“This was a good quarter in our multi-year journey to transform Burberry. We increased the availability of products designed by Riccardo, while continuing to shift consumer perceptions of our brand and align our network to our new creative vision. The consumer response was very promising, delivering strong growth in our new collections. We are on track with our plans and we confirm our outlook for FY 2020.”
Marco Gobbetti, Burberry Group plc Chief Executive Officer
· Excellent consumer response to Riccardo Tisci’s product with new collections delivering strong double-digit percentage growth compared to prior year equivalent collections, in line with our expectations.
· The proportion of new product increased to around 50% of our offer in mainline stores by the end of the quarter
· Continued to build brand heat and shift consumer perceptions with improved social media traction, press coverage and organic endorsement from influencers
· Accelerated distribution transformation with 23 stores now aligned to new creative vision
Retail revenue 13 weeks ended 29 June
|£ million||2019||2018||Reported FX||CER*|
|Comparable store sales**||4%||3%|
*IFRS 15 impact +0.3%, Space -1.5%.
· Comparable store sales +4% with growth led by new product
· Asia Pacific grew by a high single-digit percentage driven by Mainland China up mid-teens
· EMEIA grew by a low-single digit percentage supported by tourist spend, which particularly benefited the UK
· Americas was flat, the US grew by a low-single digit percentage but Canada was negatively impacted by a later markdown period
· Men’s and women’s apparel grew by a double-digit percentage
· Accessories declined with the benefit from new styles more than offset by the softer performance of lines from previous collections
· Space -2% including the planned non-strategic store rationalisation programme
Burybury Group Outlook FY 2020
· We maintain FY 2020 guidance of broadly stable top line and operating margin at CER
· As previously announced, we anticipate a more pronounced weighting of operating profit in H2 relative to H1 in FY 2020 than in the prior year
The financial information contained herein is unaudited
FY 2020 is the second year of our multi-year plan to transform Burberry. Our focus in this first phase is on investing to re-energise our brand and aligning distribution to our new positioning, while creating the foundations of a new product offering. Against this backdrop, we made good progress in the quarter as we increased the availability of products designed by Riccardo Tisci and continued to evolve our retail and wholesale network.
This was the first quarter where the proportion of new product in our stores was meaningful and the response from consumers was very promising. New collections delivered strong double-digit percentage growth, with all regions ahead of prior year equivalent collections. Consumers responded positively to the new aesthetic and house codes.
The response to the new product was also strong in wholesale, where many of our luxury doors saw significantly higher sell through compared to previous collections.
We also continued to drive brand heat and shift consumer perceptions. We surprised and excited consumers with our monthly B-Series drops and product capsules. To celebrate our monogram capsule, we launched a significant programme of high-profile activations across retail and wholesale, which generated total reach of 120 million consumers globally.
More widely, on social media our traction across Instagram and WeChat continued to improve, with growth in the number of followers and double-digit gains in the engagement rate per post compared to the previous quarter. In addition, key influencers continued to organically endorse Burberry product and editorial press coverage remained strong.
In distribution, as planned, we accelerated our alignment programme. In retail, 23 stores incorporated our new creative vision by the end of the quarter and a cumulative nine of the 38 smaller, non-strategic stores previously announced for rationalisation have now been closed. Meanwhile, in wholesale, we continued to rationalise space in non-luxury US doors.
Finally, we continued to innovate with sustainable raw materials, introducing ECONYL, a yarn created from nylon waste in landfill and ocean plastics into men’s and women’s outerwear. ECONYL can also be recycled and recreated into new products.
Financial performance and outlook*
In June, the proportion of new product was around 50% of the mainline offer compared to 10-15% in March. This underpinned the improvement in comparable store sales growth to +4%.
We maintain our FY 2020 guidance for broadly stable revenue and adjusted operating margin at CER including cumulative cost savings of £120m.
In terms of comparable store sales growth, mainline is expected to accelerate as the new product builds through the year. However, we anticipate this will be partially offset in the second half of the year by reduced markdown inventory compared to the prior year.
As we announced at year end, we anticipate a more pronounced weighting of adjusted operating profit in H2 relative to H1 than in the prior year, largely due to a strong H1 comparator in the prior year.
*Guidance assumes constant exchange rates, a stable economic environment and current tax legislation. It excludes the impact of the adoption of IFRS 16 and the UK’s possible withdrawal from the EU without an agreement. In the event of the UK withdrawing from the European Union without an agreement, there is likely to be a material but manageable operational and financial impact on Burberry’s business. We continue to prepare mitigating actions to limit the operational and financial impact in the short term.