The retailer said Wednesday that sales and traffic have steeply declined in the last week because of COVID-19 in places like Milan and Seattle and “a few additional locations.” The company added there has not been a significant impact in other locations or online.
“Due to the uncertainty around the spread of COVID-19 in North America and Europe, at this time, we cannot forecast the extent to which COVID-19 will impact our business in the first quarter,” read a company press release.
The company would not respond to requests for further comments, and whether the coronavirus has impacted the company’s other brands: Anthropologie and Free People.
Earlier this month, Urban Outfitters’ chief executive officer Richard A. Hayne told analysts during the company’s quarterly conference call that consumers were responding well to the new spring assortments and that the virus was not backed into the company’s guidance.
“There is one large caveat to this optimism, and that’s the COVID-19 virus,” Hayne said on the call.
As of March, less than 15 percent of the retailer’s production of internally designed products was in China.
“Getting accurate and reliable information from China is currently difficult, but we believe most Chinese factories and mills have reopened with output running approximately 50 percent of capacity,” Hayne said. “The expectation is the output will grow steadily over the next two weeks as workers clear the virus incubation period and return to work. In case that doesn’t happen or happens more slowly, our teams are working diligently to secure alternative sources in other regions.”
But as the virus continues to spread globally, Hayne added on the conference call that it could spread throughout the supply chain or by way of flare-ups in European or North American cities.
“As of now, we are monitoring the situation closely, planning for as many foreseeable impacts as possible and doing everything we can to support our business, our employees and our business partners who may be impacted by the outbreak,” Hayne said the first week of March.
“We are aware that some delivery delays in the April, May time frame are likely,” the ceo continued. “This would impact production flow and could increase landing costs as well, as we form new factory relationships and use expedited shipping. The second risk is disruption to the communities where we have stores, offices and fulfillment centers. We have no store exposure in Asia and our office in China is small. However, there is the potential for flare-ups to disrupt communities in Europe and North America. At this time, we have no way to quantify this risk. The bottom line is COVID-19 supply chain uncertainty could create demand uncertainty as well. We are aware of these risks and have taken actions and made plans to mitigate their effects to the best of our abilities. Keeping our associates safe is obviously our highest priority.”
Shares of Urban Outfitters, which are down roughly 44 percent year-over-year, fell more than 6 percent at the start of Wednesday’s trading session. Meanwhile, the Dow Jones Industrial Average fell about 1,000 points, or 4 percent, the same day as the world remains on high alert over the spread of the virus.
To date, more than 1,000 cases have been reported in the U.S. On Wednesday, German chancellor Angela Merkel said about 70 percent of the German population could contract the virus.
A note written by Wedbush analyst Jay McCanless said the virus is starting to affect consumer shopping habits.
“Our new proprietary survey of U.S. adults last week indicates that more than one-third of respondents are reducing their shopping at stores and more than half expect to reduce their shopping at stores in the month due to the coronavirus,” McCanless wrote. “The S&P Retail ETF has declined by [about] 18 percent since investor concerns began in late February, pricing in more than a transitory impact on demand.”