Tuesday 27 September 2016

Burberry feels the pinch as Chinese cut down on Hong Kong spending

Published 16/07/2015 | 02:30

Burberry
Burberry

Luxury-goods maker Burberry Group said it may try to lower its rent bill in Hong Kong to offset a worsening slump there that drove sales growth to a two-year low.

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The company "may well take the opportunity if it persists to see what we can do in terms of negotiating different rents," chief financial officer Carol Fairweather said yesterday.

First-quarter comparable sales declined by a double-digit percentage in the three months through June, London-based Burberry said. The drop was single-digits in the second half of the previous financial year. The stock fell as much as 3.7pc. Luxury-goods makers are reeling as fewer wealthy Chinese buy expensive coats and bags in Hong Kong amid a clampdown on graft and largesse in China, a situation that analysts say will continue for at least six months.

Burberry responded by cutting trenchcoat and scarf prices there in April, as well as in China, following similar moves by peers. Prada shares dropped to a three-year low yesterday when first-quarter profit missed estimates due to Asian weakness.

"The threat of volatile international markets has become a reality," said Andrew Hall, an analyst at London-based market researcher Conlumino. "Changing consumer demand has led to a faltering of sales for Burberry."

Burberry's total comparable sales climbed 6pc, the weakest since the third quarter of 2013, though beating analyst estimates. The shares traded 1.9pc lower at 1,589 pence as of 10:44am yesterday in London. Total retail revenue rose to £407m (€580m), Burberry said. Analysts had predicted £414m. Burberry's 17 shops in Hong Kong remain profitable and there's no change in strategy in that market, Fairweather said. (Bloomberg)

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