February 4, 2020 / 6:13 PM / 2 months ago

Italy sees fashion sales hit due to China virus, Pandora warns of business freeze

MILAN (Reuters) - Italy’s fashion industry expects revenues to fall 1.8% in the first half of 2020 due as the coronavirus outbreak hits sales, an industry official said on Tuesday, as jewellery maker Pandora warned business in China had ground to a halt.

FILE PHOTO: A man wearing a face mask walks in a deserted shopping area in Jiujiang, Jiangxi province, China, as the country is hit by an outbreak of the novel coronavirus, February 2, 2020. REUTERS/Thomas Peter/File Photo

Several high-end brands also said they had shut down stores in China, the world’s biggest luxury goods market, stoking concerns that the industry could face significant damage to sales if the virus is not contained quickly.

Carlo Capasa, head of Italy’s national fashion chamber CNMI, said the coronavirus outbreak would cause turnover for the Italian industry to fall by 1.8% in the first six months of the year, mostly in the first quarter.

Home to the likes of Prada (1913.HK), Armani and Moncler (MONC.MI), Italy is second only to France among European countries for fashion and luxury goods sales. Total turnover for the sector was 90 billion euros last year, or about 5% of gross domestic product in the euro zone’s third biggest economy, according to CNMI figures.

“In December the outlook for 2020 was a return to our historical annual growth rate of around 3%, but all that changed with the China virus spreading,” Capasa said.

“The full economic impact can’t be calculated yet, but we would be lucky if the sector grew 1% this year.”

Chinese shoppers fuelled a decade of growth for the luxury goods industry and today account for 35% of the sector’s global sales, estimated at 281 billion euros last year by consultancy Bain & Co.

But the coronavirus has seen parts of China put under quarantine, flights halted and many Chinese cancel trips abroad, including during the New Lunar Year holiday, a peak retail season in China and overseas.

Companies around the world have warned that the outbreak could disrupt supply chains or hurt bottom lines.

Ralph Lauren Corp (RL.N) said on Tuesday it has shut about half of its 110 stores in China due to the disease, which has so far killed over 420 people.

Tiffany & Co, bought recently by LVMH (LVMH.PA), said it had also temporarily closed several stores in affected areas.

“As I sit here and watch the Chinese business, it is in a standstill mode, I mean there’s pennies being sold,” Pandora’s Chief Executive Alexander Lacik told Reuters on Tuesday, describing an “unprecedented” drop in business.

The Danish company, about 10% of whose annual sales are to Hong Kong, China and its tourists, has closed 70 of its 240 shops in China on government orders, customer traffic at other stores, mostly in shopping malls, is “next to none”, Lacik said.

Capasa said three Chinese designers had been forced to cancel their shows at Milan’s Women’s Fashion Week on Feb. 18-24, and about 1,000 Chinese people who had been expected to attend would now likely not show up.

“The Chinese are big spenders, for us this is quite relevant,” he said.

Additional reporting by Stine Jacobsen in Copenhagen, Uday Sampath Kumar in Bangalore; Editing by Catherine Evans

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