Burberry issues sales warning as coronavirus impacts luxury demand

Burberry has issued a sales warning today (7 February) relating to the outbreak and continued spread of the coronavirus in mainland China.

In a market announcement, the luxury retailer and brand said the global health emergency, which has killed 638 and infected more than 31,000 people to date, “is having a material negative effect on luxury demand”.

The business said its most recent guidance for the year ending March 2020 predates the impact of the coronavirus outbreak, so it felt obliged to comment further. Currently 24 of Burberry’s 64 stores in Mainland China are closed, while its remaining stores are operating with reduced hours and have seen significant footfall declines.

It added the situation is impacting retail sales in China and Hong Kong, and although spending patterns of Chinese customers in Europe and other tourist destinations have reportedly been less affected, the widening travel restrictions coming into play are anticipated to worsen demand in the coming weeks.

Marco Gobbetti, Burberry CEO, commented: “While we cannot currently predict how long this situation will last, we remain confident in our strategy.

“In the meantime, we are taking mitigating actions and every precaution to help ensure the safety and wellbeing of our employees. We are extremely grateful for the incredible effort of our teams and our immediate thoughts are with the people directly impacted by this global health emergency."

The troubles in China perhaps comes as a particular blow to Burberry, which had targeted major growth in the region in 2020, supported by a dedicated men’s and women’s fashion show in April, and various targeted marketing campaigns towards Chinese consumers.

Burberry said it will continue its key growth initiatives in preparation for a recovery in luxury demand, but it is clear the coronavirus is going to impact full-year results, which are set to be announced this spring. The company indicated it fully supports the efforts the Chinese government is taking to contain the virus, which has included telling circa 12 million residents within around 100 miles of Shanghai that only one person can leave their household at a time.

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