There’s arguably no sector of the retail industry that has more cross-currents than luxury goods. For every company that has defied the COVID-driven economic storm with positive results there’s another one that has not. And for every company that has reported those positive results, there’s a second wave of the pandemic knocking at the door.
Case in point: Burberry. Its earnings, announced Thursday (Nov. 12), showed a precipitous drop in profits, but a return to sales growth. Other good news included data that showed the British luxury icon was attracting new and younger customers during the recovery. However, it warned that current and even future lockdown measures in the EU would hurt. Ten percent of its stores are currently closed.
“Though the momentum we had built was disrupted by COVID-19 at the start of the year, we were quick to adapt, while making further progress against our strategy,” said Burberry CEO Marco Gobbetti. “While the virus continues to impact sales in EMEIA, Japan and South Asia Pacific, we are encouraged by our overall recovery and the strong response to our brand and product, particularly among new and younger customers. In an environment which remains uncertain, we will continue to deliver exceptional product, localize plans and shift resources, while leveraging the strength of our digital platform to inspire customers.”
By the numbers, comparable-store sales fell 6% in the three months to Sept. 26, an improvement on the 45% slump in the previous quarter during which the pandemic severely impacted the luxury-goods sector.
That strong digital platform mentioned by Gobbetti has been a key development in the luxury space. Somewhat lost in the flurry of election news last week was Cartier’s investment of $550 million in online luxury marketplace Farfetch. The investment was matched by Alibaba, which is an endorsement of luxury spending in China.
Richemont’s earnings, announced Nov. 6, showed that its sales for the first half of the year decreased by 26 percent. But again the counter-trend showed that Q2 sales were down only 6 percent following a 47 percent decline in the first quarter. Sales in China were up by 78 percent, which mitigated declines in the EU and the US. Online retail channel sales were down only by 4 percent for the first half of the year compared to 2019.
“A strong presence in China and an acceleration in digital initiatives have partially mitigated the consequences of temporary store closures and a halt in tourism worldwide,” said Richemont chairman Johann Rupert. “Our Maisons (retail stores) were swift to build on past investments in digital infrastructure and maintain direct engagement with clients, contributing to our Maisons’ resilience, with online sales growing at a triple digit rate. Our efforts to improve the quality of our distribution networks and inventories at our multibrand retail partners also helped lessen some of the negative impacts of the pandemic.”
Again the retail cross-currents exist. While the Richemont and Cartier maisons were adapting, legendary Italian goods retailer Furla filed for Chapter 11 bankruptcy and said it would focus on eCommerce as one of its recovery strategies.