Daily Insights

Coronavirus Hits Luxury Fashion

By: Nikhil Sharma | Feb 19, 2020

With a death toll over 1600 and no signs of slowing down, the Coronavirus has created a state of frenzy across the luxury fashion industry. According to Bain and Co., China’s luxury spending constitutes almost a third of the total global luxury spending and this unprecedented outbreak poses a serious threat to the bottom line figures for global fashion brands. As a precautionary measure, Shanghai Fashion Week, a prominent event that sets the narrative for the Chinese fashion industry, has also been postponed.

 Global luxury fashion brands such as Bulgari, Micheal Kors, Coach, Burberry, and Louis Vuitton have already taken a hit as the virus has disrupted both production and consumption of inventory. Shuttered stores and scarce customer footfall is a common story for luxury stores across mainland China. Brands are fretting much steeper losses if the condition worsens in the next few months. Supply chains have also witnessed major challenges due to shipping restrictions and quarantined business zones leading to a major hard stop for moving products.

The share price of Canada Goose Holdings has reflected a plummeting trend during the last week following a “material negative impact” as well. The company has cut down its 2020 projected revenues, citing  “the health crisis has resulted in a sharp decline in customer traffic and purchasing activity” with retail stores and e-commerce activity in China experiencing “significant reductions” in revenue. The full-year company growth projection for 2020 is now at 13.8% to 15.0%, as compared to the previous guidance of a strong 20% growth. 

 British luxury brand, Burberry has reported an evident impact in terms of sales, too. Burberry describes this outbreak to be much worse for business than the Hong Kong protests which had nearly halved its sales last quarter. In a quick response to this, Burberry had to shut down a third of its stores in China as foot traffic fell by a whopping 80%.

 The dwindling effect is expected to continue for a foreseeable period of at least two to three months followed by an uncertain duration for recovery. On the bright side, the Chinese government is taking all possible measures and precautions to curb the outbreak. What can the industry expect going forward? Upcoming fashion trends and luxury sale channels will likely also witness some serious paradigm shifts in the next fashion cycle.