By Eric Sylvers in Milan, Dave Sebastian in New York and Matthew Dalton in Paris
Chinese tourists are disappearing from major shopping capitals
across the U.S. and Europe as a result of the new coronavirus, and
their absence is hurting some of the world's highest-profile luxury
brands.
The outbreak has exposed how dependent high-end retailers in
places such as New York, Paris and Milan have become on visitors
from China, who often spend more than the typical tourist. Estée
Lauder Cos. and Capri Holdings Ltd., which owns the Versace and
Jimmy Choo brands, warned investors this week their financial
results could suffer due to lower sales to Chinese travelers.
A new Galeries Lafayette store on Boulevard Haussmann in Paris,
where there are signs in Chinese and a center where tourists can
claim value-added tax refunds, was largely empty this week.
Normally, more than 1,000 shoppers a day visit the store, many of
them Chinese tourists who arrive by the busload after stopping at
sights such as the Louvre, a salesman said.
On Milan's Via Monte Napoleone, almost every shop has hired a
Chinese-speaking sales clerk in recent years -- but now tourists
from China have virtually disappeared.
"If you think you see a Chinese shopper these days, it's
probably a mirage," said Giovanni Cammaroto, who works in a Fendi
store on the Italian city's most upscale shopping street. "Until a
week ago, we still had large groups of Chinese coming through, but
in the last few days it's been maybe one or two here and
there."
That matters to retailers a lot more than it did in the past.
Almost 170 million residents of China traveled outside the country
in 2018, the most recent year for which figures are available,
according to the U.N. World Tourism Organization, and they spent
about $277 billion. That is more than three times the number of
travelers and five times the amount of spending as a decade
earlier.
Globally, Chinese consumers last year bought nearly $110 billion
worth of luxury goods, including clothes, leather goods and jewelry
-- mostly outside China.
The U.S. economy overall could lose $10.3 billion in Chinese
visitor spending due to the outbreak, according to estimates by the
research firm Tourism Economics. Chinese represent 7% of all
overseas visitors to the U.S., and they spent roughly $34 billion
on travel and transportation services in 2019, including spending
in the U.S. and on U.S. airlines, the firm said.
"We assume that there will be obviously an important reduction
of Chinese travelers -- not visiting the U.S. -- in the next at
least two, three months, and this will have a negative impact,
obviously, on the sales to Chinese tourists," said Fabrizio Freda,
the chief executive of Estée Lauder.
"We assume that there would be obviously an important reduction
of Chinese travelers visiting the U.S. in the next two, three
months, and these will have a negative impact obviously on the
sales to Chinese tourists," said Fabrizio Freda, the chief
executive of Estée Lauder.
The company on Thursday nudged down its full-year financial
outlook to account for the effects the coronavirus will have on its
business.
Capri, whose brands also include Michael Kors, said on Wednesday
that prolonged travel restrictions could decrease store traffic and
pressure Chinese spending, in both China and countries frequented
by Chinese tourists. The company anticipates the outbreak in China
to slash about $100 million in revenue on an adjusted basis in the
fiscal fourth quarter.
"This estimate could materially change if the severity of the
virus worsens, including potential broader impact on our business
outside of China if outbound travel and tourist traffic is further
restricted from China into other countries," said Chairman and
Chief Executive John Idol.
Burberry, the British luxury fashion company, said Friday that
the outbreak is hurting sales in China. "The spending patterns of
Chinese customers in Europe and other tourist destinations have
been less impacted to date but given widening travel restrictions,
we anticipate these to worsen over the coming weeks," Burberry
said.
Tapestry Inc., which owns handbag and accessory brands such as
Coach and Kate Spade, on Thursday said it expects the epidemic to
cut sales by about $200 million to $250 million for the second half
of the fiscal year.
"The escalating coronavirus outbreak in China is now impacting
our business, resulting in both significant traffic declines and
the closure of the majority of our stores on the mainland,"
Chairman and Chief Executive Jide Zeitlin said. "If the situation
further deteriorates or the outbreak further affects demand outside
of the country, this impact could be worse."
Chinese visitors have become a pillar of the European tourism
industry. Italy, their top European destination, had 5.3 million
overnight stays last year from Chinese visitors, who stay in Italy
for almost 13 nights on average, more than for any other country's
tourists, according to the Bank of Italy. Americans are in fifth
place at 9.6 days.
In Paris, the average Chinese tourist spends about EUR1,000
($1,099) during a trip, compared with EUR640 for tourists overall,
according to the Paris Chamber of Commerce. Chinese are some of the
biggest-spending tourists in France, purchasing around EUR4 billion
each year, according to the Bank of France.
Many Chinese consumers prefer to get a Gucci bag in Milan or
Hermès perfume in Paris, where the prices tend to be lower than in
China. Some brands also sell products in Europe that can't be found
in China.
--David Hodari contributed to this article.
Write to Eric Sylvers at eric.sylvers@wsj.com, Dave Sebastian at
dave.sebastian@wsj.com and Matthew Dalton at
Matthew.Dalton@wsj.com
(END) Dow Jones Newswires
February 07, 2020 07:36 ET (12:36 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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