Poor Burberry earnings point to problems for luxury market

A salesgirl walks at a Burberry store in Chongqing Municipality, China.

Shares of Burberry are down more than 18 percent this morning. The luxury retailer slashed profit forecasts and warned that the luxury goods market is headed for hard times.

The main cause, says Milton Pedraza, CEO of the Luxury Institute, is global slowdown. Even while other retailers struggled, luxury retailers were boosted by sales from overseas, especially in Asia.

"China had been the engine of growth for the last several years," says Pedraza, "[and] it generated a tremendous number of tourists who had been holding up the European luxury market."

The Chinese slowdown, therefore, has not only affected the luxury market there, but also in Europe.

Luxury retailers could react in a number of ways, says Pedraza, from lowering their prices to reducing their inventory. Most importantly, though, he thinks they will "go after retaining customers who have purchased before," hoping to increase customer culture and keep previous customers coming back.

 

About the author

Stacey Vanek Smith is a senior reporter for Marketplace, where she covers banking, consumer finance, housing and advertising.

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