Burberry’s chief executive Marco Gobbetti has warned the material negative effect of Covid-19 on luxury demand has ”intensified”, forcing more store closures.
In a statement, Burberry said trading in mainland China has started to improve with the reopening of most of its stores. However, sales in EMEIA (Europe, the Middle East, India, and Africa) and the Americas have fallen materially in recent weeks.
More than 60% of the compny’s stores in EMEIA and around 85% of its stores in the Americas are currently closed with those still open operating with reduced hours and “with very weak footfall”. In total, around 40% of Burberry’s directly operated stores globally are closed, with additional closures expected over the coming days.
Due to trading, travel and social restrictions in recent days and the impact this will have on demand, Burberry 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 the Q4 2020 comparable retail store sales to be around -30%.
Burberry is now implementing mitigating actions to contain costs and protect its financial position, including renegotiating rents, restricting travel and reducing discretionary spending.
The company revealed that it has ”significant” financial headroom, including liquidity of £0.9bn from £0.6bn cash balances, before lease obligations.
“Since our February update, the material negative effect of Covid-19 on luxury demand has intensified and is now impacting the industry in all regions”, Gobbetti said.
“Our primary concern is the global health emergency and we continue to take every precaution to help prevent the spread of the virus and ensure the safety and wellbeing of our employees, partners and customers. We are implementing mitigating actions to contain our costs and protect our financial position, underpinned by our strong balance sheet. We remain confident in our strategy and the strength of our brand and I am exceptionally proud of our teams’ resilience and commitment.”