ADVERTISEMENT

China Retail Shutdowns Spread as Virus Concerns Grow

Such indefinite shutdowns in China are likely to crimp President Xi Jinping’s resolve to spur growth

China Retail Shutdowns Spread as Virus Concerns Grow
Lanterns hang outside retail stores at the Yuyuan Bazaar in Shanghai. (Photographer: Qilai Shen/Bloomberg)

(Bloomberg) -- Neither the glitzy jewelry stores in China’s upscale shopping malls nor its spicy hotpot restaurants that once saw long waiting lines are likely to come back to life anytime soon as their owners plan to wait out the deadly coronavirus outbreak.

Big consumer firms from Chow Tai Fook Jewellery Group Ltd. to Yum China Holdings Inc. have closed as many as 80% of total stores as China races to curb the contagion which has already killed over 1,100 people and infected more than 44,000 in China.

As local authorities ask residents to stay indoors and take drastic measures against those infected with the pathogen, shoppers are wary of stepping out, dealing a body blow to consumer companies during a festive week that would usually have seen more than $140 billion in spending. Brokerages from Goldman Sachs Group Inc. to UBS Group AG have pared China’s 2020 growth forecast on virus hit.

China Retail Shutdowns Spread as Virus Concerns Grow

Chow Tai Fook, the world’s biggest jewelry chain by revenue which has temporarily halted operations in about 80% of its stores in mainland China, has no planned date for reopening. Those outlets will remain closed until further notice, according to a company spokesperson.

China Retail Shutdowns Spread as Virus Concerns Grow

Majority of the remaining stores have reduced their operating hours, she said, adding that there were no plans to cut staff. Chow Tai Fook has more than 3,600 outlets in mainland China.

‘Cannot Forecast’

China Retail Shutdowns Spread as Virus Concerns Grow

Yum China Holdings Inc., which has 9,200 outlets across over 1,300 cities in China, has temporarily closed over 30% of restaurants, Chief Financial Officer Andy Yeung said in an earnings call with analysts on Feb 6. “We cannot forecast when nor at what rate the closed restaurants will be reopened, and the traffic will be restored,” he said. “We may be required or otherwise decide to close additional stores or modify our operations in response to the outbreak.”

Haidilao International Holding Ltd., China’s largest hotpot restaurant chain, too has no time line for reopening its 550 stores shut since Jan. 26. “We are closely monitoring the situation and paying attention to governments’ gradual plan for resuming operations,” said Yang Xibei, a spokeswoman of Haidilao in a WeChat message.

Fast Retailing Co. still hasn’t reopened 350 Uniqlo stores in China while Ryohin Keikaku Co., closed two more Muji stores taking the total to 140 as of Feb. 11.

Wake-Up Call

Such indefinite shutdowns in China are likely to crimp President Xi Jinping’s resolve to spur growth in the largest Asian nation that was suffering from the worst economic slowdown since 1992 even before the novel coronavirus struck. It’ll also be a wake-up call for consumer goods giants that had been relying heavily on Chinese consumers to fuel growth.

China Retail Shutdowns Spread as Virus Concerns Grow

Meanwhile China’s cities continue to look like ghost towns and the world’s biggest consumer companies have begun taking a hit.

Nike Inc. said last week that it has closed about half of its company-owned stores in China due to the virus contagion and expects it to have a material impact on its operations in the country. Rival brand Adidas AG has closed a significant number of stores in China, as have its franchisees.

Starbucks Corp. said Jan. 29 that it has closed more than half of its coffee shops in mainland China -- about 2,000 locations -- but was yet to calculate the impact.

Representatives of Nike, Adidas and Starbucks didn’t immediately respond to requests for an update on closed stores.

--With assistance from Lisa Du.

To contact the reporters on this story: Jinshan Hong in Hong Kong at jhong214@bloomberg.net;Daniela Wei in Hong Kong at jwei74@bloomberg.net

To contact the editors responsible for this story: Rachel Chang at wchang98@bloomberg.net, Bhuma Shrivastava, Sam Nagarajan

©2020 Bloomberg L.P.