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Burberry weak as sales collapse as coronavirus lock downs hit Europe and the US

In total, around 40% of the luxury good chain's stores are closed

Burberry Group PLC -
Trading in Mainland China has started to improve

Burberry PLC (LON:BRBY) shares dropped on Thursday as the luxury goods firm warned that retail sales have collapsed in the last few weeks due to the impact of coronavirus.

In a statement, the FTSE 100-listed group said that from the end of January, when heavy restrictions were imposed in China, sales had dropped by between 40-50%.

Since the virus spread to Europe and the US causing widespread lockdowns, however, this has accelerated to declines of between 70-80%, the firm added.

Burberry said trading in Mainland China has started to improve with the reopening of most of its stores there, but Europe, Africa and the Americas have fallen materially in recent weeks as the pandemic has taken its toll.

“More than 60% of our stores in EMEIA and around 85% of our stores in the Americas are currently closed with those still open operating with reduced hours and with very weak footfall," the group said.

In total, around 40% of its stores are closed and sales overall in the final quarter of the year to end-March 2020 are down by 30%.

Marco Gobbetti, Burberry's chief executive, said:” Since our February update, the material negative effect of COVID-19 on luxury demand has intensified and is now impacting the industry in all regions."

Nicholas Hyett, equity analyst at Hargreaves Lansdown commented: “The closure of stores across Europe and the Americas has inevitably had knock-on effects for sales, and things look set to get worse before they get better.

"There are some glimmers of good news. Chinese sales are recovering after stores reopened – although we suspect the bounce back will be slow. The balance sheet still looks pretty healthy with plenty of cash and borrowing facilities available, helping the group to weather a downturn.

The key question for investors is how long will the current lockdowns last? That’s an unknown and the longer this drags on the more permanent the damage will be.”

In afternoon trading, Burberry shares were 6.4% lower at 1,032.50p.

 -- Adds analyst comment, share price --

 

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