Hong Kong protests could dent Burberry to tune of £100m - report
Oct 9, 2019
The Hong Kong protests could hurt Burberry by as much as £100 million, analysts have said, with the company generating around 8% of its total sales there and having as many as 10 stores.
Analysts at Jefferies said the impact on the British luxury firm in the short term could be “painful” and that the year to April 2020 might see sales as much as £100 million lower. The analysis was reported in The Telegraph, which said that Burberry hasn’t commented on the assessment.
On the plus side, around half of the losses could be recovered via higher sales elsewhere in the Asia-Pacific region and by ongoing sales rises in Europe, the analysts said.
Flavio Cereda of Jefferies said Burberry’s exposure to the ready-to-wear clothing market put it under more pressure than some rivals to shift current season stock. For many luxury brands in Hong Kong, accessories make up a bigger percentage of the mix and these can be less seasonal that RTW is.
Cereda predicted that Burberry right need to introduced markdowns “pretty soon” and that the company would currently be thinking about diverting stock that would have been destined for Hong Kong. He said that could mean more product being diverted to mainland China.
The newspaper also quoted RBC Capital Markets that has said luxury sales overall in the territory could have been down by as much as 60% in the quarter to September. The political turmoil has dented tourist arrivals from many countries, including the all-important Chinese tourists.
The problems in Hong Kong have led some companies to start negotiating with landlords already in order to try to get reductions on the territory’s traditionally sky-high rents. But there are expectations that some stores will be forced to close as well.
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