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Market “concerned” over Burberry as Michael Kors owner books US$100mln coronavirus hit

Capri, which also owns Versace and Jimmy Choo, said the impact on revenues could be greater if the situation gets worse

Burberry Group PLC - Market “concerned” over Burberry as Michael Kors owner Capri takes US$100mln coronavirus hit
Burberry made a campaign for the Chinese New Year

 A warning from Michael Kors owner Capri Holdings Ltd (NYSE:CPRI) of a US$100mln hit from coronavirus disruption has turned the spotlight firmly onto rival Burberry Group PLC (LON:BRBY).

The luxury goods sector has been hit hard by measures to contain the epidemic in Asia, one of its key markets.

READ: China could end up spoiling the show for Burberry

Capri, which owns Versace and Jimmy Choo as well, has been forced to close 150 of 225 stores in China, while the rest have seen a “significant” decline in activity.

The fashion designer said the estimate could change if the situation gets worse, including potential problems outside the region if outbound travel is further restricted.

Burberry has made no comment yet on the impact of coronavirus but since its outbreak the share price has dropped by over 10%.

“I think the market is definitely concerned about Burberry's exposure to China,” Patrick O’Brien, research director at GlobalData, told Proactive.

“While it has done well to keep margins stable despite the disruption caused to its Hong Kong operations by the protests there, the coronavirus poses an even greater threat to it, bearing in mind that China is a central part of its strategy.”

The trench coat maker derived 40% of its revenues from Asia last year with the emerging middle-classes of China accounting for a large chunk of those sales.

Analysts at Exane BNP Paribas, however, think any weakness caused by the virus will be an opportunity for investors in the sector.

“Disruptive events, especially those affecting consumer sentiment and people travelling, have an impact on the luxury sector’s valuation but have proven to be historically good times to buy into the sector,” they said in a note.

Burberry shares dipped 1% to 2,021p on Thursday afternoon.

Quick facts: Burberry Group PLC

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Price: 1755 GBX

Market Cap: £7.11 billion

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