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Burberry Group

Burberry Group Strong balance sheet and liquidity, with space for investment when markets recover

Burberry Group plc (LON:BRBY) has today announced its preliminary results for the 52 weeks ended 28 March 2020.

“Prior to Covid-19, we were delivering strong momentum across our brand and product, with sales ahead of our expectations. Since then, the global health emergency has had a profound impact on the world, our industry and Burberry but I am very proud of the way we have responded. We have taken swift action to mitigate the financial impact on our business, while prioritising the safety and wellbeing of our teams and customers. We have a strong balance sheet and liquidity, with space for investment when markets recover. We have found new ways to strengthen our connection with consumers, drawing on our digital leadership. We have also mobilised our resources in support of the relief efforts. It will take time to heal but we are encouraged by our strong rebound in some parts of Asia and are well-prepared to navigate through this period. Now, more than ever, our strategy to secure our position in luxury fashion is key. I would like to thank our teams for their dedication and leadership during these challenging times.” Marco Gobbetti, Chief Executive Officer

In the current year, we have adopted new accounting standard IFRS 16, recognising operating leases as right of use assets and lease liabilities on the balance sheet the impact of which is set out on page 21. Throughout this review, to aid comparability, a pro forma FY 2020 has been included to be comparable with FY 2019 results.

·    Strong momentum in brand, product and sales delivered before the COVID-19 outbreak, ahead of our previous expectations

·    Double digit growth in followers and engagement on social platforms year on year, including through the crisis

·    Comparable sales -27% in Q4 with around 60% retail stores closed at end of March. This compares to +4% for the first 9 months of the year

·    Adjusting items of £245m predominantly due to store impairments and stock provisions relating to COVID resulting from its expected impact on future cashflows generated by these assets

·    Year to date sales in Mainland China and Korea already ahead of the prior year and continuing to show an improving trend

·    Responded rapidly to COVID-19 with a comprehensive cost mitigation programme tailored to several outcome scenarios whilst prioritising the safety and wellbeing of our people

·    Retooled our factory in Yorkshire to make gowns and sourced surgical masks through our global supply chain. To date donated >150,000 pieces of PPE to NHS and care charities, funded research into a vaccine developed by the University of Oxford and donated to charities tackling food poverty in the UK

·    Existing cost saving programme delivered cumulative savings of £125m this year and programme accelerated to deliver cumulative savings of £140m by FY 2021 

·    Strong balance sheet with cash of £887m including £300m from a drawdown of the RCF in March 2020 and actions in place to protect liquidity

·    Capital allocation framework retained. However, given current uncertainty, a final dividend has not been declared, with future dividend payments to be reviewed at end of FY 2021

FY 2021 outlook***

We are not in a position to provide specific guidance for FY21 at this stage as it is currently challenging to predict the course of the pandemic and the longer lasting economic consequences. However, we currently have 50% of our store network closed and we expect our first quarter (to end June 2020) to be severely impacted with store closures likely to be at or near peak for most of the quarter. We are leveraging our digital platforms to forge stronger connections with our customers and have mitigation plans to conserve cash and reduce operating costs, whilst retaining flexibility to respond rapidly and optimise revenues in markets as they start to recover.

All metrics and commentary in the Group Financial Highlights and Business and Financial Review exclude adjusting items unless stated otherwise. 

The following alternative performance measures are presented in this announcement: CER, Pro forma FY 2020 results, adjusted profit measures, comparable sales, free cash flow, cash conversion and lease-adjusted net debt in the prior period. The definition of these alternative performance measures are in the Appendix on page 13.

Cumulative cost savings are savings compared to FY 2016 operating expenses. The savings relating to the store rationalisation programme are measured compared to the reported costs, which were under IAS 17.

Certain financial data within this announcement have been rounded.

·      There will be a live webcast presentation today at 9.30am (UK time) for investors and analysts

·      The presentation can be viewed live on the Burberry website www.burberryplc.com 

·      The supporting slides and an indexed replay will be available on the website later in the day

·      Burberry will issue its First Quarter Trading Update on 15 July 2020

·      The AGM will be held on 15 July 2020



·    Revenue £2,633m ,-4% CER, -3% reported

·    Comparable retail store sales -3% (H1: +4%; H2: -9%) with Q4 -27%, materially impacted by the COVID-19 outbreak

Pro forma profit measures

·    Pro forma adjusted operating profit £404m, -8% CER. Pro forma margin 15.3%, down 70bps at CER

·    Gross margin before adjusting items down 100bps as investments in product quality were partly offset by lower levels of discounting

·    Operating expenses before adjusting items -4% year on year benefiting from our cost saving programme and mitigating actions

·    Pro forma adjusted diluted EPS 77.9p, -5% at both CER and reported, supported by an effective tax rate reduction of 80bps and 7m share repurchases prior to COVID-19

Reported profit measures

·    Operating profit £189m, -57% reported, principally due to £244m of adjusting operating items relating to store impairments, inventory provisions and other charges resulting from the expected impact of the COVID-19 pandemic on our future trading

·    Diluted EPS 29.8p, -64% reported, principally due to adjusting items relating to COVID-19

Cash measures

·    Free cash flow of £66m (2019: £301m) due to lower profit, accelerated timing of UK tax payments resulting from new HMRC rules, increased capital investments and working capital outflows

·    Cash of £887m at 28 March 2020 including £300m from the drawdown of our revolving credit facility and after returning £325m cash to shareholders through a combination of dividends (£175m) and share buybacks (£150m) completed before the COVID-19 outbreak

·    Full year dividend 11.3p, down 73% (2019: 42.5p) to protect our future cash position


FY 2020 was the second year of our journey to transform Burberry. Our focus in this first phase was on re-energising our brand, aligning our distribution to our new positioning in luxury fashion and establishing a new product offering. Against these objectives, we made strong progress in the year. However, from late January 2020 the outbreak of COVID-19 had a material negative effect on consumer demand. We took rapid action to implement mitigating actions to ensure the safety and well-being of our people and limit the financial and operational impact on our business.

Strategic progress

Our strategy to establish ourselves in luxury fashion, with a greater emphasis on leather and accessories, means we are positioning Burberry towards the more resilient and fastest growing segments of the luxury market. Over the last two years we have successfully established a foundational platform from which to leverage the Burberry brand over the coming years. This includes a new, desirable product assortment, better aligned distribution channels and improved brand perception. In light of the current environment, our strategy to secure our position in luxury is key.

In the past 12 months, we increased the availability of new product in our mainline stores from 10-15% at the start of April 2019 to around 85% by the end of March 2020. Prior to the COVID-19 outbreak, the consumer response was very positive with all new collections – Summer 2019, Autumn/Winter 2020 and Spring 2020 – delivering double digit growth in our own stores. We also delivered growth in sales to luxury wholesale partners compared to the prior year.

We continued to see a strong response to our most recent collections. Our Spring/Summer 2020 campaign generated online reach over three times higher than the previous season. And in February, our Autumn/Winter 2020 show, Memories, generated a global press reach of 230 million, up double digits compared to our Autumn/Winter 2019 show.

We also increased brand heat, inspiring consumers in innovative ways. Our dedicated Lunar New Year campaign drove industry leading reach and engagement across social media platforms. After restrictions eased in Mainland China in mid-March, we live streamed an event on T-mall with influencer Yvonne Ching browsing our Shanghai Flagship store, which attracted almost 1.4 million viewers. In total, our inspiration activations led to strong double-digit year-on-year growth in followers and engagement on Instagram and WeChat.

In distribution, we continued to transform our global network. We opened flagship stores in Beijing, Shanghai and Ginza (Tokyo) and we continued with our refresh programme with 64 stores now aligned to our new creative vision. We also exited a cumulative 23 smaller, non-strategic stores previously earmarked for closure. Meanwhile, in wholesale, the rationalisation of non-luxury doors in the US is now complete.

Over the last two years, we have transformed our operational efficiency at Burberry. We have migrated functional support to Burberry Business Services in Leeds and we have strengthened the financial platform used to support the business.  In FY 2020, this produced incremental cost savings of £20m in the year bringing the cumulative total to £125m. In addition, as part of our drive to mitigate the impacts of COVID-19, we accelerated our plans by a year and now expect to complete the full programme of £140m of cumulative savings by FY 2021.

Finally, we made strong progress against our Responsibility agenda including launching a Regeneration Fund to support a portfolio of carbon insetting projects to directly tackle the environmental impact of Burberry’s own operations. The new insetting projects will be implemented within our supply chain, working at farm level to promote biodiversity, facilitate the restoration of ecosystems and support the livelihoods of local producers as well as storing carbon at source and removing it from the atmosphere. We also worked directly with cotton growers in the US to develop a fully traceable organic cotton supply for the future and rolled out dedicated sustainability labelling across all key-product categories. In addition, we continued to support communities internationally, through the Burberry Foundation, by expanding Burberry Inspire, a platform bringing together schools and creative organisations to allow students to explore the arts.

Impact of COVID-19 on our business

Since late January, our business has been very materially impacted by the outbreak of COVID-19.

In revenue terms, most of our losses in February were in Asian markets. At peak, the majority of our stores in Mainland China were closed and those that remained open operated with reduced hours amid very significant declines in footfall. Towards the end of the year, trading in Mainland China started to improve with the reopening of all our stores. However, footfall in other parts of Asia, including Hong Kong S.A.R, remained materially weaker throughout.

EMEIA and the Americas also suffered very significant losses in the last three weeks of the year. By the end of March, in line with government guidelines, all of our stores in these regions were closed with only the digital part of our business open for trading. 

We also saw disruption across our supply chain. Our leather-goods centre of excellence, Burberry Manifattura, and our trench coat factory in Castleford, Yorkshire closed in March. We also shut our major global distribution centre in Italy in March, with our American and UK logistics hubs reducing hours but remaining open to service our digital business. We also re-shaped our supply chain to enable a continued service to those parts of the world that remained open.

In order to limit the impact of the outbreak on our business, we implemented mitigating actions to contain costs and protect our financial position. These included renegotiating rents, restricting recruitment, travel and other discretionary spending.

We also leveraged our digital platform to continue to connect with customers that were unable to visit our stores. This included bringing our products to our clients through remote selling and roadshows, live streaming events from stores and creating immersive experiences such as our recent launch of Bags World.

Throughout, we prioritised the safety and wellbeing of our employees, partners and customers, following government guidelines in all our markets. We implemented home working for office-based teams, and reduced work patterns and shift rotations for teams whose roles could not be performed remotely, while putting in place strict protocols for hygiene and social distancing.

At the same time, we looked beyond Burberry to support the relief efforts continuing Thomas Burberry’s legacy of protecting others and caring for our communities. We are facilitating the delivery of surgical masks, non-surgical masks and gowns for use by medical staff and patients. We retooled our factory in Castleford, Yorkshire to make non-surgical gowns. We are funding research into a single-dose vaccine developed by the University of Oxford and we are donating to charities, including FareShare and the Felix Project, which are dedicated to tackling food poverty across the UK.

Financial performance

During the year, the increased proportion of new product in our stores underpinned an improvement in comparable retail store sales growth to +4% for the first three quarters of the year, despite headwinds from the considerable disruptions in Hong Kong S.A.R from August 2019.

Following the end of January 2020, as described above, trading deteriorated significantly, impacted by store closures, reduced operating hours and significant footfall declines. As a result, our Q4 comparable store sales declined 27% and full year comparable store sales declined -3%. Total revenue including our wholesale and licensing channels declined -4% at CER.

Group adjusted pro forma operating profit declined 8% in the year at CER, partially protected by cost mitigation. Reported operating profit declined 57%, predominantly due to the impact of adjusting items relating to the COVID-19 pandemic.

We generated free cash flow of £66m in the year, below the prior year level of £301m. This predominantly reflected a reduction in profits, an increase in working capital, a year on year increase in capital investment of around £40m, as guided and tax payments of £150m (2019: £111m) primarily reflecting the accelerated timing of UK tax payments.

As at 28 March 2020, we had cash balances of £887m (2019: £837m), which included the cash proceeds from the drawdown of a £300m revolving credit facility (RCF). In terms of leverage, we had £0.5bn of net debt (including lease liabilities), equating to a net debt (including lease liabilities to EBITDA ratio of 0.7x, well within our targeted range of 0.5x to 1.0x. Our position is also well within the RCF covenants. In addition, since the year end, we have secured funding of £300m under the UK Government sponsored COVID Corporate Financing Facility (CCFF) to mid-March 2021.

FY 2021 outlook 

We are not in a position to provide specific guidance for FY 2021 at this stage as it is currently challenging to predict the course of the pandemic and the longer lasting economic consequences. However, we currently have 50% of our store network closed and we expect our first quarter (to end June 2020) to be severely impacted with store closures likely to be at or near peak for most of the quarter.

We feel confident in the strength of the Burberry brand and are encouraged by the recovery we are experiencing in Mainland China and Korea with cumulative sales in both markets since the beginning of April ahead of the prior year, albeit it is likely there is a benefit from some repatriation of spending in Mainland China. However, as government restrictions ease across the globe, consumers in different markets are likely to respond in distinct ways, with the travelling consumer likely to take longer to return. As a result, it could take some time for the luxury industry to recover to pre-crisis levels.

Given the current uncertainties, we have developed a range of possible recovery scenarios based on scientific, epidemiological and economic forecasts and we have prepared tailored capital expenditure and cost mitigation plans for these outcomes. This has included a comprehensive review of all the components of our cost base, with savings identified in variable costs, discretionary spend and property-related expenditure.  We have also tiered our capital expenditure projects by priority.

In addition, we have tightened our management of inventory, balancing our objective to conserve cash with allowing capacity to realise sales opportunities as markets recover. Specifically, we have increased our agility and shortened supply chain lead times, as well as working in collaboration with our wholesale partners to control inventory levels. 

Embedded into our plans is flexibility to invest in consumer facing activities to fuel growth when demand increases. This includes tailoring our approach to individual markets, mirroring their stages of recovery, and capitalising on our digital platform to forge stronger connections with our customers.

For the purposes of liquidity, we are aiming to ensure that the company maintains sufficient funding headroom even in an especially protracted period of significant store closures. Our capital allocation policy remains in place, prioritising investment in the long-term growth of our business and dividend distribution to shareholders. However, given the uncertainty caused by COVID-19, we believe it is prudent to protect our liquidity position at this time. As a result, a final dividend has not been declared with future dividend payments to be reviewed at end of FY 2021 with the intention of the earliest possible return to our stated progressive dividend policy. 

Our objective is to manage the business efficiently and flexibly, maintaining control and securing the long term value of the Burberry brand whilst ensuring we preserve the headroom required to fuel growth when the market opportunity returns.

Revenue analysis

Revenue by channel

Period ending £ million 28 March 2020 30 March 2019 % change reported     FX% change CER
Retail2,1102,186 (3)(4)
Comparable retail store sales(3%)2%   
Wholesale476488 (2)(3)
Licensing4746 11
Revenue2,6332,720 (3)(4)


·    Retail sales -4% at CER, -3% reported

·    Comparable store sales -3% (H1: +4%; H2: -9% with Q3 YTD: +4% and Q4: -27%)

·    Net impact of space on revenue -1%, slightly below guidance due to the low productivity of new space in the final weeks of the year

Comparable store sales by region:

Asia Pacific declined by a mid-single digit percentage

·    In the first 9 months Asia Pacific grew by a mid-single digit percentage with Mainland China up mid-teens and we had a strong lead up to Lunar New Year. However, from the end of January, sales were severely impacted by store closures across Mainland China and materially reduced footfall trends across the region

·    For the full year Mainland China and Korea grew low single digits, whilst Japan declined low single digits and Hong Kong S.A.R declined around 40% impacted by the disruptions from August

EMEIA was stable year on year

·    In the first 9 months EMEIA grew by a mid-single digit percentage and sales in January were strong, up double digits. However, consumption from travelling customers weakened materially in February and in the final weeks of the year our sales were curtailed by store closures

·    For the full year the UK was stable, Continental Europe grew low single digits and the Middle East declined low single digits

The Americas declined by a low single digit percentage

·    In the first 9 months, the Americas grew by a low single digit percentage and the performance in January was stable. However, February sales were impacted by negative tourist flows and store closures materially impacted our performance in March

·    For the full year, the US declined low single digits whilst Canada and Mexico declined double digits

By product,

·    New product is now around 85% of the mainline store assortment

·    We saw a strong consumer response to the new collections, delivering double digit growth for the first 9 months

·    Replenishment lines remained softer through the period, however, we started our work to identify the products that could be icons of the future and the early consumer response was positive

·    Accessories benefited from a fuller leather goods assortment and proved slightly more resilient to the decrease in luxury demand caused by the COVID-19 outbreak

Store footprint: 

The transformation of our directly operated distribution network is well underway:

·    Store openings included new flagship stores in China World Beijing, IFC Shanghai and Ginza Tokyo

·    A cumulative 64 stores are now aligned to our new creative vision, including one in every major city globally

·    23 of the non-strategic stores previously announced for closure have now been rationalised with most remaining stores expected to close in FY 2021


Wholesale revenue declined 3% year on year at CER and declined 2% at reported. In the first 10 months of the year, wholesale revenue increased 2% with the impact of COVID-19 related cancelations impacting the performance in February and March. Growth in luxury wholesale accounts was more than offset by the rationalisation of non-luxury doors.

By region:

·    Asia Pacific declined by a low double digit percentage reflecting lower year on year sales to Asian travel retail partners resulting from a high comparative base as well as COVID-19 related cancelations

·    EMEIA grew by a low double digit percentage with strong growth in luxury accounts more than offsetting non luxury door closures

·    The Americas declined double digits impacted by our strategic rationalisation of non-luxury doors, which was completed by the end of the year


Licensing revenue was up 1% year on year at CER and reported, with eyewear performing particularly well in the period.

Burberry Group is listed on the London Stock Exchange (BRBY.L) and is a constituent of the FTSE 100 index. ADR symbol OTC:BURBY.

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