitizers, sporadically, we’re out of stock. But we’re continuing to receive a supply.
Dollar General (Earnings Call – 3/12)
Before I turn the call over to John, I want to note that we are following the coronavirus outbreak closely, and our thoughts are with everyone affected. As compared to some retailers, our direct import sourcing exposure is relatively limited, although many of our domestic vendors also source from other countries. We have limited insight into the extent to which our business may be impacted by this outbreak, and there are many unknowns. But we currently do not have a material impact on fiscal 2020 results from anything that we have experienced to date. Of course, we are continuing to monitor the events closely.
We are also mindful of those who were impacted by the devastating tornados [destructed] Nashville and surrounding areas last week, and we are actively working to support our people and this community. As I’ve (inaudible) and their health and safety will always be a top priority.
Target (10K – 3/11)
Political or financial instability, currency fluctuations, the outbreak of pandemics or other illnesses (such as the recent coronavirus), labor unrest, transport capacity and costs, port security, weather conditions, natural disasters, or other events that could slow or disrupt port activities and affect foreign trade are beyond our control and could materially disrupt our supply of merchandise, increase our costs, and/or adversely affect our results of operations. There have been periodic labor disputes impacting the U.S. ports that have caused us to make alternative arrangements to continue the flow of inventory, and if these types of disputes recur, worsen, or occur in other countries through which we source products, it may have a material impact on our costs or inventory supply. Changes in the costs of procuring commodities used in our merchandise or the costs related to our supply chain could adversely affect our results of operations.
Starbucks (Prospectus – 3/11)
Due to the outbreak of coronavirus disease (COVID-19), we temporarily closed stores in China beginning in late January and reduced operating hours at stores that remained open. More than half of Starbucks stores in China were temporarily closed as of January 28, 2020. These unplanned store closures, combined with planned closures in observance of the Chinese New Year holiday, resulted in peak closures of approximately 80% of Starbucks stores in China in early February. Since that time, we have gradually reopened the vast majority of these stories in a disciplined and thoughtful manner.
Adidas (Earnings Call – 3/11)
And here is an assessment of the coronavirus development. What we know is, at the beginning of 2020, Greater China performed strongly. So for the first 3 weeks, we saw a stronger performance of our China business than we’ve seen before. Between Chinese New Year and the end of February, our revenues were approximately down 80% year-over-year. In March, we’re seeing a slight improvement. That means stores and warehouses are gradually opening up, and the traffic is picking up but from a very low base. And of course, we’re working together with our wholesale partners to keep inventory levels healthy, which means it could result and will result in significant takebacks. We want to make certain that we have fresh inventory in the channel. And particularly, when we move from one season to another, this is fundamental for future success.
Q1 revenues in China, we estimate to be approximately between EUR 800 million and EUR 1 billion below the prior year, which already includes a significant amount of potential takebacks. The operating profit in Greater China is expected to be between EUR 400 million and EUR 500 million below the prior year. Global sourcing activities have not seen a major impact. What we don’t know is how — and this is where the situation keeps evolving with many unknowns. What are the further recovery rate and acceleration in China? What is the extended spillover into other countries? So far, we’ve seen the business impact in Japan and South Korea only. And should there be, which we have not seen, availability issues of raw materials? And that’s why in the context of this, we can only give you the guidance we have given, and we cannot be more specific than we are at this stage. Everything else, we’ll be getting.
DFS Furniture (Earnings Call – 3/10)
Finally, we’ll come on to our outlook, which is now made more uncertain given the potential impact of COVID-19 on the remainder of our financial year. I’ll spend more time on this later, but the headlines of our approach are based on: number one, our people and our customers; number two, managing our operations and our supply chain; and number three, the potential impact on consumer behavior and on our markets.
We are following all of the latest guidance from the government and the relevant health authorities in terms of being transparent and supportive of our people.
After a period of a few weeks of disruption for our Chinese suppliers, the situation is now normalizing, and we have detailed business continuity plans in place and prepared for all aspects across the group.
Finally, when it comes to the impact of COVID-19 on consumer demand in the U.K., all I can say here is that, clearly, it’s incredibly difficult to predict what may happen over the remaining 16 weeks of our financial year. We haven’t seen a material impact yet on order intake, and we have a very strong business model in terms of cash generation, balance sheet and scale to manage any potential disruption.
Dick’s Sporting Goods (8K – 3/10)
The Company’s outlook balances the enthusiasm it has for its business with the rapidly evolving coronavirus situation. Accordingly, the low-end of the Company’s outlook includes some caution related to supply chain disruption potentially impacting its results beginning in the second quarter.
At Home Group (8K – 3/10)
Mr. Bird continued, “We are also closely monitoring the impact of the Coronavirus outbreak on our supply chain and consumer demand while prioritizing the health of our team members and customers. Given the fluid nature of the situation, we look forward to sharing an update on current trends during our upcoming earnings call on March 24, 2020.”
Macy’s (Bank of America Merrill Lynch Consumer & Retail Technology Conference – 3/10)
Answer – Lorraine Corrine Maikis Hutchinson: Thanks so much, Paula. I wanted to kick things off with a broader macro question. How do you think your core consumer is today?
Answer – Paula A. Price: Well, what I would say, Lorraine, is very similar to what we’ve said before, with the obvious caveat being that our outlook was prior to the COVID-19 outbreak and the oil plunge. So here’s how we think about the consumer fundamentals.
U.S. job, wage, and income growth remain solid, which should contribute to consumer spending. But while the consumer environment remains healthy, we do expect slower economic growth overall versus prior years. And so with that in mind, we would expect that we would maintain our relative market share as a starting point for how we think about 2020.
Answer – Lorraine Corrine Maikis Hutchinson: Excellent. The potential impact to supply chains and sales from the coronavirus is top of mind for investors right now. In terms of sales, are you seeing any impact from softer tourism? And how exposed are you to this revenue stream?
Answer – Paula A. Price: Yes. So I would start by, again, just saying, as I said in my opening comments, that this continues to be very much an evolving process, and we’re getting updates from our teams on a daily basis. And again, first and foremost, our colleagues and customers are top of mind, and we’re taking every precaution there. And so as this continues to evolve and more cases are being identified throughout the U.S., it’s still too soon to quantify what the impact on sales could be. But what we can say is that we’re certainly seeing a slowdown in international tourist sales. And as for the impact from the domestic customer, we’ll continue to monitor that very closely.
Christopher & Banks (Earnings Call – 3/10)
Before I turn to our outlook, I wanted to echo Keri’s comments that our thoughts are with those that have been impacted by the coronavirus. In regards to the COVID-19 coronavirus, the situation remains highly fluid, and we are monitoring it closely to assess the potential implications to our business. Accordingly, our guidance does not reflect the potential impact of the COVID-19 outbreak.
With that said, for fiscal 2020, we expect comparable sales to be up low single digits in fiscal 2020, gross margin expansion of 200 to 350 basis points, resulting in adjusted EBITDA of flat to positive $5 million. And we expect to end the fiscal year with positive cash and no outstanding borrowings under our asset-based credit facility. We expect capital expenditures for 2020 to be approximately $3 million, which is in line with our 2-year average spend.
EssilorLuxottica (Earnings Call – 3/6)
Answer – Laurent Vacherot: Paul, maybe on the coronavirus effect? Do we see something in another geography than China?
Answer – Paul du Saillant: So I will — Laurent, will comment for Essilor. And maybe, Stefano, if you want to give some color on the Luxottica side for the coronavirus impact. On the Essilor side, at this point, meaning early March, the main business impact has been localized in China, where clearly the traffic in the store, in the shopping malls were way down in February. Outside of China, so far, we have seen a little bit of impact in Asian, namely Singapore, some little impact in Korea, South Korea. And so far, in Europe, we don’t see any impact. So we’ll have to monitor, and we monitor daily, weekly the dynamic of the market. But so far, on the business impact, it’s mainly in China. And we’ll see in March if the traffic in the store will build progressively. And as Laurent said, on the call for the first quarter, we will have a good view of where we are. But that’s where we are on the 6th of March.
Answer – Laurent Vacherot: Then on the impact in other geographies?
Answer – Stefano Grassi: Yes. Yes. I’ll probably add a little bit more color on the B2C side of the business. We do continue to see traffic deceleration on a double-digit territory clearly, in the Asian part, Mainland China, Hong Kong, and some of our Retail footprint, as Paul explained, is actually trending on the double-digit negative. Where do we see a slowdown? We do see a slowdown in some of our Retail operations in Europe, the one that are at least more affected by the coronavirus, whether because there is a lack of touristic traffic in certain parts of Europe or because there is specific restrictions to mall and, therefore, that is impacting our Retail store footprint performance.
But just to put in perspective our guidance, as Laurent explained before, the way we portrayed this guidance is to have a low start of the year, first quarter, and the first part of 2020 and then progressively improve our performance month-after-month, quarter-after-quarter. That is what is behind our performance assumption that we have from a top-line perspective.
Tata Motors (6K – 3/6)
Jaguar Land Rover sales in China grew on average about 25% year on year for the 6 months from July through December 2019 and we continued to see strong growth for the first 3 weeks of January. The coronavirus has significantly impacted China sales with February retails down around 85% vs the prior year. In the first half of the month, about 20% of dealers were open which has since improved to now over 80% although most are still operating with reduced staffing and facilities. Jaguar Land Rover expects this to improve over the course of March, however, retail sales are expected to recover more gradually. The spread of the virus to other markets such as South Korea, Japan, and Italy will also impact sales in those markets.
Starbucks (8K- 3/5)
During the month of February, Starbucks China’s comparable-store sales were down 78% versus the prior year, primarily due to temporary store closures, reduced operating hours, and severely reduced customer traffic. The sharpest decline in weekly comparable-store sales occurred in the second week of February; however, as disclosed on February 27th, we are seeing early signs of a recovery with sequential improvements in weekly sales. In the last fiscal week of February, relative to the prior week, average daily transactions per store improved 6% and total weekly gross sales in China grew 80%, reflecting the reopening of stores. In that last week, Starbucks China’s mobile orders accounted for approximately 80% of the sales mix, with 30% Mobile Order & Delivery and 50% Mobile Order & Pay.
Walmart (Consumer Global and Retail Conference – 3/5)
Answer – M. Brett Biggs: Yes. It’s — I think like a lot of other companies, I mean, we’re just — we’re watching this really closely. We’re — it wouldn’t surprise you, the first thing we’re concerned about is the safety of associates and customers and making sure we’re doing the right thing. In China, our stores, for the most part, have stayed open, which — the communities there need that, but it’s been challenging in China, and we talked about that a couple of weeks ago. The U.S. is starting to see more news, which I think everybody anticipated, and we’re just going to be really careful about it.
From a supply chain standpoint, we haven’t seen major impacts. So not much different than I would have said a couple of weeks ago. I do think in ways, the work that our merchants did around tariffs over the last 12 to 18 months helped us think about some things differently that are probably paying off some now and how you think about supply chain differently. It does feel like — I’m reading the same things you are, but it does feel like China is starting to kind of come back to work, which will help from a factory standpoint. And we’ll just have to keep monitoring it day-to-day, week-to-week. We’re seeing, as you would expect, stock-up with customers on certain items, but not tremendous changes in customer behavior. Again just week-to-week, we’ll have to see how it transforms and we’ll have to keep people safe and continue to run the business efficiently as we can.
Hugo Boss (Earnings Call – 3/5)
So what are we seeing? First of all, we look back at a very promising and successful start to 2020 with 3 consecutive weeks of strong double-digit growth in the Asia Pacific, reflecting a highly successful Chinese New Year. However, since the coronavirus began to spread in late January, approximately 60% of our more or less 150 retail points of sales in Greater China were closed throughout much of February. Those that remained opened were not only operating at reduced hours, but more importantly, have recorded significant traffic declines of more than 80%.
GEOX (Earnings Call – 3/5)
So the like-for-like performance suffered in February minus 85%, and as of week 09, the aggregate year-to-date like-for-like sales for the region were negatively reaching almost minus 50%. Retail sales performance in Italy and in Europe. On 21st of February, Coronavirus, and urgency also hit the North of Italy, mainly the region of Lombardy and then Veneto and in Romania. And on the 24th of February, (inaudible) is introduced measures including the closure of 35 direct operated stores in Lombardi last week and out of a total of 47. Consequently, last week, I’m just talking about the last week. Like-for-like sales in Italy were negative with the lowest figure being recording obviously margin due to the closures. And also the other region in Italy has nonetheless been affected by the drop in footfall and the general level of, I would say, concern among our consumers which is, in turn, reducing their propensity to make purchases. Overall, in week 9, Italy recorded a negative like-for-like sales at minus 44% causing aggregated like-for-like year-to-date for Italy to also become slightly negative. Similar dynamics have been recorded in the rest of Europe.
Lowe’s (UBS Global Consumer Consumer and Retail Conference – 3/5)
Well, look, what I would say is, I mean, this is a unique market environment, with the coronavirus. I mean like all other businesses and retailers, I mean, we’re staying really close to our supply base around the world, our manufacturing base, because we are predominantly a business that really penetrates heavy in spring from a sales perspective.
As we look at Q1, we see no short-term interruptions in the business. As a matter of fact, our business trends are strong. As we look farther into the year, into Q2 and beyond, it becomes more uncertain because you’re at the mercy of the news cycle. You’re at the mercy of what happens next.
Kroger Co (Earnings Call – 3/5)
From a financial standpoint, it is too early to tell the effect on our business. It is not included in our guidance. And while it is obviously very early for this public health event in the United States, we’re not seeing anything so far that would cause us to change our guidance.
We generally believe that we have limited supply chain exposure in China as the majority of the products we source is domestic. We certainly feel for those in America and around the world who have been affected. The health and well-being of our associates, our customers, and our communities is Kroger’s top priority. Always being there for our communities is part of our heritage and especially in times of uncertainty. We believe everyone deserves to have access to affordable fresh food.
Burlington Stores Inc (Earnings Call – 3/5)
The situation is evolving very rapidly and there are a lot of unknowns. Our guidance for the first quarter does not, and cannot, incorporate a full set of risks that we, along with other retailers may be exposed to in the coming weeks. That said, we are taking steps to prepare as best we can for a range of possible outcomes.
Home Depot (Raymond James Conference – 3/4)
So on our global supply chain, I would say, for Q1, we’re in pretty good shape. So product for Q1 is largely in our stores. So Q1 and 2, for us, is a big strength. Spring and outdoor project business, we’re largely set. So all our merchandising space has largely transitioned to spring products. We’ll be finished with that in our northernmost markets in the next week or 2. But — so all that product that comes in, think grills and patio sets and the outdoor power equipment I was talking about previously, for Q1, that product is largely in-store, in our supply chains or on the water.
Q2, I would say, it’s a very fluid situation. So as you say, we have very strong relationships with our supplier partners. For our direct imports, where we’re working directly with factories in Asia, we are in constant contact with them and monitoring their capacity and how they’re getting back up to speed, and what their shipping horizons, timing are going into Q2. It’s fluid. We’re literally looking at this PO to PO. The good news is the ports are open and functioning. We haven’t had delays in ports. It’s really a matter of workers getting back to factories from the Chinese New Year. Most of those workers or many of those workers are in residence at the factories. And for those 2 weeks of Chinese New Year’s, they travel home to wherever their provinces may be out of the major cities. So it’s been a transportation issue in restrictions of travel intra-country to get those workers back to the factories.
So again, we’re in contact, varying degrees, as you can imagine, of building back to capacity. The next set of suppliers are suppliers that, while we don’t procure directly from China, we know the country of origin is China and Asia. And we’re in constant contact with them, starting to build orders into Q2. Again, it’s PO to PO. You’re obviously not going to order too deep into Q2. You just — the supply chain won’t handle that sort of cube. So we just have to keep working it. Nothing alarming at this point. We said there was nothing in our guidance for 2020 that included coronavirus. We were 3.5% to 4% at our analyst meeting in December and after our first quarter — after our Q4 earnings call. And there’s no change to that at this point. But certainly, it’s a fluid situation.
Dollar Tree (Earnings Call – 3/4)
Let me give you a bit of an update on the coronavirus as it affects our supply chain as we see it today. Our global sourcing group and merchants along with our logistics team are meeting daily and updating our progress on visibility to individual purchase orders. Generally, we are seeing production pickup, and factory attendance is increasing each week. Our global sourcing team in China and third parties that provide quality assurance inspections are nearly at normal levels. All ports and third-party freight consolidators are open and operating at near-normal levels, and we are getting all needed space on vessels for our freight. At this point, all of our Easter merchandise and lawn and garden seasonal product is in our domestic supply chain, either in distribution centers or flowing to stores. At this point, we see a very small percentage of products canceled and some products moving on to later delivery, usually by a few weeks. And our teams are working to mitigate with sources elsewhere, including domestic sources, to mitigate any effect there. More to come.
Our initial outlook for fiscal 2020 includes the following assumptions: our outlook does not include any potential impact related to the supply chain or other aspects of the company’s business for the COVID-19 coronavirus.
We certainly are seeing a spike on anything that’s related to hand sanitizers and cleaning surfaces. But I would say we’re also in the first [of] month right now in tax refund time. So right now there is money in the market for all those reasons, plus heightened efforts for everyone to wash their hands and use hand sanitizer. So we’re seeing that in the stores as well.
Walmart (Raymond James Conference – 3/4)
Certainly, I’m looking at reading the same things as you are and with Coronavirus and certainly, we’re concerned about associates and and customers and making sure we’re doing the right thing there. When you look at kind of the underlying economy, it still feels good to us. And we said that a couple of weeks ago at our analyst meeting, inflation is low, interest rates are very low, wages are good. Fuel prices are low. So all of that portends to being — having a pretty good economy, particularly here in the U.S. And so I think, overall, the consumer feels pretty good.
Brown-Forman (Earnings Call – 3/4)
Specifically, our base in China has been growing underlying net sales at a double-digit rate since fiscal 2018, led in large part by our growing e-premise business where we have been focusing our investment in this market. Our performance through January had essentially not been affected by the coronavirus. So understandably, we do expect a marked slowdown in our fourth quarter in this market in other parts of Asia and have already experienced this in February. Despite this near-term headwind, we remain optimistic about the long-term growth potential for our portfolio throughout Asia.
So again, if you looked at what we did, we took our overall forecast down, as you saw, we reduced our underlying forecast with 2 factors. First, it was the tempering of the growth and contribution from some of our international markets, again reflecting some short-term disruptions as well these macro and economic and geopolitical challenges. So when we look at our base business, but we would estimate now that our base business is doing is probably growing in the 3.5% to 4.5% range. It is, therefore, a couple of points less than what our expectations were just 3 months ago. But the second factor that we built into our forecast, and this is what you’re asking specifically about Vivian, that led to a reduction in our top-line outlook, and again not surprising, is this unpredictability and uncertainty surrounding the coronavirus and what it may have on our business globally. So we’ve estimated at this point, there’s about a point drag including those markets that are currently affected. So to your point, directly from the Asian markets, including China and other parts of Asia, Travel Retail and we haven’t Italy in there. So collectively, that’s about 8% of our business. And as I said earlier, yes, we’ve already seen areas — many of these areas already affected in results. But that being said, we also have, in that 1%, some additional downside impact. And we don’t know, none of us knows that’s going to be enough, too much we’re learning daily as this situation and So we’re really only looking at our fourth quarter. We haven’t had to estimate downstream, secondary effects on anything beyond the demand we see in an expectation for perhaps it some other markets. We don’t know about the economy and consumer confidence and sentiment and how they may linger into our first quarter and summer months.
Target (Earnings Call – 3/3)
But first, I want to address the question of whether we’ve accounted for any known or anticipated impact related to the coronavirus. And the answer is that as of today, we haven’t seen a large impact on our business or outlook. Of course, we are monitoring our import programs down to the purchase order, and we’ve already made some slight adjustments to our plans to ensure we are well-positioned throughout the year. But because of our size and the flexibility that comes from our multi-category portfolio, we haven’t seen anything so far that would cause our financial expectations for 2020 to deviate from our longer-term algorithm.
And certainly, from a merchandising standpoint, we know that we’re going to see some periodic delays. We’re out in front of that, making changes in our assortment and our promotional and presentation plans. But all that’s reflected right now in our view of guidance for certainly the first quarter and the balance of the year. We’ve also been working very closely with some of our domestic vendors, our DSD partners, as we see some growing demand in categories like household essentials and food and beverage to make sure we are supporting that with the right level of inventory.
But over the last few days, as obviously everyone’s been reporting, we’ve certainly seen a U.S. consumer that’s starting to stock up on household essentials, disinfectants, food and beverage items. All those staple items that the CDC has recommended, they add to their pantry. And certainly, we’ve seen aggressive shopping across the country in our stores. So we’re obviously working closely with our domestic vendors, with our DSD partners to make sure that we’re elevating inventory in preparation for what we think is going to be a continued demand for stock-up items.
So certainly, we’re seeing that across our network. We expect that to continue over the next few weeks, and we’ll watch it carefully over time.
Ross Stores (Earnings Call – 3/3)
As noted in our press release, our guidance does not reflect the potential unknown impact of the evolving coronavirus outbreak. While we’re closely monitoring the situation, there remains a high level of uncertainty over supply chain disruptions in China. In addition, it is unclear how a further possible spread of the coronavirus could negatively impact U.S. consumer demand.
Autozone (Earnings Call – 3/3)
At this point, I’d like to talk about any disruption we may be seeing from the ongoing coronavirus epidemic. While we have not incurred disruption thus far, we must and are being diligent. We have created a contingency plan for each merchandise category sourced from China. Our teams have done a wonderful job planning for potential scenarios. At this point, we have nothing substantial to report. But the longer this outbreak lasts, the more it will impact us in both our and the overall retail industry. It is currently a very fluid situation as many of the factories have just begun to reopen after an extended Chinese Lunar New Year holiday. Some are coming back online quickly while others are quite slow, and certain of them haven’t come back online yet. The next few weeks will be critical.
As you would expect, over the last month or so, we have been very focused on the supply chain aspects of coronavirus and, in the last week or 2, more and more focused on what’s happening here in the United States and, ultimately, Mexico and Brazil. We see no indications at this point in time of any demand destruction as a result of coronavirus. But just like we said with the supply chain, it’s an incredibly, incredibly fluid situation. I think the next couple of weeks to a month, are going to be critical to see what actually happens. We don’t have good insights into that.
Stanley, Black & Decker (Raymond James Conference – 3/2)
Throughout the first quarter, we really have not seen much revenue being generated in the local Chinese business, as you might expect. And that probably will be the case through the remainder of the first quarter. But probably the bigger question you have in your mind is our supply chain. Our supply chain in China serves 40% of our capacity across the company.
As it relates to the virus and where we are in China as far as our manufacturing capabilities as of today. We shut down these 10 plants for the 2 weeks of the holiday season around Chinese New Year. The week after that, these plants began to open up and the production capabilities and utilization have got to about 50%, 60% on average across those plants sometime last week. We’re continuing to make progress on that. And those numbers continue to improve as we sit here today. And we’re continuing to focus on getting more employees back to work, that’s one of the challenges we have right now, where all the employees have not returned to the plants. We have a process that we need to go through with every employee before they get into the plant around checking for fever and other symptoms that are visible and then, obviously, wearing masks within the plant to try to protect our employees as much as possible in that environment. We do believe it will take another 2 or 3 weeks probably to get to 100% utilization in these plants. And that obviously is assuming that the virus doesn’t worsen in China, that it stabilizes and begins to — to begin to go — retract or go backward.
If that happens to get worse, then obviously, those numbers could change. But right now, that’s what our plans are, and we believe that’s achievable based on where we are today. This will cause some pressure for us in March and April from a revenue perspective. So we see that revenue in the last 2 weeks of March will probably be pressured based on these capacity challenges we’re having and also in the month of April. We do believe it’s more of a timing-related matter at this stage. But obviously, that’s very dependent on where the virus goes and how significant it is. If things stabilize, and we don’t see a dramatic worsening, we think that’s probably where we are. We have a timing issue we have to work through for the first half of the year and the full year as well.
Pernod Ricard (Earnings Call – 2/13)
So in terms of outlook, again, I won’t go back on H1, which shows and clearly demonstrates the resilience of our business, of our business model. For full-year, fiscal year ’20 in particular, given the uncertain environment, we do expect clear, continued execution of Transform & Accelerate. It’s the second year of our strategic plan. We’re right in the middle of it with a strong focus on operational excellence and sustained investment, as I mentioned earlier, behind our strategic priorities in terms of markets, brands and initiatives. So good, diversified growth is expected to continue, albeit clearly the third quarter, January to March, will be, that’s for sure, severely impacted by COVID-19 in China and Travel Retail Asia.
Estée Lauder (10Q – 2/6)
Although it is difficult to anticipate the full impact of the coronavirus on our business, global travel retail, localities most affected by the virus outbreak, and destination markets favored by tourists are expected to experience the greatest negative impact in the coming months followed by a gradual recovery later in the fiscal year. We are also cautious of foreign currency movements, including their impacts on tourism. Additionally, we continue to monitor the effects of the global macroeconomic environment; social and political issues; regulatory matters, including the imposition of tariffs; geopolitical tensions; global health issues and global security issues.
Yum Brands (8K – 2/5)
The Company has taken a number of measures to protect its employees, customers and business partners, including the temporary closure of more than 30% of its restaurants in China. For restaurants that remain open, same-store sales since the Chinese New Year holiday period were down 40-50% compared to the comparable Chinese New Year holiday period in 2019, due to shortened operating hours, reduced traffic, and other factors related to the outbreak. At this time, the Company cannot forecast when the closed restaurants will re-open (and at what rate) and the traffic will be restored (and at what level), or the other factors relating to the outbreak that will continue to impact the Company’s operations. Furthermore, the Company may be required or otherwise decide to close additional stores, reduce operating hours, or take other steps, as the situation warrants.
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