Burberry's Demand in Asian Market Decreases

British fashion company Burberry Group PLC confirmed that demand for luxury goods in Asia is declining, but the slowdown in sales growth has not been as severe as investors expected.

On Thursday, Burberry said that in the six months ended September 30 of this year, related sales revenue in the Asia-Pacific region increased by 8% year-on-year, compared to 52% in the same period of last year. The sales revenue in Asia Pacific accounted for more than one-third of the company’s total revenue.

Stacey Cartwright, Burberry's chief financial officer, said that the Chinese leadership is about to change.... But when the market recovers, it's not that we have the final say. Burberry is famous for its classic trench coats, checkered Haymarket handbags and avant-garde fashion design.

Cartwright added that store traffic has fallen in recent months, but the average consumer spending per customer has increased. This reflects the shift of demand to high-end goods in the luxury market. She said: The quality of our sales is improving.

Cartwright said: Some of the reasons for the slowdown in sales growth are related to the macro economy. If you consider the recent data released by some of our important markets on economic growth, luxury goods industry and international travel, you would not be surprised.

Overall, the sales growth rate of the same stores in Burberry fell to 1% in the second quarter of this year. In the first quarter, this growth rate was 6%, and in the second quarter of last year it was as high as 16%. This indicator only counts stores that have been open for more than one year. The growth rate of 1% was higher than that of Burberry's previous expectations and caused its stock price to rise.

The company's shares listed on the London Stock Exchange rose 133 pence to 11.36 pounds, an increase of 13%.

Due to concerns about the slowdown in Asian business growth, Burberry made an unexpected profit warning last month, which shocked the luxury goods industry. This caused the Burberry stock price to plunge more than 20% within a day, and its European mainland rival's stock price has also been hit.

This also triggered market concerns about the end of the luxury goods boom. In this wave of luxury goods boom, although the economic recession continued for many years, high-end luxury retailers still announced high sales growth and invested heavily in store expansion, especially in mainland China.

As the world's largest and fastest-growing luxury goods market, China has become the most important engine supporting the growth of the global luxury goods market. The wealthy Chinese are buying expensive goods. However, there are signs that China's economy is showing signs of weakness and that the change of leadership has created uncertainty, which has led analysts to make predictions that the luxury bubble is about to burst.

This week in Hong Kong, luxury retailers that had hoped to see significant increases in sales revenue during the National Day Golden Week were disappointed. Compared with the same period of last year, sales of watches and jewellery declined.

Burberry also said that in April 2013, Interparfums SA's authorization to sell the company's perfume and beauty products will expire. By then, Burberry will start operating these two businesses and fully control its brand. This will bring a fifth business to Burberry based on the accessories, women's, men's and children's wear business.

Burberry said that this business has significant opportunities for accelerated growth.