Burberry and its fashion rivals face a summer of discontent. European lockdowns are starting to ease, and Chinese shoppers are lining up outside their stores in the Middle Kingdom. But there’s no sign that spendthrift travellers are about to resume flying in droves.
The British fashion group, which was in the middle of a turnaround before the pandemic, on Friday reported a 27% fall in comparable stores sales in the quarter to end March compared with the same period a year earlier. More recently, however, clients in mainland China have been queuing to shop at reopened luxury stores, be they Burberry’s or those of bigger rivals Hermes International and LVMH.
This is encouraging for the UK fashion company, which depends on Chinese buyers for some 40% of its global sales, above an industry average of roughly 30%. But it’s probably not enough to save the summer season. Half of the Chinese shoppers’ luxury purchases are made abroad, with Europe and Hong Kong their most favourite destinations.
Europe, where stores have started to gradually reopen from mid-April, will be off limits to Asian spenders due to current curbs to long-haul travel. But many won’t return for a while even if restrictions are lifted. More than 80% of 4,000 consumers surveyed this month by UBS in China, Japan, South Korea and Britain said they had no plans to leave their country for at least three months. This points to a potentially slower recovery for the sector.
Without tourists’ purchases, luxury groups will struggle to sell in-store collections, which were planned before the health emergency erupted. The forced closure of stores around the world, has created a build-up of merchandise. And the reopening of European stores is coming months after the usual start of the spring-summer collections.
Burberry is taking a cautious approach. It took provisions worth 68 million pounds against clothes and bags that will no longer sell at full value. Other luxury players may have to follow suit. Easing lockdowns will help but a more sustained rebound in their fortunes will have to wait until travel becomes less of a rarity.