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

(Reuters) - Levi Strauss & Co LEVI.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.

FILE PHOTO: Products are displayed at a Levi Strauss store in New York, U.S., March 19, 2019. REUTERS/Shannon Stapleton

This comes a few months after Levi’s opened its largest store in China in the 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 about the store closures in China, which contributes about 3% to the company’s revenue.

The flu-like virus has set-off alarm bells across the globe, with companies such as Starbucks Corp SBUX.O and Tesla Inc TSLA.O warning of a financial hit from slowing business in the world's most populous country. Earlier this week, Starbucks also said it closed about half its stores in China.

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 forecast 2020 earnings above estimates, boosted by demand for women’s apparel in its own stores and online, sending shares up 3% for the company which returned to public markets last year.

Singh pointed to the strong start to 2020 fiscal year, saying Levi’s had “hit the ground running” during the crucial holiday shopping season.

The company 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, beating expectations of 21 cents per share.

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

Reporting by Aditi Sebastian and Uday Sampath in Bengaluru; Editing by Shinjini Ganguli