Hong Kong Protests Dampen Burberry’s Asian Sales Gains

In What's New, Industry News by Jeff Prine

burberry

Naomi Campbell and Jourdan Dunn wearing Burberry Prorsum for the Spring/Summer 2015 campaign

London—The pro-democracy activists who camped out in Hong Kong’s main business district for two months to bring attention to their cause also wreaked havoc with retail brands in that city.

Today, Burberry blamed the fallout from the protests for its low single-digit increases in Asia during its third quarter. Elsewhere in Asia, however, China and Korea posted strong sales. Meanwhile, double-digit growth in the Americas and Europe, Middle East, India and Africa, beat analysts’ forecasts for a 7% rise.

The brand’s Hong Kong stores, which account for 10% of its international sales, had a significant decrease in sales during the quarter, Chief Financial Officer Carol Fairweather told analysts on a conference call. But she added that comparable sales were down by only a low to mid-single digit percentage.

Still, weakness in Hong Kong wasn’t enough to dampen an otherwise strong quarter for the luxury brand, Fairweather noted. Retail revenues climbed 14% during the quarter to 604 million pounds (about $912.3 million). Sales were strong across America and Europe, too.

The slowdown in Hong Kong and “a change in the regional sales mix” had more than offset a modest improvement from exchange rate movements, which Burberry indicated in November could hurt its full-year retail/wholesale margin.

Luxury Sales in China Down

Nonetheless, Burberry and many other luxurygoods brands had hoped for bigger sales in China. They continue to be faced with the Chinese government’s crackdown on corruption, including a holding extravagant banquets, fancy cars and giving or accepting luxurygoods as gifts.

For the first time, spending trends in China slipped into negative territory. Luxury spending in the country fell 1%, according to consultants Bain & Co., following greater controls on spending and changing consumer patterns.

“China is flattening while South Korea strengthened its position as a trendsetter and influencer for fashion and luxury,” report author Claudia D’Arpizio wrote.

In its report, Burberry said wholesale revenue would be down by a mid-single-digit percentage for the six months to March 31.

Licensing revenue from its Japanese licensees, eyewear, watches and the European wholesale children’s license for fiscal 2015 is expected to be broadly unchanged at constant exchange rates. At current exchange rates, reported licensing revenue will be reduced by about 10 million pounds sterling because of the movement in the sterling-yen rate.

 

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