Outdoor apparel and footwear company Columbia Sportswear says the coronavirus (Covid-19) outbreak is impacting its suppliers’ ability to source certain raw materials and fulfil finished goods orders.
In an update on the business impacts of the outbreak, Columbia says while only a low-double-digit percent of its finished goods are manufactured in China, its contract manufacturers source a large portion of raw materials from the country.
“Temporary factory closures and the pace of workers returning to work have impacted our contract manufacturers’ ability to source certain raw materials and to produce and fulfil finished goods in a timely manner.
“The outbreak is also impacting distribution and logistics providers’ ability to operate in the normal course of business. These supply chain impacts will likely affect our ability to timely fulfil orders and meet consumer demand.”
The company says it has already received substantially all of its spring 2020 product, so potential order fulfilment delays would impact future seasons.
The outbreak is also hurting its sales in the region. In 2019, China represented about 5% of Columbia’s total net sales and the Asia-direct business, which includes Japan, China and Korea, represented about 15% of total net sales.
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By GlobalDataWhile stores have begun to reopen in China, around half of the company’s owned and partner stores there remain temporarily closed.
“Stores that are open in China have experienced a material decline in traffic and corresponding sales. There has also been an impact of the Covid-19 outbreak in Japan and Korea. Until normality returns, we expect a continued unfavourable impact on sales in our Asia-direct business.”
“We believe our fortress balance sheet, including no long-term debt, and diversified global business model will enable us to overcome this present adversity and unlock the full potential of our brand portfolio in this market over time,” says CEO Tim Boyle.
Columbia says it expects its 2020 results to be “significantly affected” by the Covid-19 outbreak, and will provide a further update with its first-quarter earnings in April.
Columbia reported a 4% rise in fourth-quarter net sales to a record US$954.9m for the three months ended 31 December, while net income was up 1% to $114m from $113.3m last year.
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