World’s Biggest Maker of Sneakers Pou Chen Wants to Halt Operations in Vietnam

UTC by Teuta Franjkovic · 3 min read
World’s Biggest Maker of Sneakers Pou Chen Wants to Halt Operations in Vietnam
Photo: Unsplash

Pou Chen Corp., the world’s largest maker of athletic shoes, wants to pause its operations in Vietnam, because of concerns about a potential outbreak of the coronavirus. Pou Chen’s shares are down.

Ho Chi Minh City said it wants Vietnam premier’s consent to temporarily shut down a unit of Pou Chen Corp., the world’s biggest manufacturer of athletic shoes, due to worries regarding a potential outbreak of the COVID-19.

City’s officials said they are worried about Pouyuen Vietnam, which employs 70,000 workers and operates three shifts a day. Ho Chi Minh has the biggest number of confirmed infected patients in the country after Hanoi, and the officials say that the outbreak will impact not only the workers but those at neighboring firms and four bordering provinces.

Mayor Nguyen Thanh Phong stated that the city came up with a three-day suspension from Monday, corresponding with the final days of a 15-day national social distancing order imposed on April 1, to ensure the safety of workers amid the developing pandemic.

Pou Chen Is Trying to Limit Infection Risk in Vietnam

Pou Chen is, by their own words, the largest branded athletic and casual footwear producer in the world, and a manufacturer for international brands such as Nike, Adidas and New Balance among others. The group manufactures more than 300 million pairs of shoes per year, accounting for around 20% of the combined wholesale value of the global branded athletic and casual footwear market.

Ho Chi Minh City last week published a number of indicators in order to determine the infection risk of companies based there in an effort to diminish the outbreak. A company is required to break off all operations if it happens to have more than 80%, according to the statement. Pouyuen was graded at 81%.

The company said it will adhere to all decisions and broaden the suspension if the isolation order isn’t lifted after April 15, according to the statement.

Cu Phat Nghiep, chairman of Pouyuen Vietnam Labour Union said that Pouyuen will try to limit the infection risk. He added that the measures will include different starting hours, temperature checks, the use of face masks and social distancing.

Missed EPS By 7.4%

The company also came out with its yearly results two weeks ago stating revenues of NT$313b were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at NT$4.01, missing estimates by 7.4%. Following the latest results, Pou Chen’s five analysts are now forecasting revenues of NT$326.3b in 2020.

This would be an okay 4.2% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to decrease by 5.7% to NT$3.78 in the same period. Before this earnings report, the analysts had been forecasting revenues of NT$332.9b and earnings per share (EPS) of NT$4.37 in 2020. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a substantial drop in EPS estimates. The average price target fell 5.5% to NT$38.54, with reduced earnings forecasts clearly tied to a lower valuation estimate.

At the time of writing the price of Pou Chen shares was falling by 0.71% to $27.90. Stocks of Nike Inc (NYSE: NKE) grew by 1.75% while Adidas AG (ETR: ADS) went up by 4.38% to $86.79 and € 226.60 respectively.

Samsung Display in Problems Too

Meanwhile, the Vietnamese government called for 44 employees of Samsung Display on Monday to be quarantined after one worker tested positive for COVID-19.

The case was confirmed by parent company Samsung Electronics Co Ltd who added Samsung Display’s production lines in Vietnam had not been affected.

Vietnam’s health ministry has reported 262 coronavirus cases in the country and no deaths.

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