Burberry warns of 80% sales fall amid coronavirus outbreak

burberry

Fashion brand Burberry has warned its sales may sink by up to 80% following the coronavirus outbreak.

The London-listed company said trading has “deteriorated significantly”. It added comparable retail store sales were tracking between -40% and -50% over the last six weeks.

Burberry trading

While trading in Mainland China has started to improve with the reopening of most of its stores, sales in EMEIA and the Americas have fallen materially in recent weeks.

More than 60% of the brand’s stores in EMEIA and around 85% of stores in the Americas are currently closed; those still open are operating with reduced hours and with very weak footfall.

In total, around 40% of its directly operated stores globally are closed with additional closures expected over the coming days.

Following the significant escalation of governmental trading, travel and social restrictions in recent days and the inevitable impact this will have on demand, the firm is expecting its comparable retail store sales in the final weeks of the year to be within the range of -70% to  -80%.

As a result, it now expects Q4 2020 comparable retail store sales to be around -30%.

“We are implementing mitigating actions to contain costs and protect our financial position; including renegotiating rents, restricting travel and reducing discretionary spending”, the company said.

Health concerns

“Our primary concern is the global health emergency and we are taking appropriate measures to help prevent the spread of the virus and ensure the safety and wellbeing of our employees, partners and customers, while following government guidelines in all our markets.

“These include implementing home working for the majority of our office-based teams and reducing work patterns and introducing specific shift rotations for teams whose roles cannot be performed remotely as well as putting in place strict protocols for hygiene and social distancing.

“We remain confident in the strength of our brand and our strategy. Until 24 January 2020, the consumer response to the new product was very positive and as such, we are protecting key growth initiatives in preparation for a recovery in luxury demand.

“We have significant financial headroom including liquidity of £0.9bn from £0.6bn cash balances (before lease obligations) and a £0.3bn Revolving Credit Facility.

“In terms of leverage, at September 2019, we had £0.4bn of net debt including lease liabilities and we are operating with a net debt including lease liabilities to EBITDA ratio within our targeted range of 0.5x to 1.0x.”

The announcement anticipates and replaces the company’s planned extraordinary trading update in April. Its next scheduled announcement is when it publishes its full year results in May 2020.

Burberry’s shares were down 2% at £10.80 on Thursday morning. They have fallen from a recent high of more than £23 since January.