Virus impact: Starbucks shuts stores, Toyota halts production

Starbucks Corp has closed more than half of its coffee shops in mainland China - about 2,000 of them - and Toyota Motor Corp is halting production in the country as global corporations grapple with a SARS-like coronavirus that has killed more than 130 people and is threatening a key growth market

Starbucks Corp has closed more than half of its coffee shops in mainland China - about 2,000 of them - and Toyota Motor Corp is halting production in the country as global corporations grapple with a SARS-like coronavirus that has killed more than 130 people and is threatening a key growth market.

Wuhan, the epicentre of the coronavirus that has infected almost 6,000, is a manufacturing, shipping and business hub. Apple Inc is working with its suppliers in the city to mitigate any production loss, but the impact outside of the region is less clear, chief executive officer Tim Cook said on Tuesday.

Toyota said yesterday it is suspending operations in its China plants until Feb 9.

As the virus has spread in China and beyond despite travel restrictions and other worldwide efforts to contain the disease, airlines suspended flights and chains including McDonald’s Corp and KFC have shut locations. Volkswagen AG, Canadian insurer Sun Life Financial Inc and banks from Credit Suisse Group to Morgan Stanley are telling staff to work from home.

Here is a summary of how some of the biggest companies are responding to a crisis that is disrupting supply chains around the world:

Business estimates

Apple provided a wider-than-usual forecast range for the current quarter because of the uncertainty surrounding the coronavirus.

CEO Cook addressed the virus during a conference call with analysts, saying Apple is following developments. Virtually all iPhones are made by Foxconn’s Hon Hai Precision Industry Co in Zhengzhou, China, and by Pegatron Corp at an assembly site near Shanghai.

Starbucks, which has has more than 4,000 locations in China, maintained its 2020 forecast but said it doesn’t include the impact of closing half of the mainland stores because it can’t yet calculate it.

Compared with McDonald’s and Domino’s Pizza Inc, Starbucks is the most exposed to the outbreak, as measured by percentage of worldwide revenue and operating income, according to Guggenheim analyst Matthew DiFrisco. Carnival Corp and Royal Caribbean Cruises Ltd Carnival’s Costa Cruises brand, working with the Chinese government, decided to suspend nine voyages leaving China from Jan 25 to Feb 4. In a separate statement, Royal Caribbean said it suspended Jan 27 and Jan 31 sailings. Both pledged to provide refunds to customers. China is a small but growing market for American cruise companies, and analysts project further cancellations could hurt earnings.

Tesla Inc, NIO Inc

About eight million cars were sold last year in the roughly 40 Chinese cities that have 10 or more diagnosed coronavirus cases, or 36.8% of total retail volumes in the country, Bernstein analysts estimate. Those cities accounted for 82.5% of Tesla’s retail volumes, and 68% of NIO’s, the analysts wrote in a note. “The latter looks especially vulnerable to a prolonged slump in EV sales, ” they said. Imax Corp, the Mississauga, Ontario-based company, known for its large-format screen technology, has said it’s delaying movie releases at its theaters in China in the wake of the outbreak. The impact of lost revenue from the Chinese New Year will cost Imax at least US$60mil in global box office sales, according to MKM Partners. If the epidemic lasts for a few more weeks, “it is not unreasonable to project” a shortfall of US$200mil in the first quarter, MKM Partners analysts said in a note. Remy Cointreau SA, the French cognac maker, abandoned its forecasts for this year after a slump in Hong Kong dented sales. — Bloomberg

Source: Bloomberg 

Posted on : 30 January 2020
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Last Updated : Tuesday 7th April 2020