British luxury brand Burberry hit by falling sales

Burberry warned on Wednesday that a fall in sales in the key market of Hong Kong in the last quarter of 2014 could impact its full-year margin.

Pro-democracy protests began choking parts of the Asia financial centre in late September, disrupting business in one of the world's top markets for luxury companies, which accounts for about $9.7 billion of global luxury sales, or 4 per cent of the total, according to estimates by Bernstein Research.

Known for its raincoats with camel, red and black-check patterned linings, Burberry said retail sales rose 14 per cent to £604 million in its October-December third quarter, with comparable growth of 8 per cent, steady on the previous quarter.

Burberry said Asia-Pacific delivered low single-digit percentage growth compared to double-digit growth in the previous six months, as sales in the high-margin market of Hong Kong fell slightly even though mainland China and Korea grew by a mid to high single digit percentage.

Even before the protests, luxury goods companies had been under pressure from an anti-corruption campaign in China, which has sapped appetite for such goods among mainland Chinese, some of Hong Kong’s biggest tourist spenders.

Burberry said the slowdown in Hong Kong and a change in the regional sales mix had more than offset a modest improvement from exchange rate movements, which it had said in November could hurt its full-year retail/wholesale margin.

It reiterated the rest of its outlook for the full-year for its wholesale and licensing businesses, and added that it expects net new space to contribute about 5 per cent to total retail revenue growth.

Traders said they expected Burberry’s shares to open unchanged to down about 1 per cent.

Reuters