Hong Kong strife hits Burberry's margins

Business | 15 Nov 2019

British luxury brand Burberry expects gross margins to fall by about 150 basis points for the financial year, below its previous expectation for a 100-basis-point decline, largely reflecting the disruptions in Hong Kong.

"Hong Kong is a higher margin market," said chief financial and operating officer Julie Brown.

"We expect further disruption in the next six months or so. We have seen a significant decline in Hong Kong, particularly in the second quarter, driven by a fall in Chinese visitors' spending.

Brown said about 8 percent of total revenue came from Hong Kong, but recently the proportion has fallen to 5 percent.

She said Burberry has 12 stores in Hong Kong but has no plan to shut any.

Gross profit margin for the 26 weeks ended September 28 dropped by 10 basis points to 67.5 percent from a year before.

Burberry recorded GBP14 million (HK$140.73 million) of store impairments related to Hong Kong. Interim net profit increased 13.63 percent year-on-year to GBP150 million.

Meanwhile, Burberry is teaming up with internet giant Tencent (0700) to develop social retail in China. Burberry will open a social retail store in Shenzhen in the first half of next year.

The net loss of clothing retailer Global Brands (0787) narrowed by 68.31 percent to US$90 million (HK$702 million) for the six months ended September. Revenue slid by 5.2 percent to US$641 million.

Luxury brands retailer Joyce Boutique (0647) said the net loss for the six months ended September 30 more than doubled to HK$54.9 million.

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