The coronavirus outbreak in China will be felt around the world, both in terms of the tragic and deadly spread of the disease and its economic fallout.
The Federal Reserve predicted that the disease has “presented a new risk to the outlook” of the entire global economy. And retailers across the board have shut down their stores to avoid getting swept up in the outbreak. But some companies and product categories are more at risk than others.
Here’s a look at five companies and product categories that could take a big hit from the coronavirus outbreak, according to analysts.
The entire beauty industry
A UBS Group note from 3 February said that the coronavirus could pose a problem for the entire beauty business, given that it is one of the “largest dollar categories in travel retail” and therefore dependent on Chinese consumers.
The UBS analysts wrote that Estée Lauder in particular has “outsized exposure” to disruptions to travel retail, and that China contributes to half of the company’s Asia-Pacific revenues.
Moody’s analysts predicted in a 30 January note that the coronavirus outbreak “will temporarily slow down Apple’s strong earnings momentum” by slowing down the brand’s growth within China.
That being said, it’s not all bad news. The note also reported that Apple has signaled its ability to “use alternate suppliers”
“Apple has robust credit profile and is well positioned to manage through short term disruptions in China,” Moody’s analysts also wrote.
Luxury fashion brand Burberry—along with the rest of the high-end apparel business—sees its business in China particularly at risk as the coronavirus continues to spread.
A report said 24 of Burberry’s 64 stores in mainland China temporarily shuttered due to the outbreak, prompting CEO Marco Gobbetti to say that the coronavirus “is having a material negative effect on luxury demand.”
In a 3 February note, UBS analysts also noted an impact on the “luxury” category.
The Walt Disney Company
The Walt Disney Company will take a $175-million hit if its parks in Shanghai and Hong Kong remain closed for two months.
But that’s not the only bad news for the House of Mouse.
Deadline also reported that J.P. Morgan analyst Alexia Quadrani released a report saying that The Walt Disney Studios could also be adversely affected due to the mass shutdown of Chinese movie theaters.
One subset of luxury goods that seems set to endure some pain over the coronavirus outbreak is the alcohol category.
UBS’ 3 February note on the coronavirus found that the brands Brown-Forman, Diageo, Pernod Ricard and Rémy Martin are “most exposed” to a dip in travel retail.
“We expect the coronavirus to compound recent weakness in Asia Duty Free that resulted from unrest in Hong Kong,” the UBS analysts wrote.
Moody’s analysts also wrote in a 4 February note that the spread of the disease will “curb Chinese consumption” of European packaged alcoholic beverages “in what is one of the world’s largest markets.”
Compounding the negative impact is the fact that the virus started during the Lunar New Year, which Moody’s said was “one of the busiest periods for alcoholic beverage consumption” in China. (Business Insider)