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Luxury's having a tough time. Burberry is the latest brand to announce a decline in profits, predicting that this year's overall earnings will be on the lower end of analysts' expectations.
In a statement released today, the British luxury company said that declining tourism in Hong Kong and Europe has knocked sales down by 1% to about $2.1 billion, in the second-half. The most significant change comes from continental Europe where tourism, and thus shopping, has dropped significantly due to the recent terrorist attacks in Paris and Brussels.
The company's stock also fell by about 7.9% following the trading update this morning. Christopher Bailey, Burberry's CEO and creative director, said that the external environment remains "challenging" for the luxury market as a whole.
And he's right. In December, Prada announced a nine-month decline in net profits, which led the brand to delay, and even cancel, the opening of 80 stores in 2015. And just this week, LVMH, the parent company to brands like Louis Vuitton, Céline, and Fendi, announced that growth in their revenue from fashion and leather goods was at a standstill due to similar decreased tourism in France.
Despite these setbacks, Bailey said that Burberry will continue to look ahead, "We continue to focus on reducing discretionary costs and are making good progress with developing enhanced future productivity and efficiency plans."
He also adds that "brand momentum is strong, digital continued to outperform in the half and innovation in new products is resonating well with our customers."