‘Dire’ Hong Kong market cripples Burberry sales

A “dire” Hong Kong market has damaged Burberry sales for the latest quarter.

Retail revenue remained unchanged at £423 million, but like-for-like sales fell 3 per cent.

“Whilst sales declined across all three regions (Asia Pacific, EMEIA and the Americas), a dire performance in Hong Kong and Macau stood out as a particularly stubborn thorn in the side of the luxury player,” observed Andrew Hall, an analyst with Verdict Retail.”

Burberry has appointed a new CEO, Marco Gobbetti, who inherits sales weakness across all regions from Christopher Bailey, who remains on as president and chief creative officer.   Gobbetti’s appointment is seen as a direct response to growing frustration with Bailey’s inability to turn Burberry’s poor performance around.

“One of Gobbetti’s priorities must be examining operations in these far eastern markets and considering new avenues for growth especially given there has been a renewed crackdown on gift giving in China, accompanied by the growing popularity of ‘Daigous’ – overseas shoppers who buy luxury goods and ship them to China for clients,” said Hall.

Britain’s exit from the EU is likely to benefit Burberry in the short term, as international tourists to the UK rush to capitalise on the weakened pound. However, long term,  Burberry’s UK operations may well suffer from a reduced flow of wealthy tourists as travel to the UK becomes more regulated, making it imperative Burberry finds a way of turning this evolving geopolitical drama to its advantage.

“While Gobbetti faces a number of challenges as he attempts to revive flagging retail sales, his experience at Celine will stand him in good stead,” said Hall.

“Burberry’s strength in digital and the continuing appeal of its brand are good foundations to work with and the clear segmentation of leadership between Bailey and Gobetti will benefit Burberry’s strategic direction.”