Will Burberry be the first luxury brand to leave Hong Kong, as protests cause projected losses of US$122 million?
Citing a potential loss of US$122.4 million, Burberry and other luxury brands are being affected by the Hong Kong protests, forcing them to look to other Asian markets
Burberry could take a £100 million (US$122.4 million) hit to its sales in Hong Kong this year, according to investment experts at Jefferies.
In a note to clients, a group of Jefferies analysts said they expect the British luxury brand to be badly affected by protests that have taken hold of the city in recent months, describing the short-term impact on its sales as being “painful”. The group’s analysts estimate that eight per cent of Burberry's total sales are generated in Hong Kong.
“We continue to believe this will force a rethink of its retail footprint here in the next 24 months or so, as sales and sales densities generated hereon will no longer justify selling space of this size [and cost]," the analysts wrote. The note was first reported by The Telegraph.
Jefferies’ outlook for the future wasn't any rosier, either. Its analysts are expecting the current political unrest to result in a “permanent contraction” of Hong Kong as a luxury hub.
… we are sceptical on the likelihood of volumes returning to previous highs any time soon and we expect luxury brands to adapt to the new normal
“In other words, whilst Hong Kong still offers a few advantages on paper … we are sceptical on the likelihood of volumes returning to previous highs any time soon and we expect luxury brands to adapt to the new normal,” its analysts wrote in a report on the Hong Kong market earlier this month.
Long term, however, it believes that luxury brands will be able to recoup the cost of lost sales in Hong Kong by growing elsewhere in Asia.
A spokesperson for Burberry did not immediately respond to Business Insider's request for comment.
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