Burberry’s third-quarter sales in Hong Kong halved, but luxury fashion house still raises full-year forecast

Louise Moon

Burberry Group’s sales in Hong Kong fell by half in the third quarter because of the ongoing protests, but the British fashion house still raised its full-year sales forecast as consumers flock to new collections.

The luxury brand founded in 1856 said it expects “low single digit percentage” revenue growth for the full year, up from a previous guidance of “broadly stable”. This came despite the share of sales in Hong Kong to the group halving from 8 per cent last year, to 4 per cent in its third quarter ended December.

A “strong response” from consumers to new collections by chief creative officer Riccardo Tisci meant comparable store sales grew 3 per cent in the period to £719 million (US$937 million), from £711 million a year earlier, chief operating and financial officer Julie Brown said in a conference call on Wednesday.

Tisci’s collections saw double digit growth in the quarter, with new products making up 75 per cent of goods in mainline stores. The company’s festive campaign launched in November, which focused heavily on social media, also helped to boost revenue.

Burberry feels the impact of Hong Kong protests

“We have had a major macro factor in Hong Kong and we have still been able to raise our guidance,” said Brown. “We have absorbed a significant impact from Hong Kong.”

The halving of sales in Hong Kong was mainly because of a “considerable reduction of Chinese tourists”, said Brown. Tourist arrivals to the city in November sank 56 per cent year on year – the most since protests began in June.

New collections by chief creative officer Riccardo Tisci lifted Burberry’s same store sales. Photo: Bloomberg

Burberry stores have not been damaged and the London-listed brand does not have plans to close any branches in the city, despite more than seven months of turmoil.

“We are very much focused on local business and in discussions with landlords” about rents, said Brown.

Chinese spending accounts for around 40 per cent of Burberry’s business globally.

Although sales fell in Hong Kong, it picked up on the mainland to reach “mid teens”, and drove overall sales in the wider Asia-Pacific region by “low single digit percentage”.

“Inspiring the Chinese customer is key,” said Brown, adding that the mainland will remain as a key focus for the brand.

Last Friday, Burberry announced plans to take its Autumn/Winter 2020 collection runway show to Shanghai in April. “The men’s and women’s show will include new looks designed specifically for the event that will be available to purchase exclusively in the market,” it said in a statement.

In December, the brand launched a Lunar New Year campaign for the upcoming Year of the Rat as well as an online game “Ratberry”. Later this year Burberry plans to open its first social retail store in partnership with Chinese internet giant Tencent in the southern city of Shenzhen, dubbed China’s Silicon Valley.

Brown said it was too early to determine whether an outbreak of the coronavirus in China, which has claimed nine lives so far, will impact sales over the Lunar New Year holiday.

“Clearly we are very sorry to hear about the virus,” she said. “All we can do at this stage is just keep the situation under review.”

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