May 9, 2022 - Economy

Beijing's zero-COVID policy disrupts corporate outlook

Illustration of a vise grip holding a shopping cart

Illustration: Natalie Peeples/Axios

COVID's spread in China comes as the rest of the world sees the pandemic fading.

Why it matters: Prevention measures like lockdowns of major cities are a double whammy for companies that rely on China for production as well as consumer demand.

Axios wrote last month about how that could hurt global growth. Now companies are sharing specifics.

What's new: Under Armour and Adidas, which both source from China, reported huge declines in quarterly sales in their business in China.

State of play: A new Omicron variant caused a spike in COVID cases in China starting in March, prompting the country’s officials to partially or fully lock down major cities including Shanghai, which has been in lockdown for six weeks.

What they're saying: "72% of the 225 cities we're in experienced Omicron outbreaks, including Shanghai and Shenzhen," Starbucks China chairman Belinda Wong told analysts on last week's earning's call.

  • Under Armour CFO David Bergman told analysts that revenue in the company's Asia Pacific region has been affected not only by inbound shipping delays, but also by "significant reductions in retail traffic" due to restricted store hours and closures.

What to watch: Expect more companies to warn of similar impacts as earnings season continues.

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