Shares have fallen and footfall is down for the fashion company
Coronavirus hits Burberry results harder than HK protests
- Luxury brand has temporarily closed more than a third of its stores in mainland China and a noticeable decline in spending across the globe by Chinese tourists as travel restrictions take hold
- Remaining outlets in the country are running with reduced hours and have suffered a significant drop in footfall
- The shares are already down by roughly 15% since the virus came to mainstream attention and no doubt there is a good probability shares will fall lower should the virus spread further
- Recommendation: We continue with our ‘Hold’ recommendation but do view some investors may find them tempting for a long term investment and taking advantage of the lower price
While Burberry was relatively unscathed from the period of protests and political unrest in Hong Kong, there is no escaping the impact of the Coronavirus as parts of the country are virtually shut down. Where there are stores still open, the footfall is far lower than is normally the case and, in other international regions, there is a noticeable decline in spending by Chinese tourists as travel restrictions take hold.
It was always going to be the case that a luxury goods company with so much exposure to the Far East would feel the impact, and investors should appreciate Burberry’s openness on the matter. No financial impact assessment has been released by management, but investors should brace themselves for a material hit to full year profits ending in March. The shares are already down by roughly 15% since the virus came to mainstream attention and no doubt there is a good probability that that shares will fall lower should the virus spread show no signs of slowing.
Before this, we had a neutral Hold recommendation on the stock while noting that management were making good progress on taking more control of the brand and delivering on new lines from the catwalk. However, we were wary of the Hong Kong issues and a slowing Chinese economy. We continue with our Hold recommendation, although some investors may find them tempting for a long term investment by taking advantage of the lower price.
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