Burberry Group PLC, which has been in the crosshairs for burning tens of millions of dollars of its products, is far from the only firm to destroy unsold goods to maintain the exclusivity and luxury mystique of their brands.
In its annual report the British fashion firm acknowledged that it had burned unsold clothes, accessories and perfume worth ￡28.6 million (US$37 million).
More than one-third of the products destroyed were perfumes, which the company said was due to the rupture of its license with US fragrances manufacturer Coty Inc.
Since Thursday, when that piece of information buried in its 200-page report came to light, Burberry has come under scrutiny on social and news media for the practice.
However, industry experts say Burberry is far from alone.
“It is a widespread practice in the fashion industry, it’s commonplace,” said Arnaud Cadart, a portfolio manager at Flornoy & Associates who has previously followed the luxury industry as an analyst.
He said very few luxury brands hold sales to get rid of stock and instead destroy unsold products. Fashion items with short cycles increases the amount of leftover stock and items destroyed.
“Once you do some private sales to employees and journalists, it’s dumping,” he said.
Burberry on Thursday said it had measures in place to minimize its amount of excess stock, that it takes its environmental obligations seriously and harnesses the energy from burning the items.
“On the occasions when disposal of products is necessary, we do so in a responsible manner and we continue to seek ways to reduce and revalue our waste,” the firm said.
The destruction of goods is reflected in financial accounts, but in a manner “difficult to comprehend, often under an entry ‘impairment of inventories,’” Cadart said.
French luxury giant LVMH Moet Hennessy Louis Vuitton SE said in its latest annual report that “provisions for impairment of inventories are ... generally required because of product obsolescence [end of season or collection or expiration date approaching] or lack of sales prospects.”
Hermes International SCA’s annual report also spoke of product “obsolescence,” notably finished seasons or collections.
“Yes, there is a moral, ethical question as well as protecting the environment, but from a legal point of view, the brands are destroying genuine products which they own, products that are at the end of their life or the season, and they can do what what they want” with them,” said Boriana Guimberteau, a specialist on intellectual property law with law firm FTPA.
Guimberteau said a tenet of maintaining brand image is that exclusive products should be sold in exclusive distribution networks and that markets should not be flooded with end-of-season products.
‘BIG LOSS’: This year might see the last generation of Huawei’s Kirin chips, as their production would stop next month because they are made using US technology Chinese tech giant Huawei Technologies Co (華為) is running out of processor chips to make smartphones due to US sanctions and would be forced to stop production of its own most advanced chips, a company executive has said, in a sign of growing damage to Huawei’s business from US pressure. Huawei, one of the biggest producers of smartphones and network equipment, is at the center of US-Chinese tension over technology and security. Washington last year cut off Huawei’s access to US components and technology, and those penalties were tightened in May, when the White House barred vendors worldwide from using US
’WHITE BOX’: The open platform would give local firms access to Cisco’s cloud-based mobile network to develop 5G telecom equipment and tap into the global market The Ministry of Economic Affairs (MOEA) yesterday introduced a new 5G “open lab” in collaboration with US-based information technology and networking giant Cisco Systems Inc to address the rapidly growing “white box” 5G networking equipment market. The open lab will be a platform where Taiwanese manufacturers can access Cisco’s cloud-based mobile network to develop their own 5G telecom equipment, such as small-cell base stations, network switches, modems and Internet of things (IoT) devices, a ministry statement said. The open platform would allow Taiwanese manufacturers to tap into the lucrative 5G telecom equipment market, which was previously monopolized by Nokia Oyj, Ericsson AB
CORPORATE SCANDAL: Cathay Life has invested NT$13.3 billion in Bank Mayapada since 2015, but the latest loss of NT$8.8 billion has completely written off its investment Cathay Life Insurance Co (國泰人壽) yesterday said it would recognize an investment loss of NT$8.8 billion (US$298.1 million) in Indonesia’s Bank Mayapada Internasional Tbk PT due to concerns about the lender’s operations amid a corporate scandal. The company said it would revise its earnings result for June, from a net profit of NT$6.52 billion to a net loss of NT$520 million, its first monthly loss over the past 17 months. After booking an investment loss of NT$5.2 billion in Bank Mayapada earlier this year, Cathay Life has so far recognized total investment losses of NT$14 billion in the lender, executive vice president
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday reported that revenue last month expanded 25 percent annually, but fell 12.8 percent month-on-month to NT$105.96 billion (US$3.59 billion). In the first seven months of this year, the chipmaker’s revenue surged 33.6 percent to NT$727.26 billion, compared with NT$544.46 billion a year earlier. TSMC has said it aims to grow its revenue by more than 20 percent this year. The company has since May 15 stopped taking new orders from Huawei Technologies Co (華為), its second-biggest customer after Apple Inc, due to the US’ restrictions on exports containing US technologies. TSMC has no plans to