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Apple, other major US companies starting to feel the effect of coronavirus spread in China

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Consumers may feel it soon, too

Gabby Jones/Bloomberg via Getty Images

As coronavirus continues to spread and disrupt daily life and business in China, American companies that rely heavily on China for production are starting to feel the impact, Axios reported.

Perhaps most notably, Apple reported Monday that it would not meet quarterly revenue expectations because coronavirus has limited both production of its products, and the demand for those products in China.

In a statement, Apple CEO Tim Cook detailed the factors leading to the revenue dip:

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.

The second is that demand for our products within China has been affected. All of our stores in China and many of our partner stores have been closed. Additionally, stores that are open have been operating at reduced hours and with very low customer traffic. We are gradually reopening our retail stores and will continue to do so as steadily and safely as we can. Our corporate offices and contact centers in China are open, and our online stores have remained open throughout.

Apple isn't the only company starting to feel the worldwide effect of coronavirus. MarketWatch reported that, of 364 earnings calls that occurred between Jan. 1 and Feb. 13, 38% of them mentioned coronavirus although many of them were yet unwilling to issue negative guidance based on the outbreak.

The Chinese market accounts for about 10% of Coca-Cola's global volume, and CEO James Quincey is concerned about how this blow to China's large and influential economy will impact his and other businesses.

"China's economy was in a different place when SARS happened," Quincey said. "It's worth noting that China's economy is [now] much bigger, and this could become more connected to the rest of the world."

China is responsible for about two-thirds of global sourcing for Hasbro, and uncertainty about the speed with which factories will be able to reopen and resume production presents significant issues for the company's outlook.

Roughly half of Nike stores in China are closed, and those that are open aren't getting the usual amount of traffic. Ralph Lauren Corp. could take a hit of at least $70 million, as two-thirds of its Chinese stores have been closed for a week.

Still, the U.S. markets have not shown a downturn despite these issues, although some economists warn that could change abruptly if business doesn't pick back up in China soon.

"This will eventually end badly," Guggenheim Investments global CIO Scott Minerd said, according to Axios. "I have never in my career seen anything as crazy as what's going on right now. The cognitive dissonance in the credit market is stunning."

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