The new Chinese pandemic – declared a global health emergency by the World Health Organization on Jan. 30 – is starting to put the brakes on the Chinese economy’s robust growth in terms of consumption, production and international trade in the sporting goods sector and others, with major consequences for the rest of the world as well.
Meanwhile, because of the spread of the coronavirus, Chinese authorities have cancelled all trade fairs that were scheduled to take place in the upcoming weeks. This includes Ispo Beijing, which was to take place on Feb. 12-15, but not Chic Shanghai or the Asia Apparel Expo, which have been postponed to an as-yet undetermined date. The organizers of the APLF Leather & Materials fair, which is due to start in Hong Kong on March 31, said they are considering a postponement as well.
Many sports competitions have been cancelled in China, including Taipei Cycle Show in Taiwan scheduled for the beginning of March.
Whether Messe München will also postpone Ispo Beijing or cancel it with no replacement except for Ispo Shanghai remains unknown at press time, partly because government authorities have been difficult to reach due to the Chinese New Year holidays, which have been extended. Company officials were unable to comment at this stage on refunds to the exhibitors as insurance policies may or may not cover the consequences of the epidemic.
For the major sports brands, the biggest immediate consequence of the virus has been a drop in purchases at their numerous stores in China, the second-largest sporting goods market in the world, after the U.S., and one of the few areas of growth in the last few years. It is also the place where big labels like Adidas, Nike and Puma have the highest operating margins.
Nike has admitted that the outbreak will affect its quarterly results. Both Adidas and Nike have temporarily closed many of their stores in the country – nearly half of them for the Swoosh, which noted a drop in traffic at those that have remained open for fewer hours, adding that its e-commerce operations in China have remained strong. Similarly, in reporting its latest results, Skechers said that online sales were still performing well in the country, where the brand has been growing very fast, but comparable store sales at physical stores have fallen off since travel restrictions were put in place on Jan. 23.
Skechers said it did not anticipate any short-term impact from the coronavirus on its supply chain, as less than half of its shoes are now made in China. In reporting its own results, Columbia Sportswear similarly indicated that its shipments of spring/summer merchandise should be normal. Less than 15 percent of its production is coming from China, but Columbia’s management expressed worries about its fall/winter collections, as producers in other countries are getting most of their raw materials for footwear and a significant amount of input for apparel from China.
Many important manufacturers of polyester fiber and fabrics as well as textile printers and dyers are located in Hubei, the central Chinese province at the epicenter of the epidemic. The new virus has already killed more people than Sars in 2003, when China’s output of polyester was delayed for three months.
Many workers who had left the area to go to their hometowns for the Chinese New Year holidays are being prevented from returning to their workplaces, and many may in fact take the opportunity to try to find a job elsewhere.
After Hubei, the second-highest number of cases of coronavirus has been registered in the province of Guandong, which is a major manufacturing center for footwear.
The Shanghai stock exchange has suffered its biggest drop since the summer of 2005. However, observers hope that the Chinese economy will regain strength once a vaccine is developed and the virus has been eradicated, as it did two to three months after Sars reached its peak in 2003.