China and the neighbouring countries constitute the largest expansion market for luxury brands worldwide. While from LVMH to Tencent, the fashion industry has donated millions of dollars to date to fight the coronavirus threat in APAC, as a precaution, stores have been temporarily closed and International Fashion Fair in China postponed or cancelled. International Fashion Fair has put together the repercussions so far for the fashion and luxury industry caused by the coronavirus outbreak.
From LVMH to Tencent, the fashion industry donates to fight coronavirus threat in APAC
In order to contribute to palliating the rapidly spreading coronavirus outbreak, several global fashion and luxury goods companies are stepping up and donating funds to fight the contagious virus: The LVMH Group has donated 2.3 million US dollars to the cause while the Kering Group has provided another 1 million US dollars. Other major companies are also doing their part: L'Oreal has given 720,000 US dollars to the cause, Swarovski 430,000 US dollars and Estee Lauder and Shiseido 290,000 US dollars each. Meanwhile, Chinese conglomerates Alibaba and Tencent have donated 144 million US dollars and 43.25 million US dollars, respectively.
Chinese online platform Alibaba announced on Monday that it would give loans in the amount of 20 billion yuan - the equivalent of 2.6 billion euros - to small and medium-sized companies that are affected by the coronavirus, provided they have been doing business with Alibaba for more than a year. The company announced that low-interest loans would be made available through the group's financial subsidiary, Ant Financial, and companies from Hubei Province and the rest of the country were to be considered in equal parts. Apart from other trade advantages, interest rates are to be 20 percent below market level.
Brands are temporarily closing shops in China
As a precautionary measure while authorities are assessing the situation and due to decreased footfalls, international brands are closing their retail locations in China for the time being. Chinese New Year spending, always a major event on the retail calendar for fashion brands, already took a hit with China severely limiting the travel of its citizens. An increase of overseas holiday spending of 13 percent compared to last year seems unlikely as luxury brands brace for the impact of the coronavirus.
VF Corp temporarily closes 60 percent of its stores in China
The VF Corporation, home to brands such as Timberland, The North Face, Kipling and others, has just announced that it would temporarily close about 60 percent of its owned and partner stores in China due to coronavirus mitigation efforts. The company also confirmed that the stores currently open had experienced significant declines in retail traffic. “The safety and well-being of our associates and partners in China is our highest priority. Our thoughts are with those people affected by the coronavirus,” said VF CEO Steve Rendle.
Burberry warns of negative impact of coronavirus in China demand
Burberry Group announced that 24 of 64 Burberry stores in Mainland China would be closed while the remaining stores operated with reduced hours due to significant footfall declines. “The outbreak of the coronavirus in Mainland China is having a material negative effect on luxury demand. While we cannot currently predict how long this situation will last, we remain confident in our strategy. In the meantime, we are taking mitigating actions and every precaution to help ensure the safety and wellbeing of our employees,” said Burberry CEO Marco Gobbetti in a statement.
Fashion companies are cutting financial forecast
Given that Chinese customers - shopping both at home and abroad - now account for 90 percent of the luxury goods market growth according to data from Bain & Co. and for more than a third of the value of luxury goods purchases according to the Financial Times, luxury stocks have been plummeting. Accordingly, fashion brands and especially luxury companies have been revising their financial forecasts for the quarter or even the whole year. However, they remain confident that long-term, there is growth to be expected and on track for the region.
Nike shuts down about half of its stores in China due to coronavirus outbreak
Nike Inc. announced a week ago that it has temporarily closed about half of Nike-owned stores in China due to the coronavirus outbreak. Further, the company said it is operating with reduced hours and experiencing lower than planned retail traffic in stores that do remain open. The company expects the situation to have a material impact on operations in China.