Burberry and Richemont Look to Reopened China After 25% Sales Drop

After a COVID-inspired sales drop, luxury brands Burberry and Richemont see hope in China’s reopening.

The country last week lifted some of its pandemic restrictions, offering a balm to retailers who welcome the return of shoppers from China, the world’s second-largest luxury goods consumer base after the United States

“As we reopened, we’ve seen very promising signs,” said Burberry Chief Financial Officer Julie Brown in a report by The Wall Street Journal (WSJ) Wednesday (Jan. 18). “We’ve seen strong trade coming through.”

Brown added that consumers from China are also shopping in places like Macau and Hong Kong, the report noted.

“We’ve seen early green shoots with the Chinese consumers traveling more to Asian countries,” she said, per the report. “Still very small, but we’ve certainly seen elements of it.”

A spokesperson for Switzerland-based Richemont told WSJ the company is “experiencing a strong retail rebound” in China as the restrictions lifted.

The “green shoots” Brown mentioned follow a fallow period for Burberry and Richemont in China, as revenue from the country fell by nearly a quarter for both retailers in the last three months of 2022.

A report by the Financial Times — which took a more glass-half-empty approach to the companies’ earnings — included a comment from the Burberry finance chief that noted “additional pressure” on the company’s traffic in December due to a COVID surge.

During the nearly three-year absence of Chinese tourism, a number of luxury retail locations in Europe closed. When China announced the easing of its travel restrictions, some luxury brands’ stocks climbed by as much as 2.5% as investors anticipated a return of those shoppers, PYMNTS noted last month.

Prior to the pandemic, Chinese consumers purchased roughly a third of the world’s luxury products, according to a Bain & Co. estimate, which also projected that number could reach 40% by the decade’s end.

“For companies like Hermès, which has in recent quarters seen sales in Asia grow by double digits, and LVMH, where Asia-derived sales have been improving at single-digit rates, the natural extension would be that the spending would continue as Chinese tourists flock abroad,” PYMNYS wrote earlier this month.

Luxury retailers like LVMH showed remarkable resilience last year, even as other retail brands struggled. The company’s share price topped 800 euros Tuesday (Jan. 17), a milestone that makes the fashion/luxury company Europe’s most valuable business and gives CEO Bernard Arnault an even greater lead as the world’s richest person.

For all PYMNTS retail coverage, subscribe to the daily Retail Newsletter.