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Breakingviews - Corona Capital: Trench coats, Chinese movies

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LONDON/HONG KONG (Reuters Breakingviews) - Corona Capital is a daily column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.

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- Burberry

- Wanda Film

IN THE TRENCHES. Burberry is learning the limits of a Chinese recovery. Sales in Mainland China grew by around 15% in the quarter to June 27. Much of that may have been substitution: Chinese shoppers were unable to travel and so spent at home instead. That contributed to a 45% year-on-year fall in sales in the 13-week period. The Asia-Pacific region declined 10%.

Even though the iconic trench coat maker said things were looking up in June, it still expects sales to decline as much as 20% in the current quarter. The good news for investors is that the group is reducing office space and cutting jobs. But with Burberry finery piling up in warehouses and more having to be sold at a reduced price, protecting the brand will also be crucial. Chief Executive Marco Gobbetti can’t afford for his customers to get used to paying less. (By Dasha Afanasieva)

ROLL CREDITS. Wanda Film, China’s largest cinema operator, is expecting a loss of up to 1.6 billion yuan ($228 million) for the first half of 2020, after the pandemic shut theatres early in the year. New releases have been delayed and production has been halted, so it may take a while to get viewers back into seats. The longer the shutdown lasts, the more audiences may migrate to home streaming solutions. That’s bad news for rivals, and for Hollywood studios aiming scripts at the Chinese market.

Boss Wang Jianlin could raise cash by selling assets. Unfortunately, U.S.-based AMC Entertainment, which the Dalian Wanda Group purchased in 2012, is hovering above bankruptcy, the Wall Street Journal reported. Wanda Film shares are rallying in Shenzhen on hopes of imminent theatre reopening, but a fresh wave of contagion is underway next door in Hong Kong. This season could end in tragedy. (By Jamie Lo)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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