As the coronavirus continues to spread across the world, luxury executives are likely to see a major dent in sales.
According to a survey conducted by Italian luxury brand committee Altagamma along with consulting firm BCG and asset management firm Bernstein, the luxury market is forecasted to suffer a sales decline of between 30 billion and 40 billion euros (or $32.5 to $43 billion at current exchange) this year as a result of the outbreak. Meanwhile, high-end fashion players are anticipated to lose up to 10 billion euros in profits, with the majority of respondents expecting an impact in the next three to six months.
“CEOs and CFOs are taking several actions to mitigate, as much as possible, both exposure and risk,” Altagamma researchers reported. “The overall attitude is to hope for the best but prepare for the worst.”
Many firms are grappling with the ripple effects of the deadly coronavirus, which has killed more than 2,600 people and sickened about 79,500.
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With China responsible for producing the bulk of apparel, footwear and accessories sold around the world, many retailers and brands have braced for disruption to their global supply chains. Travel restrictions in the country have impeded manufacturing and production with millions of workers delayed in returning to their factories and corporate offices.
Beyond such setbacks, some companies — including luxury names Burberry as well as Versace parent Capri Holdings and Gucci owner Kering — have opted to shutter their stores in heavily affected regions or cut back on their operating hours, leading to lower sales that are likely to hurt dent their overall fiscal year bottom lines.
Today, the Dow Jones Industrial Average plummeted more than 825 points after new coronavirus cases were reported in South Korea, Iran and Italy — the latter of which has just closed out the biannual Milan Fashion Week.
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