Burberry says coronavirus hurting luxury demand
Burberry said the outbreak of the coronavirus was hitting luxury demand in China and Hong Kong, both important markets for the British fashion brand, sending its shares lower for a second day in a row.
The label said 24 of its 64 stores in mainland China were closed and there was a significant decline in the number of shoppers visiting its remaining outlets, which were also opening for shorter periods each day.
“The outbreak of the coronavirus in mainland China is having a material negative effect on luxury demand,” Chief Executive Marco Gobbetti said. “While we cannot currently predict how long this situation will last, we remain confident in our strategy.”
Shares in Burberry fell nearly 5% in early trading on Friday and were down 2% by 0845 GMT, leaving them 15% off their January peak.
Analysts at Jefferies estimated last month that the “Chinese Cluster” would account for 46% of Burberry’s sales this year, above the average of 40% for the luxury sector as a whole.
The company said spending by Chinese tourists in Europe and other destinations had not been hit as much so far but given widening travel restrictions, it anticipated it would worsen over the coming weeks.
The death toll from the flu-like virus in mainland China rose to 636 as of Thursday as the number of cases hit 31,161.
The country has sealed off cities, cancelled flights and closed factories to try to contain the virus. The capital of Beijing resembles a ghost town, with main thoroughfares and tourist spots almost deserted.
Burberry, famed for its trench coats and check scarves, had already been suffering from the large-scale demonstrations over the last seven months in Hong Kong, though mainland demand had been taking up some of the slack before the epidemic struck.
China is crucial to Gobbetti’s multi-year strategy to revitalise Burberry by moving it further upmarket, driven by the creative vision of designer Riccardo Tisci.
The British brand said last month it had seen a strong early response to its Lunar New Year campaign and it planned to take its autumn/winter 2020 runway show to Shanghai in April.
It is also opening its first “social-retail” store in Shenzen in partnership with Tencent in the first half of its next financial year.
Last month, when the impact of the newly emerging virus was uncertain, Burberry upgraded its sales forecast for the year to the end of March to low single-digit percentage increase from broadly flat.
(This story has been published from a wire agency feed without modifications to the text.)