Starbucks shut more than half of its roughly 4,300 stores in China. Airlines dropped routes. JPMorgan, Ford and Kraft Heinz told staff not to travel there. As the coronavirus spread, foreign companies were pulling back from the country, and by Wednesday the virus had killed more than 130 people and infected more than 6,000, 5,974 of them in mainland China.
That already put the outbreak ahead of SARS in China. The 2002 to 2003 epidemic ran nine months and infected 8,098 people worldwide, a figure the new virus had not yet passed globally, according to the World Health Organization.
Flights and travel
British Airways and Indonesia’s Lion Air said they would stop flying to mainland China altogether. American Airlines suspended flights from Los Angeles to Shanghai and Beijing, citing a sharp fall in demand. Delta said it would temporarily halve its weekly US-China flights to about 20.
Companies asked US employees returning from China to work remotely for weeks as a precaution. Kraft Heinz spokesman Michael Mullen said its travel ban “will help reduce the unnecessary risk of virus exposure or transmission and is the most prudent measure to take while we continue to closely monitor the situation in China.”
Stores and factories
Starbucks warned the closures would weigh on its results. Analysts at William Blair estimated that each week of closure could cut revenue by $25 million and profit per share by half a penny. China is the chain’s second-largest market.
Yum China, which runs KFC, Pizza Hut and Taco Bell outlets there, closed stores, as did McDonald’s, the parent company of H&M, and the Ingka Group, which operates IKEA. Apple trimmed store hours. Two factories near the epicenter would stay shut another week at local officials’ request, said Dirk Van de Put, chief executive of a consumer-goods maker. “We expect less buying by the consumer,” he said.
McCormick closed three plants and Anheuser-Busch InBev shut its Wuhan brewery. Both said the Lunar New Year holiday was the reason.
Walmart was a different case. A person familiar with the matter said the government had asked it to keep its stores open so people could buy essentials. The company, which had 443 stores in China as of Jan. 31 of the previous year, said it was monitoring the situation.
The bill
US companies sold Chinese consumers and businesses $386 billion worth of goods in 2018, a spokesman for the US-China Business Council said. Royal Caribbean warned that the outbreak would hurt its 2020 results after canceling three February sailings. Boeing finance chief Greg Smith called the virus’s effect on near-term traffic growth “clearly a watch item this year.”
Procter & Gamble finance chief Jon Moeller said the damage could reach beyond China, since the outbreak “can also affect consumer confidence in large parts of the market.” Analysts at BMO Capital Markets pointed to hotels: China accounts for 6% of rooms at Hilton and 8.5% at Marriott.
LVMH chief executive Bernard Arnault said a hit lasting through March would not be terrible, but “if it lasts two years, that would be another story.” Chinese shoppers make up more than a third of luxury sales worldwide, according to Bain & Co.
