It Starts: Apple Throws Revenue Guidance Out The Window On Supply Chain Woes

This article was written by Wolf Richter and originally published at Wolf Street

China’s official reaction to the coronavirus – locking down mega-cities, shutting down part of the transportation system, closing factories and retail stores for weeks, etc. – largely shut down production and crushed retail sales. And this predictably would do two things to Corporate America:

• Throw its complex and huge supply chains that crisscross China into disarray,
• And cause sales in China of US brands – mostly made in China – to collapse.

There have already been some US companies that grappled publicly with warnings about revenues, earnings, and supply chain woes. But here is the big one.

Apple announced this afternoon – a holiday for US markets and the last day of a long weekend, when no one is paying attention – that it threw its revenue guidance of January 28 out the window. Clearly, January 28 was not the time to sow doubt; the stock had to be driven higher.

At the time, the coronavirus and China’s way of dealing with it were already in full swing, and the supply chain woes and retail sales collapse were already obvious. In my podcast of February 2 – THE WOLF STREET REPORT: What Will the Coronavirus Do to the US & Chinese Economy? – I pointed at these issues; and surely, Apple had been aware of them too for days, as part of its supply chain and retail stores in China had already been shut down.

Apple disclosed today that, as work is starting to resume at factories in China, “we are experiencing a slower return to normal conditions than we had anticipated. As a result, we do not expect to meet the revenue guidance we provided for the March quarter due to two main factors.”

Those two factors are of course the supply chain woes and collapsed retail sales in China.

The supply chain woes will cause “iPhone supply shortages” and eat into revenues.

The first is that worldwide iPhone supply will be temporarily constrained. While our iPhone manufacturing partner sites are located outside the Hubei province — and while all of these facilities have reopened — they are ramping up more slowly than we had anticipated. The health and well-being of every person who helps make these products possible is our paramount priority, and we are working in close consultation with our suppliers and public health experts as this ramp continues. These iPhone supply shortages will temporarily affect revenues worldwide.

Apple’s China sales collapsed as many stores were shuttered and as traffic plunged at stores that were open.……more here

Click here for reuse options!
Copyright 2020 Hiram's 1555 Blog