Still, a 10 percent drop in sterling could add as much as 90 million pounds to Burberry’s pretax earnings, according to MainFirst Bank AG analyst John Guy. Burberry gets about 10 percent of its revenue in the U.K., and 60 percent of that comes from tourists, estimates Citigroup analyst Thomas Chauvet. Burberry shares rose 5.9 percent in London Wednesday, the most in more than three months.
A surge in tourism to London could hurt Tokyo’s fashionable Ginza shopping district. Chinese visitors to Japan increased 31 percent last month compared with a year earlier, though visits have slowed recently as the yen has strengthened.
‘Body Punches’
Switching travel to the U.K. and Europe from Japan could save Chinese shoppers as much as 40 percent with the currencies’ shift against the yuan, according to Bloomberg Intelligence analyst Michelle Ma. She expects to see changes to the travel pattern of mainland Chinese “straightaway” as it is the middle of their summer holiday season.
“If there’s no certainty that the yen’s advance will end, it would stop people from coming to Japan and we’d lose them to somewhere else,” said Yoko Yamazaki, general manager of duty-free shops operator Laox’s corporate planning department. As the yen rises, the stronger exchange rate acts “like body punches in boxing,” Yamazaki said, prompting Chinese shoppers to buy fewer expensive items like red coral ornaments worth more than 10 million yen ($100,000).
It’s also bad news for Macau casinos, as the yuan depreciates against the Hong Kong dollar, which is pegged to the greenback. That could prompt fewer Chinese to visit the gambling oasis, according to JP Morgan analyst DS Kim. In Hong Kong, retailers such as Chow Tai Fook and Sa Sa International Holdings Ltd. are grappling with the yuan’s weakness.
For now, many of those Chinese will join Zihao Xie in shopping for friends and family on London’s Oxford Street. “I can now buy luxury brands for them so they have got some nice presents,” he said.