Burberry drops as China attacks luxury advertising

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LONDON (ShareCast) - Shares in luxury brand Burberry were hammered on Thursday as the company announced a series of boardroom changes; but market chatter was also putting the sharp fall down to the move by China to scale back luxury advertisements.

China's media watchdog, the State Administration of Radio, Film and Television (SARFT), this week claimed that some radio and TV commercials were publicising "incorrect values and helped create a bad social ethos" by encouraging people to give expensive luxury items such as watches and gold coins as gifts, according to state-run news agency Xinhua.

China's

Global Times said that broadcasters have been ordered to stop running adverts that promote gift-giving, which is sometimes used to gain favour with officials.

Ad agencies have been asked to change ads that do not meet the rule. "Unqualified advertisements will be stopped from being broadcast until they are modified", a member of the advertising department of Zhejiang Satellite Television told the Global Times.

Burberry, which has 68 stores in 35 cities across mainland China, saw shares fall 5.84% to 1,346.5p by 16:00 on Thursday.

The company is heavily exposed to the fast-growing Chinese luxury industry, which accounts for around 40% of retail sales across its whole Asia Pacific division.

On Thursday morning, Burberry appointed John Smith, the former head of BBC Worldwide, as its new Chief Operating Officer.

The firm also announced that Chief Financial Officer Stacey Cartwright would step down after nine years and be replaced by Senior Vice President of Group Finance Carol Fairweather.

Shares in French luxury brand LVMH and US jewellery firm Tiffany & Co (NYSE: TIF - news) were also out of favour on Thursday.