Honda evacuates, Starbucks stores shut: Virus impact on business

Global companies including Honda Motor Co. and Groupe PSA are evacuating workers from areas of China hardest hit by a deadly viral outbreak. Theme park operators, movie theaters, retailers and restaurant chains are suspending or curtailing operations to protect workers and limit the spread of the novel coronavirus.

The moves by companies highlight Wuhan’s importance as a manufacturing, shipping and business hub. The central Chinese city has more than 500 factories and other facilities, placing it 13th among 2,000 Chinese cities in Bloomberg’s supply chain database. It’s the capital of Hubei province, which has 1,016 such facilities, making it seventh of 32 such jurisdictions.

Japan-based companies have about 54 of the facilities, while U.S. firms account for 44 and Europeans about 40, the data show. Many plants are in the auto and transportation industries, and big names include PepsiCo Inc. and Siemens AG.

As the outbreak accelerates, China has extended the Lunar New Year holiday to Feb. 2 from the original Jan. 30 date to reduce travel. Authorities have also locked down cities with a combined 40 million people around the epicenter in Wuhan, as they race to contain a pneumonia-like illness that has killed at least 80 in the country with about 2,744 confirmed cases.

Countries including the U.S., Japan, Singapore and South Korea have also reported cases of infection.

Here is how some of the biggest companies are responding, as well as analysts’ estimates of the impact:

Jan. 27:

• Starbucks Corp., McDonald’s Corp. and Domino’s Pizza Inc. Of the three U.S. restaurant chains, Starbucks is the most exposed to the outbreak, as measured by percentage of worldwide revenue and operating income, according to Guggenheim analyst Matthew DiFrisco. “China represents a high growth region and a meaningful contributor to the longer-term global revenue growth goals for all three companies,” DiFrisco said in a note.
• Tesla Inc., Nio Inc. About 8 million cars were sold last year in the roughly 40 Chinese cities that have 10 or more diagnosed coronavirus cases, or 36.8% of total retail volumes in the country, Bernstein analysts estimate. Those cities accounted for 82.5% of Tesla’s retail volumes, and 68% of NIO’s, the analysts wrote in a note. “The latter looks especially vulnerable to a prolonged slump in EV sales,” they said. “We expect EV sales in China to be worse hit than the broader market. Consumer adoption of EVs in China is highly concentrated in the top cities where license plate restrictions and other policies enforce EV purchases.”
• Imax Corp. The Mississauga, Ontario-based company temporary closed about 70,000 theaters in the wake of the outbreak. The impact of lost revenue from the Chinese New Year will cost Imax at least $60 million in global box office revenue, according to MKM Partners. If the epidemic lasts for a few more weeks, “it is not unreasonable to project” a shortfall of $200 million in the first quarter, MKM Partners analysts said in a note.
• Nissan Motor Co. The automaker plans to evacuate most of its expatriates and their family members from Wuhan using chartered plane dispatched by the Japanese government, a company spokeswoman said in an email.
• GMO Internet Inc. The Japan-based internet infrastructure provider has told about 4,000 employees in the country to work from home after the confirmation of novel coronavirus cases in Japan, the Nikkei newspaper reported without saying where it got the information. GMO Internet employees in Shanghai and other parts of China will return to Japan, the Nikkei report said.

Jan. 26:

• Honda Motor Co. The automaker will evacuate from Wuhan about 30 Japanese workers and family using a government charter aircraft, family members and employees visiting on business trips, Teruhiko Tatebe, a Tokyo-based spokesman, said by phone. The carmaker has informed the Japanese government that it wishes to utilize a charter jet to evacuate Japanese citizens. A handful of staff needed to maintain local operations will remain in the city.

Jan. 25:

• Groupe PSA. The French maker of Peugeot cars and other brands said it will evacuate its expatriate staff and their families from the Wuhan area. A total of 38 people will leave, the company said in a statement.
• Hennes and Mauritz AB. The clothing retailer better known as H&M has closed a total of 13 stores in the region. Svenska Dagbladet reported. China is the company’s 5th biggest market in terms of revenue, with 524 stores as of Aug. 31.
• Ikea closed its warehouse in Wuhan on Thursday, according to the same report.

Jan. 24:

• Remy Cointreau SAThe French cognac maker abandoned its forecasts for this year after a slump in Hong Kong dented sales in the Christmas period and as the viral outbreak threatens business in China, the source of 20% of its profit, according to Jefferies estimates. “Clearly we are concerned,” Chief Financial Officer Luca Marotta said of the coronavirus on an earnings conference call. “We do not have any scenarios on a quantified basis. It is evolving hour after hour.”
• McDonald’s Corp.The fast-food giant, which had about 3,000 stores in China at the end of 2018, temporarily closed locations across five cities of the Hubei province due to the virus, including Wuhan. The Chicago-based company is taking extra preventative measures in the rest of the country, including taking the temperature of workers upon arrival and giving out hand sanitizers to diners.
• Walt Disney Co.The world’s largest theme park operator said it would close its Disneyland resort in Shanghai effective Jan. 25. The company is offering refunds to guests who bought theme park tickets or reserved rooms in its hotels. “We will continue to carefully monitor the situation and be in close contact with the local government, and we will announce the reopening date upon confirmation,” it said in a statement.
• Starbucks Corp.The Seattle-based chain, with about 4,100 cafes in China, also said it’s closing some locations, without providing more details.
• Delta Air Lines Inc.The Atlanta-based carrier issued a travel waiver that allows passengers traveling to, from or through Beijing and Shanghai between Jan. 24 and Jan. 31 to change their itinerary once without having to pay a fee.
• Wynn Resorts Ltd.The Chinese Lunar New Year is peak time for profits at casino operators. Authorities in Macau, the world’s largest gambling market, are requiring casinos to screen guests for high temperatures and make their staff wear respirator masks. Many Chinese tourists are also heading to Las Vegas to celebrate. “Although as of this date there are no reported cases of the coronavirus in Las Vegas that we are aware of, we will be in close contact with the Southern Nevada Health District who is monitoring the situation along with the CDC,” the company said in a statement. “We will implement any health directive they issue.”

Jan. 23:

• Avnet Inc.The Phoenix-based distributor of computer products and semiconductors said it hadn’t seen an impact so far. “But if it gets worse and they start shutting down airplanes, et cetera, then that will have a different effect on shipments out of China,” CEO Bill Amelio said on a conference call. Asked whether the area is a meaningful region from an electronics manufacturing perspective, Amelio answered: “Of course, it is.”
• American Airlines Group Inc.President Robert Isom said it is too soon to see an impact. “Our network isn’t that extensive in Asia. But we’re on top of it,” he said on a conference call. “We’ve seen viruses in the past that we’ve had to make accommodations for and to be prepared for, we’re doing all those same things right now.”
• Keppel Corp.The Singapore-based owner of the largest oil-rig builder, which has about 170 employees in Wuhan and operations across China, said it hadn’t seen a direct impact either. “We have advised our operations there and our staff there to take the necessary precautions. We are watching this very closely,” CEO Loh Chin Hua said on an earnings call.

Jan. 22

• United Airlines Holdings Inc.The U.S. carrier was among the first global corporations to comment on the coronavirus on an earnings conference call. “We’ve been coordinating closely with the CDC to ensure that we’re taking all the necessary steps to ensure that our customers and employees can travel safely,” CEO Oscar Munoz said. “By working closely together, we have in the past effectively managed situations like this.”