Coronavirus Impacts

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Coronavirus Impact

Six industries that are expected to experience a significant impact from the coronavirus outbreak include the tech, entertainment, automobile, tourism, restaurant/food, and clothing and luxury industries.

Tech

  • One industry that is experiencing a direct impact due to the coronavirus outbreak is the global tech sector. Many tech-related companies have been forced to close their offices in China, while administering travel limitations to the region for employees and executives. Some of these tech companies include Facebook, Microsoft, Google, Apple, Tesla, and Samsung, among many others.
  • Additionally, these restrictions and closings could negatively impact global supply chains, especially for the tech sector in the United States, for which China serves as a vital provider of components, a considerable market for goods, and manufactures 80% of the tablets and smartphones in the world. Consumer electronics producers are expected to experience significant revenue loss as well as a reduction in productivity.
  • Experts are cautioning consumers to prepare for shortages and delays for different tech accessories, smartphones, cars (e.g., Tesla Model 3), gaming consoles (e.g., Nintendo Switch), and VR headsets (e.g., Oculus Quest VR), as manufacturing for these items could encounter barriers due to the outbreak. For instance, it is anticipated that Pegatron and Foxconn will delay the production of iPhones and AirPods because factory employees cannot continue working.
  • Smartphone production is anticipated to decrease by about 12% in Q1 2020. Q1 Shipment forecasts (from China) for multiple device categories in the tech sector had to be revised due to the outbreak, including: smart watches (from 14.4 million units to 12.1 million), smartphones (from 307 million units to 275 million), TVs (from 48.8 million units to 46.6 million), video game consoles (from 6.9 million units to 6.2 million), automobiles (21.0 million units to 19.3 million), and smart speakers (from 26.4 million units to 23.2 million).

Entertainment

  • The entertainment industry is also expected experience a significant impact from the coronavirus outbreak. China decided to close around 70,000 different movie theaters in the country to combat the spread of the disease, harming the shares of IMAX and AMC.
  • Moreover, numerous film releases have been delayed/postponed in China, which is the second largest moviegoing market, due to the theater closures, which hurts the global box office as local ticket sales diminish. Box office revenue in China amounted to merely $3.94 million throughout the Spring Festival holiday, which represented a decrease of almost 100% from 2019 when totals reached $1.5 billion.
  • To make matters worse, imported films in Chinese theaters have collectively grossed $37.8 million in 2020, indicating an 86% reduction from 2019.
  • Disney shuttered its theme parks in Hong Kong and Shanghai due to the outbreak, and according to the company, this move could decrease its operating income by about $175 million in Q2 2020. Officials requested casinos in Macau (41 in total) to cease operations for half a month, which will affect American casino operators located in the area. Wynn Resorts closed its Macau casino due to the coronavirus, causing the company to lose between $2.4 million to $2.6 million daily.

Automobile

  • The outbreak has caused several auto plants to shut down operations in China. These include factories owned by Nissan, Tesla, and Ford Motor.
  • Also, these shutdowns extend beyond China, as companies such as Nissan closed plants in other regions (e.g., Kyushu, Japan) due to part/component shortages from China. Meanwhile, Hyundai stopped production lines in its South Korean factories for the same reason, while Fiat Chrysler indicated that the virus may interfere with production at one of the company's plants in Europe.
  • According to the China Association of Automobile Manufacturers, the outbreak will disorganize the production of a minimum of 1 million automobiles in the industry.
  • The outbreak will also hurt Telsa's plans to produce 150,000 electric vehicles at its Shanghai assembly plant, which closed from February 2-10.

Tourism

  • The global tourism industry is projected to face losses because of the outbreak as countless Chinese tourists are being quarantined. Chinese tourists spent $277 billion overseas in 2018, and this figure could fall considerably. Tourism Economics predicts that the number of Chinese individuals forecasted to visit Los Angeles alone will decrease by 325,000, which would lead to a $921 million drop in direct spending in the area.
  • Also, the number of Chinese tourists to Thailand is projected to decrease by 2 million, while Venice bookings by tourist have fallen by 30% from 2019. Italy could witness the loss of billions of euros because of hotel booking cancellations.
  • After Beijing authorities restricted overseas group tours, the volume of Chinese tourists in Europe has noticeably decreased. According to the Los Angeles Times, "tourism-dependent businesses across Europe are bracing for empty hotel rooms and stores in the coming high season."
  • Also, several conferences/business events across Europe have been canceled since the outbreak's inception. These events include Mobile World Congress, the largest mobile communication trade fair in the world (scheduled in Barcelona, Spain), which was expected to attract over 100,000 visitors, produce 14,000 temporary jobs, and generate $540 million in revenue. Organizers of this event had already initiated specific safety measures such as preventing visitors hailing from the Hubei Province from attending.

Restaurant/Food

  • Thousands of restaurants/eateries have had to close their establishments in China. Hundreds of McDonald's locations in the region are not operating.
  • Starbucks closed over half of its establishments in China. Yum Brands, which serves as Pizza Hut and KFC's Chinese operator, shuttered one-third of its locations, while the rest of its restaurants have reported significant decreases in sales.
  • Outside of China, many Chinese restaurants, as well as some local grocery stores, in the United States are struggling due to the outbreak and the stigma attached to it. Business is down 80% for many of these entities.

Clothing and Luxury

  • Also faced with store and manufacturing facility shutdowns in China is the clothing and luxury industry, which also has to contend with lower store traffic in fundamental shopping regions globally and deserted shopping malls. Additionally, Chinese consumers account for an estimated 38% of the overall global fashion sector. UK retailers are experiencing four to six week delays regarding their spring fashion offerings.
  • Since the outbreak began, Nike has shut down around half of its stores in the country, while reducing the hours of the other locations. Companies such as Canada Goose Holdings have lowered their profit outlooks for 2020.
  • The outbreak is projected to decrease Tapestry's, which owns Stuart Weitzman, Kate Spade, and Coach, sales by about $250 million in the final half of 2020. Furthermore, the VF Corporation, the owner of North Face and Timberland, temporarily closed 60% of the company's locations in China.
  • Under Armour Inc. anticipates that its sales will fall by around $50 million to $60 million because of the outbreak, while Sketchers USA Inc. claimed that "its comparable store sales in China — or those of stores open at least a year — were "below average.""
  • Luxury stocks have taken a hit because of the growing fears surrounding the coronavirus. On the final Monday of January 2020, stocks for Kering, Cie. Financière Richemont, LVMH Moët Hennessy — Louis Vuitton, and the Burberry Group fell by 3%, 2%, 4%, and 4%, respectively, as concerns for the outbreak expanded.
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