Update published February 12, 2020:
Burberry, the British heritage label, recently issued an urgent warning about the material effects of the coronavirus on the luxury market, and updated its own outlook for fiscal year 2020 as well. The announcement scrapped their positive sales forecast to a low single digit percentage increase envisioned in the brand’s third quarter trading update released last month. Moreover, they did not discuss any updates on either their previously scheduled Shanghai runway show in April or their first social retail store in partnership with Tencent. Along with their warning, however, Burberry only touched upon the “mitigating actions” they are taking to compensate for losses due to the coronavirus, but did not discuss further details.
Update published January 24, 2020:
As concerns about the coronavirus escalate, many Chinese tech companies are joining in to help. For example, Tmall, JD.com, and others have blocked vendors from jacking up prices on facial masks and other health and cleaning supplies. Also, in responding to the Wuhan city lockdown announced recently, cross-border e-commerce BorderX Lab has prepared plans to deliver supplies to Chinese consumers threatened by the coronavirus. And to minimize customers’ costs, several airlines, as well as China’s state railway company and online travel agencies, are offering refunds for trips related to Wuhan.
The timing of the outbreak during Chinese New Year, a time when Chinese travelers on the mainland and overseas make their way back home, marking the “world’s largest human migration,” only added to the spread of the virus. A total of seven cases have been confirmed outside of China, including Thailand, Japan, South Korea, and the US, updated by financial media Caixin. On Thursday, January 23, WHO clarified that the virus is not yet a global emergency. However, it’s likely to continue impacting not only travel and duty-free industries, which typically expect an increase in sales during the holiday, but also luxury retailers overseas who should brace themselves for potential hits.
Update published January 23, 2020:
Since Tuesday, when Jing Daily reported on the decline of Western luxury groups’ stock prices due to the coronavirus, prices have continued to spiral downward as the virus continues to spread in mainland China and beyond its shores. LVMH and Kering’s stock prices, which shed 25.2 euros and 36.8 euros respectively as of the close of the European stock market today, reached a 30-day low. The question is: how low will they go?
The Chinese public’s growing concern that any official action by the Chinese government, which states as of Wednesday, January 22, that there are 571 reported cases of the coronavirus and 17 deaths, has been affected by delays and censorship on the local level.
Meanwhile, the government has put an unprecedented quarantine on Wuhan, the epicenter of the coronavirus, with all public transportation, including airports and trains, that keeps the massive city of 11 million people running to a halt. And now, with four more nearby cities announcing similar measures, the concern is how to stop the global spread of the coronavirus and what lingering damage it may cause.
Original article published January 21, 2020:
The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.
China’s new strain of the coronavirus, which has already spread to at least three other countries and could spread further during the Chinese New Year holiday travel rush, has sent European luxury stocks tumbling, including the likes of LVMH, Kering, Richemont, and Burberry. Official reports say that coronavirus, a respiratory virus that causes pneumonia-like symptoms and that can be passed in between humans, has already killed four people and infected nearly 291 in China, according to state media China Daily on Tuesday. But the actual outbreak might prove worse.
An estimate by scientists from University of Hong Kong said today that nearly 1,700 people in Wuhan, China — where the virus outbreak started — may have also been infected. As China’s 40-day Spring Festival travel season just kicked off, health experts are also discouraging people to travel to Wuhan, though major cities like Beijing and Shanghai already have confirmed cases. Given the increasing concern of a global outbreak, stocks of European luxury brands that rely heavily on the Chinese market have slumped as a result. Compared to last Friday, LVMH and Burberry’s stock fell 3%, while Kering lost over 4%, and Richemont’s declined almost 5.5%.
The Jing Take:
Luxury veterans might still remember how the SARS outbreak in China left the industry in despair in the early 2000s, leading to billions in losses and cost the Chinese GDP growth by nearly 1%. At the moment, however, it’s difficult to predict how much economic damage a potential coronavirus outbreak will be for China, as well as the global economy. For Western luxury brands, there is not much they can do at this point other than paying close attention to how their consumers are reacting and pray that the Chinese government has potential epidemic under control, as it claimed this Monday. Time will tell.