Raining on Whose Parade? Hong Kong Protests Hurt Burberry Sales

Hmmmm. What possible connection could there be between protests by Hong Kong protesters demanding freedom and a British luxury brand?

Well, it turns out that Hong Kong represents 10 percent of Burberry's global sales. Which raises some pertinent points about strategy in the age of globalization and the convergence of seemingly unconnected events.

Basically, nothing is safe from anything. In a post-industrial economy, where perception and and symbolism create value, disparate factors combine to influence success or failure. No one is immune and no brand is sacrosanct.

Those looking to attract attention are naturally drawn to those who already have commanded it. It is an efficient means of generating focus. And often, the more obscure the connection, the more powerful the message.

Similarly, enterprises looking to expand and achieve global scale must confront the reality that their ambition imposes. With increased opportunity comes increased risk. It all comes down to preparing for the unexpected because your disruption is someone else's achievement. JL

Andrea Felsted reports in the Financial Times:

Sales from stores open at least a year fell in Hong Kong, which accounts for 10 per cent of Burberry’s sales and enjoys high margins.
Burberry sales were hit by the protests in Hong Kong, but the UK luxury goods group said underlying retail sales still rose over the past three months, partly thanks to demand for a £900 poncho.Total sales climbed 15 per cent to £604m and retail sales from stores open at least a year were up 8 per cent, better than analysts’ forecasts, in the three months to December 31.
But Burberry said that Asian sales growth slowed to a level in the low single-digit percentage points.The group blamed this on disruption in Hong Kong after the protests closed off main shopping districts on the island. Sales from stores open at least a year fell slightly in Hong Kong, which accounts for 10 per cent of Burberry’s sales and enjoys high margins.
Carol Fairweather, finance director, blamed the problems on shoppers steering clear of the area during the protests.
“People were not coming out shopping in Hong Kong or travelling to Hong Kong,” she said, noting that a significant amount of business in the region is from shoppers coming from outside the island.
“It was more about market sentiment than it was the specific demonstrators themselves,” she said.
Burberry said, however, that demand in mainland China and South Korea remained “robust”, with sales growth in a mid-to-high single-digit percentage.

Global luxury brands are suffering after years of soaring revenues and profits. There are concerns that demand from Chinese shoppers is stalling because of a slowing domestic economy and a tough anti-corruption campaign. The industry also faces the effects of the Russian crisis and the potential for high-spending tourists to curb travel because of the Ebola outbreak.

“Global events seem to be conspiring against luxury retailers at present. Lacklustre growth in the Asia-Pacific region will be particularly concerning to Burberry given its strategy of tapping into emerging markets,” said David Alexander, a consultant at Conlumino, the retail research group.
However, Burberry said it had been able to offset the dip in traffic in Hong Kong to some extent through efforts to increase the likelihood of store visitors making a purchase, and pushing up average selling prices. This meant that like-for-like sales in Hong Kong fell by a low-to-mid single-digit percentage, said Ms Fairweather.
Had Burberry not been hit by the disruption in Hong Kong, Asian underlying sales would “still have been growing nicely at around the same level [as in the second quarter], high single-digits,” she said.However, sales growth from Chinese consumers, both at home and when they travelled, also slowed.
Elsewhere, Burberry said sales in the Americas and Europe rose by a double-digit percentage, helped by demand for raincoats, cashmere scarves and ponchos, and its Christmas campaign featuring Romeo Beckham.
The ponchos, worn by celebrities including Sarah Jessica Parker, Rosie Huntington-Whiteley and Victoria Beckham, were “one of our standout successes, coming from the runway and filtering right through the festive period,” said Ms Fairweather.
The company said that while it had seen a “modest improvement” in the exchange rate environment, this had been more than offset by the slowdown in Hong Kong.