Burberry Hong Kong targets sales hit

Analysts are warning that Burberry Hong Kong is bracing for a £100 million hit on sales from the city’s ongoing disorder.

Burberry has declined to comment on the research note issued by Jefferies and reported by The Telegraph newspaper in London, and further by Retail Gazette.

As Hong Kong’s protests continue, retail sales have plummeted due to falling visitor numbers. The luxury sector has been hardest hit with sales down between 40 percent and 50 percent brand by brand.

The Jefferies analysts have projected that Burberry Hong Kong sales are likely to be £100 million lower in the year to next April. However, they added that as much as 50 percent of that shortfall could be mitigated by increased sales in Europe and other parts of Asia.

Burberry Hong Kong has 10 stores and the city accounts for about 8 percent of group sales.

Flavio Cereda, a Jefferies analyst, said the seasonal nature of Burberry’s offer exposed it to challenges not faced by other luxury brands, such as, for example, watch houses.

“The problem with having ready-to-wear in stores which are not shifting is that the stock is seasonal so it’s a pressing problem because it will hit markdowns pretty soon,” Cereda said.

“You’ve got two issues; you’ve got to divert deliveries and then you’ve got to think about what to do with all the stock in the stores because it’s not selling.

“The simple solution is don’t deliver stuff to Hong Kong anymore, there’s no point. Or if you’re going to deliver 500 jackets, then deliver 50 instead and ship the rest of them off to Mainland China.”