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Burberry could take 100 million pound hit from Hong Kong protests

By Huw Hughes

9 Oct 2019

Burberry could be hit by a 100 million pound dent in its sales in Hong Kong as a result of the ongoing clashes between protesters and police, analysts have warned.

Analysts at Jefferies told The Telegraph that the short-term impact of the protests is likely to be “painful” for the British luxury brand and that sales in Hong Kong were likely to be 100 million pounds lower for the year to April 2020. However, it did say around 50 percent of the losses could be recovered elsewhere from its operations across Europe and the rest of the Asia-Pacific region.

There are currently 10 Burberry stores in Hong Kong and the company generates approximately 8 percent of its total sales there.

Flavio Cereda, an analyst at Jefferies, said Burberry’s ready-to-wear offer meant it was under more pressure than some of its luxury rivals to shift seasonal stock. He told The Telegraph: “The problem with having ready-to-wear in stores which is not shifting is that the stock is seasonal so it’s a pressing problem because it will hit markdowns pretty soon.

“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 any more, 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.”

Some companies have already started negotiating with landlords in a bid to cut rents, with experts saying some retailers will be forced to close sites, according to The Telegraph.

Photo credit: Burberry, Facebook