Burberry's fall in sales is just the start
Burberry's falling sales shouldn't have come as a surprise to anyone. And as these charts show, the fashion label's problems are just the beginning of the luxury goods sector's decline.
I've written here several times about the luxury goods industry and our concerns that China's hard landing alongside its changing political environment will affect sales across the board.
This week that view gained some traction as Burberry announced that like-for-like sales are not just flat but fallingand that its profits would be "around the lower end of market expectations". Burberry shares fell 18% and dragged much of the rest of the sector down with them. LVMH was down 4% at one point yesterday and Richemont 6%.
It is possible, of course, that Burberry's stumble will be a one off. But it doesn't seem that likely. Either way, the only surprising thing is that the fall off in the sector is a surprise to anyone at all. Not only has the Chinese hard landing been obvious for some time but it doesn't take much of a leap to see that, as most recent luxury goods growth has come from China, a Chinese slowdown both in economic growth and in the political gift-giving environment was going to force a slowdown in luxury goods growth.
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Also of interest should be the below charts (both taken from Bloomberg with the first put together by Mike Malone from Mint Partners). The first charts the prices of wine, iron ore, Burberry and Richemont and the second iron ore and Chinese stocks.
There are two things to note here. First, while iron ore isn't a commodity most analysts have historically tended to pay much attention to, perhaps its time has come (note too that, while I am not sure I agree, some think it has bottomed it recorded its biggest ever one-day gain yesterday). And second, if you hold shares in Richemont, you might want to think about selling them.
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Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).
After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times
Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.
Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.
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