Macy's is planning for a coronavirus hit, but it's 'nothing to be concerned about yet'

KEY POINTS

• Macy's warned investors Tuesday that the coronavirus outbreak could hit the department store chain.
• "With respect to the supply chain, we are working with our vendor partners to minimize any possible disruption," CEO Jeff Gennette said.
• About 70 Macy's stores have a "strong Asian customer base" and those stores have seen "some slowdown of sales."

Zhuying Hua, 40, of Rockville, Maryland is concerned about coronavirus and wears a mask while shopping. The store manager said the there was a huge decline in shoppers.

Sarah L. Voisin | The Washington Post | Getty Images

Macy's warned investors Tuesday that the coronavirus outbreak, which has shuttered commerce across China and sent markets spiraling, could hit the department store chain, too.

The virus could disrupt Macy's operations in three ways, CEO and Chairman Jeff Gennette said on the company's fourth-quarter earnings call, if it affects employees, international tourism and supply chain.

"While still too early to estimate, we anticipate that there could be a small impact on first-quarter sales from international tourism," he said. "With respect to the supply chain, we are working with our vendor partners to minimize any possible disruption."

The company's office in Hong Kong has reopened after the extended Lunar New Year holiday, Gennette said, and employees there are working on "flexible schedules." He added that about 70 Macy's stores have a "strong Asian customer base" and those stores have seen "some slowdown of sales."

Despite the weaker sales at those locations, the company decided not to revise its 2020 guidance due to the outbreak, which has now infected more than 80,000 people in about 30 countries and killed at least 2,704.

"At this time, we have not factored in any potential negative impact from the coronavirus into our 2020 guidance," Gennette said.

While the virus emerged in the central Chinese city of Wuhan, it has since swept across China and abroad. The virus has spread rapidly in South Korea, Iran and Italy over the past week, prompting fears of a global outbreak. Those concerns have roiled markets across Asia and Europe, and on Monday all three major U.S. indices fell more than 3% on those fears.

Gennette said the company is preparing for the virus to hit Macy's supply chain. The company's team in Hong Kong is planning contingencies in the event that partners and suppliers cannot fulfill orders.

"We expect a slowdown. We have seen a slowdown ... Nothing concerning yet, but we're watching this one very, very carefully," he said.

He added that the U.S.-China trade war has actually helped prepare the company for this situation.

"This is an example of where the tariff situation actually over the last 18 months really gave us a very clear line-of-sight into our product flow from China," he said.

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