Virus Cuts Burberry Sales in Half as Next Withholds Guidance
Burberry Sales Cut in Half by Virus With 40% of Stores Shut
(Bloomberg) --
The coronavirus pandemic is taking a growing toll on U.K. fashion brands, with luxury label Burberry Group Plc saying sales have fallen by as much as half since late January and store chain Next Plc withdrawing financial guidance.
Burberry said about 40% of its stores worldwide are shut, with additional closures expected in the coming days as governments implement lockdowns to curb the outbreak.
The U.K. luxury brand had warned in early February of a significant sales decline in China, where the virus first emerged. Stores there are now starting to reopen, it said Thursday.
When the coronavirus emerged in China, supply was expected to be the main issue for fashion retailers, given that country’s importance as a producer, but now demand is the problem as people from Spain to Switzerland are forced to self-isolate, said Next Chief Executive Officer Simon Wolfson.
“People do not buy a new outfit to stay at home,” Wolfson said. Next shares climbed as much as 16% after slumping earlier in the day to the lowest level in more than seven years. Burberry took the reverse trajectory, declining 5.6% around midday in London trading after an early surge.
Uncertainty about the “scale, timing and impact of the coronavirus pandemic means it is impossible to give meaningful guidance for the year ahead,” the company said in a statement. Although online sales will fare better, they will probably also suffer due to the lockdowns, it said.
Problem Shifts
Next is considered to be one of the U.K.’s best-run retailers and its warning about the possible damage the coronavirus could cause to its business will heighten concerns about how some of its rivals will fare.
“China is known to be improving but it is Europe and the U.S. that are the problem now,” said Flavio Cereda, a luxury retail analyst at Jefferies.
Next said a “stress test” of its business showed that it could withstand the loss of as much as 1 billion pounds ($1.1 billion) in sales before exceeding its bank facilities.
At Burberry, comparable retail store sales have been down between 40% and 50% over the past six weeks, the company said. It was already a sensitive time for the luxury-goods maker as it embarks on a turnaround effort led by new designer Riccardo Tisci.
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