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China Coronavirus Outbreak Takes a Toll on Apple


Feb. 20 2020, Published 7:36 a.m. ET

Apple (NASDAQ:AAPL) joined the list of US multinationals taking a beating from the coronavirus outbreak in China. The company warned that its revenue for the second quarter of fiscal 2020 ending in March will likely miss the revenue guidance it provided last month. The company expected its March quarter revenue to be $63 billion–$67 billion.

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China coronavirus outbreak forces Apple to close stores

Apple doubts that it will meet the revenue guidance due to concerns about an iPhone supply shortage. Also, the demand for the product has been lower.

Most of the company’s iPhone production takes place in China. Notably, the coronavirus outbreak impacted the operations at iPhone factories. For example, Foxconn, a prominent Apple supplier, delayed reopening its Chinese plants after the Lunar New Year holiday. Although Foxconn resumed operations, it faces a shortage of workers. Therefore, the supplier won’t return to full production immediately. Meanwhile, slow production at Foxconn might cause iPhone supply constraints, which could impact sales.

Also, Apple closed its stores in China to curb the spread of the coronavirus. While the company has reopened the stores, its business remains low. Therefore, Apple might sell fewer iPhone units in the current quarter than it anticipated.

The iPhone is Apple’s main revenue source. The company generated $56 billion in iPhone sales in the first quarter of fiscal 2020—an increase of 8.0% year-over-year. The iPhone business contributed 61% of Apple’s total revenue in that quarter.

Disney, McDonald’s, and Starbucks close businesses in China

Like Apple, Walt Disney (NYSE:DIS) also expects to suffer a huge financial loss due to the coronavirus outbreak in China. The company closed its Shanghai and Hong Kong parks in an effort to control the spread of the deadly coronavirus. Disney expects a $135 million drop in the operating profit from its Shanghai park and resort business.

Also, Disney is concerned that the operating profit from its Hong Kong parks business could fall by $145 million in the current quarter.

McDonald’s (NYSE:MCD) and Starbucks (NASDAQ:SBUX) also closed stores in China in response to the coronavirus outbreak. They could take a financial hit like Apple and Disney due to lost sales.


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