The brand value of some of the world’s biggest companies could lose up to €1 trillion as a result of the coronavirus pandemic, reveals the latest analysis by valuation consultancy Brand Finance. Luxury fashion brands are set to be among those worst hit by the crisis alongside airlines and hotels.
The 2003 SARS outbreak, which infected over 8,000 people and killed 774, cost the global economy an estimated €50 billion.
CEO David Haigh comments: “The COVID-19 pandemic is now a major global health threat and its impact on global markets is very real. Worldwide, brands across every sector need to brace themselves for the coronavirus to massively affect their business activities, supply chain and revenues in a way that eclipses the 2003 SARS outbreak. The effects will be felt well into 2021.”
The firm has assessed the impact of the outbreak based on Enterprise Value on 18 March compared to 1 January 2020 and has then estimated the likely impact for each sector. Its findings reveal that Europe’s top 100 brands are estimated to drop in value by 13 per cent following the outbreak.
Luxury apparel brands are strong performers in the Europe Top 100 and all of the large luxury apparel brands have risen in value this year. Gucci, Louis Vuitton, Lancôme and Chanel all achieved significant brand value growth despite the slowing demand in China and a generally weakening growth last year.
However, the luxury industry is feeling immediate effects from the outbreak, as highest spend comes from China where the outbreak began in December 2019. As the health epidemic takes its toll on the high street and forces shops to shut, the impetus for luxury purchases will be the first to fall.
Haigh adds: “The harsh reality is that many brands are not going to make their 2020 targets due to the unprecedented challenges of the Coronavirus outbreak. It is hoped that lenders will be forthcoming in offering additional flexibility and liquidity.”
Despite the glooming outlook for some sectors, supermarkets and firms such as Amazon, Netflix, WhatsApp, Skype, BBC and Bupa are reportedly booming.