Thursday, April 16, 2015

Burberry's Big Pain Point? Hong Kong

Burberry's Big Pain Point? Hong Kong:

Burberry CEO and creative director Christopher Bailey backstage before the brand's spring show. Photo: Imaxtree
Burberry CEO and creative director Christopher Bailey backstage before the brand's spring show. Photo: Imaxtree
While Burberry is selling well in North America and Europe, its business in Asia is now growing at a slower clip. The biggest pain point? Hong Kong, where sales dropped by a "mid single-digit percentage" in the six months ending March 31, Burberry disclosed in an earnings statement Wednesday.

Chief Financial Officer Carol Fairweather noted that foot traffic in the brand's Hong Kong stores dropped more significantly in the fourth quarter than in the third. Of course, Burberry isn't the only luxury brand currently suffering from subpar sales there — consumer spending on a whole is down in the region.

On the company's earnings call, analyst after analyst wanted to know the same thing: Is Burberry, like Chanel before it, going to cut prices in China, where luxury goods have historically been more expensive than elsewhere? Fairweather says that the brand "may well" change its prices in one way or another, but reiterated again and again that Burberry adjusts its prices all the time to stay competitive with its peers in each market. (In handbags, she says, that would be Louis Vuitton, Gucci and Prada; in ready-to-wear, Armani, Max Mara, Hugo Boss, Zegna and Moncler.)

So, short answer: no price changes to report today.

Lest you get all doom and gloom about Burberry's prospects, its retail sales overall did grow 13 percent to $1.47 billion in the last six months. And it's holding a big runway show in Los Angeles on Thursday, which promises lots of red carpet-ready gowns. Nothing like some glitz and glamour to distract from financial problems, right?

Posted by Nelio Inacio at 5:39 AM

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