The protests in Hong Kong have cast a shadow of uncertainty over Burberry, as analysts predict potential losses of up to £100 million for the luxury British brand. With Hong Kong accounting for 8% of Burberry’s total sales through its 10 stores in the region, the impact of the ongoing unrest is becoming increasingly evident.
Jefferies analysts have sounded the alarm, warning that Burberry’s sales for the upcoming year ending in April 2020 could take a significant hit. The absence of a response from Burberry to these assessments adds to the growing concerns about the brand’s financial outlook.
Despite this grim forecast, there is a glimmer of hope for Burberry to mitigate some of these losses. By focusing on boosting sales in other parts of the Asia-Pacific region and capitalizing on continued growth in Europe, the brand may be able to recover around half of the projected losses. However, the vulnerability of Burberry’s ready-to-wear fashion items to market pressures compared to accessories raises challenges for the brand in navigating the current climate.
In response to the downturn in luxury sales in Hong Kong, analysts suggest that Burberry may need to implement markdowns soon and redirect stock originally allocated for Hong Kong to mainland China. The sharp decline in luxury sales in Hong Kong, potentially by as much as 60% in the last quarter, underscores the urgency for Burberry to adapt to the changing market dynamics.
As companies in Hong Kong grapple with renegotiating rents and the possibility of store closures, Burberry must navigate these challenges to safeguard its position in the region. The evolving situation in Hong Kong serves as a critical test for luxury brands like Burberry, underscoring the need for agility and strategic decision-making in the face of unprecedented disruptions.
For more information on how the Hong Kong protests are affecting businesses, read this article on CNBC. To learn about the impact of political unrest on luxury brands, check out this report by Business of Fashion.
