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Burberry says impact of coronavirus worse than Hong Kong protests | Business


Burberry has said the coronavirus is having a devastating effect on the luxury goods market, as wealthy Chinese consumers stay away from shops and travel restrictions curb overseas shopping sprees.

The British company closed 24 of its 64 stores in mainland China and those that remained open were operating with reduced hours because shopper numbers had plunged 80%. None of the group’s employees in China had been diagnosed with the illness, it said.

What is the virus causing illness in Wuhan?

It is a member of the coronavirus family that has never been encountered before. Like other coronaviruses, it has come from animals. Many of those initially infected either worked or frequently shopped in the Huanan seafood wholesale market in the centre of the Chinese city.

What other coronaviruses have there been?

New and troubling viruses usually originate in animal hosts. Ebola and flu are other examples – severe acute respiratory syndrome (Sars) and Middle Eastern respiratory syndrome (Mers) are both caused by coronaviruses that came from animals. 

What are the symptoms of the Wuhan coronavirus?

The virus causes pneumonia. Those who have fallen ill are reported to suffer coughs, fever and breathing difficulties. In severe cases there can be organ failure. As this is viral pneumonia, antibiotics are of no use. The antiviral drugs we have against flu will not work. If people are admitted to hospital, they may get support for their lungs and other organs as well as fluids. Recovery will depend on the strength of their immune system. Many of those who have died were already in poor health.

Is the virus being transmitted from one person to another?

Human to human transmission has been confirmed by China’s national health commission, and there have been human-to-human transmissions in the US and in Germany. As of 7 February, the death toll stands at 636 inside China, one in Hong Kong and one in the Philippines. Infections inside China stand at 31,161 and global infections have passed 280 in 28 countries. The mortality rate is 2%.

Two members of one family have been confirmed to have the virus in the UK, and a third person was diagnosed with it in Brighton, after more than 400 were tested and found negative. The Foreign Office has urged UK citizens to leave China if they can.

The number of people to have contracted the virus could be far higher, as people with mild symptoms may not have been detected. Modelling by World Health Organization (WHO) experts at Imperial College London suggests there could be as many as 100,000 cases, with uncertainty putting the margins between 30,000 and 200,000.

Why is this worse than normal influenza, and how worried are the experts?

We don’t yet know how dangerous the new coronavirus is, and we won’t know until more data comes in. The mortality rate is around 2%. However, this is likely to be an overestimate since many more people are likely to have been infected by the virus but not suffered severe enough symptoms to attend hospital, and so have not been counted. For comparison, seasonal flu typically has a mortality rate below 1% and is thought to cause about 400,000 deaths each year globally. Sars had a death rate of more than 10%.

Should I go to the doctor if I have a cough?

Unless you have recently travelled to China or been in contact with someone infected with the virus, then you should treat any cough or cold symptoms as normal. The NHS advises that people should call 111 instead of visiting the GP’s surgery as there is a risk they may infect others.

Is this a pandemic and should we panic?

Health experts are starting to say it could become a pandemic, but right now it falls short of what the WHO would consider to be one. A pandemic, in WHO terms, is “the worldwide spread of a disease”. Coronavirus cases have been confirmed in about 25 countries outside China, but by no means in all 195 on the WHO’s list.

There is no need to panic. The spread of the virus outside China is worrying but not an unexpected development. The WHO has declared the outbreak to be a public health emergency of international concern, and says there is a “window of opportunity” to halt the spread of the disease. The key issues are how transmissible this new coronavirus is between people and what proportion become severely ill and end up in hospital. Often viruses that spread easily tend to have a milder impact.

Sarah Boseley Health editor and Hannah Devlin 

The chief executive, Marco Gobbetti, said: “The outbreak of coronavirus in mainland China is having a material negative effect on luxury demand.

“While we cannot currently predict how long this situation will last, we remain confident in our strategy. In the meantime, we are taking mitigating actions and every precaution to help ensure the safety and wellbeing of our employees.”

Burberry said the outbreak had hit trading harder than last year’s anti-government protests in Hong Kong, where sales halved and stores were forced to close.

The decline was linked to a big reduction in the number of Chinese tourists visiting Hong Kong. The two markets make up about a quarter of the company’s sales. Chinese consumers, who do the bulk of their luxury goods shopping overseas, account for 40% of the company’s sales.

Burberry said only domestic spending patterns had been affected in China but the widening travel restrictions meant there was likely to be a reduction in spending across Europe and key tourist destinations in the coming weeks.

It was too early to predict the impact on its profits in the current financial year, which ends in March, but the company said it would update investors in April.

On Friday morning the shares were down just over 1%, at £19.91, taking their loss to almost 15% since the virus came to mainstream attention last month.

An analyst at the Share Centre said investors should expect a significant impact on Burberry’s profits.

“While Burberry was relatively unscathed from the period of protests and political unrest in Hong Kong, it’s apparent there is no escaping the impact of the coronavirus as parts of the country are virtually shut down,” Helal Miah said.

“While no financial impact assessment has been released by management, investors should brace themselves for a material hit to full-year profits.”

Several other luxury goods companies have also said the impact the virus was hampering their businesses in the important region.


Tapestry, the company behind Kate Spade and Coach, said sales had fallen and profits would be lower than previously forecast.

Morningstar’s equity analyst, Jelena Sokolova, predicted the short-term effect of the virus on luxury goods sales would be more severe than the Sars outbreak in 2002-03.

Chinese buyers account for 35% of the spending on designer clothes and handbags, compared with just 2% nearly 20 years ago.



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