Much is being made of Burberry’s 11 percent quarterly sales growth, posted yesterday. In most cases, for most brands, double-digit gains would be reason to celebrate, particularly given the current global economic strain. Some luxury insiders, however, see the number as 2 percent less than analysts had predicted and therefore a sign the high-end industry needs to brace for what could be the beginning of a very rough retail patch. In its previous two fiscal quarters, Burberry’s growth had been exceptionally healthy: 21 percent at the end of 2011, and even though falling short of analyst projections last quarter, a still strong increase of 15 percent.
It may be true that yesterday’s figures are a harbinger of slowed growth for the sector, but that’s not to say every luxury brand in every luxury vertical in every regional luxury market is headed for struggle. In fact, going strictly by Burberry’s numbers, in addition to China and greater Asia, most European states (France, U.K., Germany) performed quite well over the past three months. Burberry was also quick to point out non-market factors affected their revenue this period, such as the recent closure of several product licenses and the shuttering of two mainline brick and mortar locations.
Another headache this week in the luxury realm came courtesy of the Chinese government. On Monday, state leaders announced an official reining in of bureaucrats’ notorious use of company money to purchase big-ticket items. Though predominately covering the “three publics” (cars, dining, travel), the new ban — which goes into effect on October 1st — also extends to clothing, handbags, jewelry and other retail indulgences. Watches have long served as one of the most important gifts and status symbols among Chinese men; this year, China even overtook the U.S. as the most consumptive country of these sometimes five or six-figure accessories. But with sales in that vertical already weakening, this new regulation is anything but welcome.
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