Luxury brands and retailers in the UK are bracing for a significant downturn in footfall and sales as the spread of coronavirus amplifies.
Health secretary Matt Hancock declared on Monday that the new coronavirus was a “serious and imminent threat to public health” as the number of confirmed case in the UK rose to eight people. Flights between the UK and China remain suspended. While the human impact remains front of mind, luxury brands and retailers in the UK are beginning to count the cost as spend from Chinese shoppers – who luxury group Walpole says account for 22% of total luxury spend in the UK – stagnates.
The UK managing director of one luxury brand told Drapers: “The footfall impact is self-evident across London and the impact will be sorely felt on a global level given the high spend generated by Chinese consumers. No one knows how long the situation will last, but my best-case scenario estimate would be three months before travel numbers get back up towards last year’s.”
He added: “As a business we have followed health warnings, ensured correct information is sent, shared and regularly updated to all team members. We have also purchased face masks for staff who wish to wear them, but this is non-compulsory.”
Last week Burberry warned the coronavirus outbreak has resulted in a “material negative effect” on luxury demand and sales in the Chinese market. It said 24 of its 64 Chinese stores remain closed as a result of the outbreak, affecting sales in both mainland China and Hong Kong. Meanwhile, Italian outerwear brand Moncler said this week that shopper numbers in its Chinese store have fallen 80% since the outbreak.
The former director of one UK luxury brand said the impact on the luxury industry is “serious”: “Annual results will be seriously affected. We all love the Chinese customer, because they’re a fantastic spender, so I’m sure it will have a negative impact on retail sales, [especially at places like] Bicester Village.
“It’s going to affect the next few months. The next real holiday season [for Chinese shoppers travelling to the UK] is Golden Week in May, and I can’t see much of an improvement before then.”
One finance source agreed: “The luxury brands especially are going to take a hit. Michael Kors said it expects revenues to be down £100m and I can see something similar for Mulberry. Bicester Village is empty and it’s going to have a knock-on effect on manufacturing and sourcing.”
However, Walpole CEO Helen Brocklebank was optimistic the industry would bounce back quickly: “A downturn is unavoidable, but it will be much shorter than in the SARS outbreak in 2003, as the global response has been much quicker to contain the virus.
“It’s a great shame that no one wanted, but we have to ride this through. Business is really robust, we’re coming off the back of 49% growth over the last four years. The luxury sector has been in an incredibly good place.”