Days after Alibaba, Apple too has now issued a warning about the consequences of the coronavirus. The epidemic has hit the iPhone maker harder than expected, and it has also affected the results of many other companies: from small to large, from electronics to fashion, no one is spared.
iPhones and laptops compromised
Barely three weeks after Apple announced record results and promised good quarterly sales of 65 billion dollars for the current period, CEO Tim Cook has already had to withdraw those words. It is taking longer than expected for the situation in China to normalise, the CEO admits.
Chinese demand is falling sharply (many stores are closed or only open to a limited extent), but even more dramatic are the stock shortages that are becoming apparent worldwide. Factories in China have been completely or largely inactive for weeks: iPhone production in particular is lagging, as under 10 % of Foxconn’s employees are still at work. Also, laptop production in China is down by a third.
Some suppliers and producers have moved their production to other countries, such as Taiwan, but there they face a lack of spare parts – these still have to come from China.
Luxury standstill
Apple is by no means the only one company to be affected by the virus: companies from Alibaba to Versace are bearing the consequences of the epidemic. For the first time ever, Alibaba issued warned for a possible turnover drop due to delays in deliveries and supply shortages.
European luxury goods companies, which to a large extent rely on growing Asian demand, fear the coronavirus just as much. LVMH has already warned that the virus will leave its mark on results in the new financial year, despite record growth in 2019. Kering, Richemont and LVMH have already lost a combined 30 billion euros in market value since the outbreak of the virus.
Fashion holdings VF Corp, Versace owner Capri and Burberry also issued profit warnings. This should not come as a surprise, as no less than 35 % of the worldwide turnover in the luxury sector comes from the Chinese market. Last year, affluent Chinese consumers even accounted for 90 % of the sector’s growth.
Improvement on the horizon
The outbreak started just before Chinese New Year, traditionally an important consumption moment in the country. Moreover, many Chinese workers, who go back to their native region for the New Year festivities, have not yet returned. As a result, both supply and demand are lagging in the cities.
Given China’s importance in the global consumer market, the consequences will reach much further in the coming period. For example, Belgian postal company bpost no longer sends mail to China due to transport problems, which is a barrier to trade with the country. However, there is also light at the end of the tunnel: both Apple and Alibaba indicate that in more and more cities work is being resumed and employees are gradually returning.
