Burberry's Chinese Sales Drop as Demand Slows
By Prasanth Aby Thomas | October 12, 2012 4:52 PM EST
Confirming earlier warnings, Chinese sales of British fashion group Burberry Group fell in the first half of the fiscal year, although total underlying earnings rose 8 percent during the period.
In September, the 156-year-old company had warned that the slowdown in China may affect its profits, sending the company shares down almost 21 percent.
The Chinese market is expected to be crucial to the company's performance, given the slowing demand in Western countries. Earlier this year a research from McKinsey had said that China will overtake the US to account for 20 percent of global luxury sales by 2015.
Burberry's falling Chinese sales could raise more concerns on the performance of other foreign companies in the country as the world's second largest economy slows.
The firm's retail revenue in the UK also fell, but those in Hong Kong, France and Germany remained strong.
"Compared to the first quarter, Hong Kong, France and Germany maintained their robust performance, while the UK and China slowed. Korea and Italy remained weak," the company said in a release.
Stacey Cartwright, chief financial officer of Burberry, told the New York Times that the falling sales in China were partly due to the upcoming change in the party hierarchy in the country.
"Gifting is part of the Chinese culture, gifting to people who are in positions of authority, etc." she said. "Until you know how things settle down after the leadership transition, who are you gifting to?"
However, investors in London were encouraged by the overall picture and shares of the company gained 13 percent to £11.36.
"The market has reacted positively and is saying, 'OK, we have been too pessimistic about the sales outlook,' " Catherine Rolland, a luxury goods analyst at Kepler Capital Markets, told the NYT.
But Rolland said the company's performance remained unstable for the moment and hence it would not be possible to come to safe conclusions from the latest report alone.
To contact the editor, e-mail:
Most Popular Slideshows
- Jeremy Lin, Kobe Bryant Among The Top 5 Overpaid Players In The NBA (Part 1 - Western Conference)
- Reasons Why Michael Jordan Is Better Than LeBron James [PHOTOS And VIDEO]
- Dwyane Wade, Joe Johnson, Amare Stoudemire Among Worst Contracts In The NBA (Part 2 - Eastern Conference)
- Brawl-Marred Game in NFL Week 3: Philadelphia Eagles 37, Washington Redskins 34 [PHOTOS]
Join the Conversation
- New Samsung Galaxy Note 4 and Galaxy S5 Android 5.0 L Killer Features, Encryption and More
- Google Release Roundup: New Nexus 6, Nexus 8, Android 5.0 L Launch and Killer Features
- Xperia Z, Xperia ZL, Xperia ZR Android 4.4.4 KitKat Update Guide
- Nexus 8, Nexus 9 Release Date, Device Name And Price Conundrum: What To Expect?
- New Zealand Could Be Next ISIS Target After Australia Beheading Plot, Says Expert
- China Is Also Seizing Disputed Land Along Indian Border
- Xiaomi Mi4 v. Moto X (2014) – Specifications, Features, Release Date And Price Showdown