Levi's shuts half its China stores on coronavirus outbreak, expects financial hit

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(Reuters) – Levi Strauss & Co (N:) has shut about half of its stores in China due to the outbreak of a new coronavirus and will take a near-term financial hit as a result of the epidemic, Chief Financial Officer Harmit Singh said on Thursday.

This comes a few months after Levi’s opened its largest store in the central Chinese city of Wuhan, the epicenter of the coronavirus epidemic which has killed about 170 people, marring its plans to tap into the city’s 11-million strong population.

“It will put a dampener on our growth objectives in the near term,” Singh told Reuters in an interview.

The flu-like virus has set-off alarm bells across the globe with companies such as Starbucks Corp (O:) closing stores and warning of a financial hit from slowing business in the world’s most populous country.

Levi’s has also stopped all employee travel in and out of China.

Singh said the coronavirus impact was not baked into the company’s full year forecast, but will be quantified when it reports first quarter results in April.

Levi’s, which gets about 3% of its revenue from China, forecast 2020 earnings on Thursday above estimates, boosted by demand for women’s apparel in its own stores and online.

With foot traffic at malls and department stores shrinking, Levi’s has been investing more in its e-commerce business, adding features designed to attract millennial and Gen Z consumers.

A new customization option on Levi’s website lets shoppers personalize their pair of jeans with custom prints and patches, helping the near 170-year old company pull in more customers looking to add a personal touch to their denim.

The company, however, missed fourth quarter revenue estimates, hurt by plunging sales at department stores and protests in Hong Kong which dented demand in the Asian shopping hub.

Fourth quarter net revenue fell 1.4% to $1.57 billion, compared with analysts’ estimates of $1.58 billion, according to IBES data from Refinitiv.

Adjusted net income fell 9% to $108 million, or 26 cents per share, in the quarter ended Nov. 24.

The company forecast adjusted 2020 profit of $1.18 per share to $1.22 per share above Wall Street estimates of $1.17.

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