Bright spots of China, Korea fail to lift Burberry’s global sales as coronavirus hits luxury shopping in Europe, America

Cheryl Arcibal
·3-min read

Strong sales for Burberry in China and Korea were not enough to offset a weak performance in Europe and the Americas as the iconic British fashion brand reported lower revenues in the October to December period.

The brand known for its tan trench coats and tartan patterns said on Wednesday retail revenues came to £688 million (US$936.7 million) in the third quarter of its fiscal year, down by 5 per cent with exchange rates kept constant.

Comparable store sales declined 9 per cent from a year earlier overall despite an 11 per cent rise in Asia-Pacific, specifically in China and Korea. Sales in Europe, the Middle East, India and Africa fell 37 per cent – a drop attributed mainly to travel restrictions – while in the Americas they slipped by 8 per cent.

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In 2019, Chinese consumers accounted for 35 per cent of sales in the global luxury market, much of that shopping done while travelling, according to the consultancy Bain & Company.

The decline in overall sales was worse than the 6 per cent drop Burberry reported in the second quarter, but much better than the 45 per cent contraction in the first quarter.

While online sales of full-priced items grew by more than half in the third quarter, with a triple-digit rise in mainland China, store closures averaged 7 per cent, which had an impact on trading.

“We currently have 15 per cent of stores closed, and 36 per cent operating with reduced hours or restrictions providing an uncertain trajectory given the spread of the more transmissible new variant of Covid-19,” said Julie Brown, chief operating and financial officer. “Given this outlook we expect trading to remain susceptible to regional disruptions as we close the financial year. However, we are well placed to accelerate once the pandemic eases.”

To help offset lower sales, the company said cost savings are being implemented and inventory is on track to be lower than last year’s.

With shops still hobbled by social distancing measures across the globe, Burberry sees huge opportunity in digital sales growth, particularly in mainland China where they are still coming off a low base, Brown said. Before coronavirus, about 10 per cent of sales of luxury goods were typically from digital channels.

Asia is the least developed region in terms of e-commerce, with mainland Chinese buyers still preferring to buy luxury goods from physical stores.

“It is largely because mainland Chinese still prefer the personal contact and the luxury experience in the stores, that’s why we opened a new store in Shenzhen, combining social and retail. It’s been very powerful connecting the journey and engaging in social media that allows them to have that continuity,” Brown said.

Digital channels are also likely to be key for the London-listed company’s sales in the mainland as the northern region of the country, including Beijing, is currently fighting a resurgence of infections in recent days, potentially dampening sales during the shopping peak period around Lunar New Year.

“The northern region including Beijing is being impacted at the moment, and we have one store closure,” Brown said. “Overall we are seeing an impact on traffic in the northern region, but it’s relatively low. The Chinese business continues to be strong.”

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