Burberry could take a $123 million hit on sales because of the Hong Kong protests, analysts warn

• Analysts say that Burberry could take a £100 million ($123 million) hit to its sales in Hong Kong this year because of ongoing violent protests in the city.
• In a note to clients on Tuesday, a group of Jeffries analysts said that they expect the British luxury brand to be badly impacted by protests because it has fairly large exposure to the Hong Kong market.
• And these analysts aren't expecting the luxury boom times to resume in Hong Kong anytime soon, warning that we could see a "permanent contraction" in the city's role as a luxury hub.
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Burberry could take a £100 million ($123 million) hit to its sales in Hong Kong this year, according to Jeffries.

In a note to clients on Tuesday, a group of Jeffries analysts said that they expect the British luxury brand to be the badly impacted by protests that have taken hold of the city in recent months, describing the short term impact on its sales as being "painful." These analysts estimate that 8% of Burberry's total sales are generated in Hong Kong.

Read more: Hong Kong protesters say they're prepared to fight for democracy 'until we win or we die'

"We continue to believe this will force a rethink of its retail footprint here in the next 24 months or so as sales and sales densities generated hereon will no longer justify selling space of this size (and cost)," the analysts wrote. The note was first reported by The Telegraph.

Jeffries' outlook for the future wasn't any rosier either. Its analysts are expecting the current political unrest to result in a "permanent contraction" of Hong Kong as a luxury hub.

"In other words, whilst Hong Kong still offers a few advantages on paper...we are skeptical on the likelihood of volumes returning to previous highs any time soon and we expect luxury brands to adapt to the new normal," its analysts wrote in a report on the Hong Kong market earlier this month.

Long term, however, it believes that luxury brands will be able to recoup the cost of lost sales in Hong Kong by growing elsewhere in Asia.

A spokesperson for Burberry did not immediately respond to Business Insider's request for comment.

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