German sportswear maker Adidas expects first-quarter sales to drop by up to €1 billion in greater China due to the coronavirus.
The company said today while business is picking up there it is now being hit in Japan and South Korea.
China accounted for 20% of Adidas sales in 2018. It sells its products from about 12,000 stores in China, most franchises plus fewer than 500 of its own stores. Almost a fifth of its shoes and apparel are produced in the country.
Adidas warned last month that its business in the greater China area had dropped by about 85% year on year in the period since Chinese New Year on January 25.
It said today it had started to see a "slight improvement" in business activity in greater China, while shopper traffic was now deteriorating in Japan and South Korea, and the impact on other countries was uncertain.
In greater China, Adidas cancelled all shipments to wholesale partners in February and it said it plans to clear excess inventory through its own channels during the rest of the year.
It expects sales in greater China in the first quarter to fall by between €800m and €1 billion and operating profit to decline by between €400-500m.
While its supply chain has faced disruptions, Adidas most of its factories in China were operating again and its global sourcing activities had not been hit so far.
Adidas forecast currency-neutral sales to increase by between 6% and 8% for the full year and for its operating margin to rise by between 10.5% and 11.8%.
But it said the outlook did not include any impact from the coronavirus outbreak.
Adidas said it remained "fully confident" about its future growth prospects due to its strong positioning in an attractive industry despite the temporary challenges posed by the coronavirus outbreak.
The company said its fourth-quarter sales rose a currency-adjusted 10% to €5.84 billion, while operating profit came in at €245m, missing analysts' mean forecasts of €5.88 billion and €288m, respectively.
Currency-neutral sales grew 18% in greater China, 10% in North America and 14% in Europe.
Europe saw a big rebound from declines in the first half of 2019 after the firm took steps to reduce its reliance on its Originals fashion line.