Burberry cuts jobs as sales slide despite strong demand in China and Korea

A pedestrian passes the Burberry store as they walk along Regent Street in central London. (AFP/File)
Short Url
Updated 15 July 2020

Burberry cuts jobs as sales slide despite strong demand in China and Korea

  • Burberry employs about 3,500 people in Britain

LONDON: Burberry is to cut 500 jobs after global coronavirus lockdowns sparked a sales collapse, the British luxury fashion group said Wednesday.

Sales tanked 45 percent to £257 million ($322 million) in the company’s first quarter, or 13 weeks to June, from a year earlier, Burberry said in a trading update that sent its share price sliding.

Burberry, which generates a large chunk of its turnover from big-spending tourists, including in airports, has been hit hard by the COVID-19 outbreak that shut shops and grounded planes worldwide — but it has seen a turnaround in key market China.

The London-listed group on Wednesday said it was launching a fresh efficiency drive to generate annualized savings of £55 million with a one-off restructuring charge of £45 million.

“In total the changes we are proposing would impact roughly five percent of roles globally, or 500 out of 10,000. This includes the UK,” a Burberry spokeswoman told AFP.

Around 150 office-based jobs were expected to be shed in Britain, where the group employs more than 3,500 people. The remaining roles will be removed overseas, she added.

The measures are in addition to the company’s existing £140-million cost-cutting program.

Chief executive Marco Gobbetti conceded that demand would “take time” to recover, despite easing lockdowns and the resumption of air travel.

“In the first quarter, sales were severely impacted by the drop in luxury demand from COVID-19 and we expect it will take time to return to pre-crisis levels with the resumption of overseas travel,” Gobbetti said.

“We are encouraged by the improving trends in all regions ... We saw an excellent response to new product launches in recovering economies as well as online.

“Demand for leather goods was particularly strong in mainland China and Korea, bringing new, younger luxury customers to the brand,” Gobbetti added.

Burberry also warned that the group’s second quarter, which runs to the end of September, would also be “materially impacted” by the coronavirus crisis, with retail sales sliding by between 15 and 20 percent.

“In retail, tourist flows are likely to remain negligible, and store operations are continuing to face significant headwinds, with some remaining closed and operating with reduced trading hours,” the company added.

In late morning deals, Burberry shares dived 6.8 percent to £14.51 on London’s FTSE 100 index, which was 0.8 percent higher at 6,231.77 points.

“It’s something of a mixed picture from Burberry,” said Nicholas Hyett, equity analyst at Hargreaves Lansdown.

“Overall sales numbers are predictably ugly, but the pace of recovery is faster than we’d expected with a particularly stylish turnaround in mainland China.”

Turkey on brink of recession as economy collapses

Updated 53 min 32 sec ago

Turkey on brink of recession as economy collapses

  • Consumer debt has increased by 25 percent to more than $100 billion in the past three months

JEDDAH: President Recep Tayyip Erdogan’s popularity is plunging in lockstep with Turkey’s collapsing economy and the country is on the verge of a potentially devastating recession, financial experts have told Arab News.
The value of the Turkish lira has fallen to 7.30 against the US dollar and the central bank has spent $65 billion to prop up the currency, according to the US investment bank Goldman Sachs.
Consumer debt has increased by 25 percent to more than $100 billion in the past three months as the government moved to help families during the coronavirus pandemic, but the result has been a surge in inflation to 12 percent.
With the falling lira and increased price of imported goods, the living standards of many Turks who earn in lira but have dollar debts have fallen sharply.
The economy is expected to shrink by about 4 percent this year. The official unemployment rate remains at 12.8 percent because layoffs are banned, although many experts say the real figures are far higher.
To complete the perfect storm, tourism revenues and exports have been decimated by the pandemic, and foreign capital has fled amid fears over economic trends and the independence of the central bank.
Wolfango Piccoli, of Teneo Intelligence in London, said logic dictated an increase in interest rates but “this is unlikely to happen.”
Piccoli said central bank officials would strive to avoid an outright rate hike at their monetary policy meeting on Aug. 20. “A mix of controlled devaluation and backdoor policies, such as limiting Turkish lira’s liquidity, remains their preferred approach,” he said.
There is speculation of snap elections, and Erdogan’s view is that higher interest rates cause inflation, despite considerable economic evidence to the contrary.