The novel coronavirus is inducing panic worldwide. Apart from stringent travel restrictions and quarantine orders, ban on large gatherings, including conferences and public events across the world, is one of the measures undertaken to curb the spread of this fatal virus.
The sporting goods industry was the latest to take a hit as the pandemic casts a shadow on the global sporting calendar. On Wednesday (Mar 12), the National Basketball Association (NBA) suspended its season until further notice, after Rudy Gobert of the Utah Jazz was tested positive for COVID-19. Earlier, the organizers had planned to conduct the season without the fans to cheer.
The suspension of NBA until further notice dealt a big blow on the shares of NIKE (NKE - Free Report) and its partner Foot Locker (FL - Free Report) , as NIKE is the official sponsor of the sports league. Shares of NIKE plummeted more than 11%, while Foot Locker nosedived 14.2% on the news. Further, biggies like Adidas (ADDYY - Free Report) , Under Armour (UAA - Free Report) and lululemon athletica (LULU - Free Report) also felt the jitters, sinking 14.3%, 14.9% and 12.7%, respectively, on Mar 12.
Apart from the NBA, other events like the NHL, Major League Soccer, Major League Baseball (MLB), men's and women's basketball tournaments hosted by NCAA, men's ATP Tour, FIFA World Cup 2022, Spain’s La Liga and F1 Australian Grand Prix remain suspended as the impacts of coronavirus intensify. However, the International Olympic 2020 to be held in Tokyo is still scheduled to begin on Jul 24.
NIKE, which has seen sales in China surge 62% since 2016, is likely to witness a decline in sales in the upcoming quarter due to the closure of nearly 50% of its stores in China since February. The company’s operations in Europe and the United States are also suffering a setback due to significant declines in imports from China.
Its prime rival, Adidas, expects its Europe and China operations to be affected drastically from the coronavirus outbreak. It expects first-quarter sales in China to be down by $1.14 billion. Further, Under Armour projects first-quarter sales to see a negative impact of $50-$60 million due to the effects of the pandemic. Yoga-apparel maker, lululemon athletic, which generates 60% of its sales from China, has also closed the majority of its stores in the country.
Clearly, the growing uncertainty about COVID-19 and the potentially severe consequences have sent the sporting world on a downward spiral. Market watchers are particularly cautious about the industry’s outlook due to the ambiguity associated with the spread and duration of the health hazard.
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