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After Prada & Burberry, retailers issue profit warnings in China

By Don-Alvin Adegeest


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After Prada, Salvatore Ferragamo and Burburry comes luxury retailing group IT Hong Kong, who today issued a profit warning after incurring a foreign exchange loss of nearly 8 million US dollars as the Renminbi depreciates.

Burberry on Tuesday saw its shares fall 4.4 percent as a result. The company operates 65 stores in mainland China, which accounts for about 14 percent of the company's sales. The weaker yuan makes imports more expensive, and shares fell on concerns about export demand for luxury goods makers.

China is the second biggest supplier of UK goods imports, and fashion exports are increasing every season, so the there will an impact for British business that export abroad and rely on Chinese orders.

One benefit to the UK out of the current devaluation is its ability to continue to export services and high value-added manufacturing goods, as Chinese consumers become more affluent and trade barriers are reduced.

China is already the second biggest export market for the EU (behind the US) and Britain's sixth largest overseas market. Investment in the UK by Chinese companies can provide a further boost.