Close shop, work remotely: Big business reacts to the coronavirus

Wuhan, the epicentre of the coronavirus, is a manufacturing, shipping and business hub for global corporations.

Coronavirus man in street
WeWork said Tuesday it is temporarily closing 55 offices across China and encouraging employees to work from home or in private rooms, while other major companies have also taken measures to contain the impact of virus [File: Qilai Shen/Bloomberg]

Starbucks Corp., KFC, Pizza Hut and office-sharing company WeWork are shutting locations in China, while Facebook Inc., Nissan Motor Co. and other companies enact measures to shield employees in areas hardest hit by a deadly viral outbreak.

WeWork said Tuesday it is temporarily closing 55 offices across China and encouraging employees to work from home or in private rooms. Global banks from Credit Suisse Group to Morgan Stanley are telling Hong Kong staff to work from home for two weeks. Facebook employees based in China, and those who recently returned from trips to the country, are also being told to work from home, people familiar with the matter said.

Apple Inc.’s supply chain is at risk of being disrupted. Virtually all of the world’s iPhones are made in China by contract manufacturers, and the company had been increasing production to meet higher-than-anticipated demand.

Wuhan, the epicenter of the coronavirus that has infected more than 4,500 and killed 106 people, is a manufacturing, shipping and business hub for global corporations. The capital of Hubei province has more than 500 factories and other facilities, placing it 13th among 2,000 Chinese cities in Bloomberg’s supply chain database. Many plants are in the auto and transportation industries.

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

Jan. 28

Canadian insurer Sun Life Financial Inc. is asking employees who traveled to mainland China to work from home for two weeks before returning to the office, similar to steps taken by Bank of Montreal and Manulife Financial Corp. Sun Life and Manulife derived 17% and 34% of their earnings from their Asia divisions, respectively, in the most recent quarter.

Yum China Holdings Inc. temporarily closed most of its KFC and Pizza Hut stores in Hubei province until further notice.

Volkswagen AG is asking about 3,500 employees in Beijing to work from home for two weeks, starting the first day following the city’s Chinese New Year Holiday, from Feb. 3 to Feb. 17.

UBS Group AG and Goldman Sachs Group Inc. are among financial firms that have imposed travel restrictions to mainland China. HSBC Holdings Plc suspended business travel to Hong Kong until Feb. 11. Some including Standard Chartered Plc are providing staff with face masks and hand sanitizers, along with guidance on hygiene and how to avoid getting sick.

PricewaterhouseCoopers LLP: The accounting firm has suspended all business travel to Wuhan and employees returning from the city are required to work at home for two weeks before coming to the office, a spokeswoman said. The company extended Chinese New Year holidays for staff in Hong Kong and Macau to Jan. 31 and asked employees to work remotely where feasible following the holiday.

Apple: “Supply chain disruption is a worry if employees across Foxconn and other component manufacturing hubs in China are restricted,” analyst Dan Ives of Wedbush Securities Inc. said. “If the China outbreak becomes more spread it could negatively impact the supply chain which would be a major investor worry.”
Shiseido Co.: The Japan-based cosmetics maker has banned employee travel to China, with some exceptions, a spokesman for the company said Tuesday. The company got about 20% of revenue last year from the country, its biggest overseas market.

Facebook: Travel limits, which went into effect Monday, halt non-essential travel to China by all Facebook employees, said the person, adding that if workers have to visit the country, they will need specific approval. The company declined to comment.

Bayer AG: The German drug and chemical giant will donate about 1.5 million euros ($1.7 million) worth of medicines and financial aid to help support people affected by the outbreak. The cash portion of about 600,000 euros will mainly be used to pay for protective clothing for medical staff in Wuhan, Bayer said in a statement.

Jan. 27

Carnival Corp. and Royal Caribbean Cruises Ltd.: Carnival’s Costa Cruises brand, working with the Chinese government, decided to suspend nine voyages leaving China from Jan. 25 to Feb. 4. In a separate statement, Royal Caribbean said it suspended Jan. 27 and Jan. 31 sailings. Both pledged to provide refunds to customers. China is a small but growing market for American cruise companies, and analysts project further cancellations could hurt earnings.

Fast Retailing Co.: The operator of the Uniqlo casual clothing chain, has shut about 50 of its stores in China temporarily, a spokeswoman said.

Ryohin Keikaku Co.: Owner of the Muji clothing and housewares brand has closed some stores in Wuhan, according to a spokesman.

Aeon Co.: Japan’s largest supermarket operator, expects sales from Wuhan area stores to drop by half, spokesman Makoto Sueyoshi said Monday. Aeon shuttered the three malls it operates in Wuhan, but its five general supermarkets were operating on a limited basis to sell daily goods and food.

Nitori Holdings Co.: the Japan-based furniture and housewares retailer has closed seven stores in Wuhan, and shortened some store hours in other areas including Shanghai and Suzhou, spokeswoman Haruna Muramatsu said.

Starbucks, 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. The Seattle-based chain has about 4,100 cafes in China.

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.

Imax Corp. The Mississauga, Ontario-based company, known for its large-format screen technology, has said it’s delaying movie releases at its theaters in China 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 sales, 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: 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 wrote 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.
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.

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.

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 & 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 SA: The 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.

McDonald’s: 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.
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.

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.

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,” 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.”

–With assistance from Leslie Patton, Thomas Mulier, Thomas Buckley, Christopher Palmeri, Phil Kuntz, Mary Schlangenstein, Yukari Chilnik, Brian Moran, Kana Nishizawa, Craig Trudell, Jonathan Levin, Lisa Du, Grace Huang, Anna Kitanaka, Siraphob Thanthong-Knight, Kiuyan Wong, Masatsugu Horie, Anne Pollak, Cathy Chan, Christoph Rauwald and Doug Alexander.

Source: Bloomberg