Burberry, like many other fashion houses that are dependent on Asian customers, are still struggling after
China was hit by the huge anti-corruption and anti-extravagance campaign led by President Xi Jinping
The high-end British brand said in its trading update on Thursday that full year profits before tax are likely to be at the bottom of analysts’ expectations this financial year.
Burberry added that in the six months to March 31, group revenue fell 1%, compared with a 9% increase over the same period last year.
And although it counted demand across scarves, ponchos and runway rucksacks rising, it was not enough to save Burberry from some pretty crappy trading figures.
“In an external environment that remains challenging for luxury, we continue to focus on reducing discretionary costs and are making good progress with developing enhanced future productivity and efficiency plans,” said Christopher Bailey, Chief Creative and Executive Officer, at Burberry.
“Meanwhile, brand momentum is strong, digital continued to outperform in the half and innovation in new products is resonating well with our customers.”
Hong Kong and China combined account for 35% of Burberry’s retail revenues so when the Chinese government cracked down on gifting — which has made luxury goods less accessible to the growing Chinese middle class and less acceptable for members of China’s elite after the corruption crackdown.
Still, Bain & Company’s 2014 China Luxury Market Study, which was released at the beginning of last year, showed that China’s luxury-goods industry accounted for 29% of the global market.
Burberry’s shares are trading down by nearly 6% as of 8.27 a.m. on April 14. The Burberry stock is also down by nearly 30% over the year.