TIDMBRBY
RNS Number : 6053F
Burberry Group PLC
16 July 2019
16 July 2019
Burberry Group plc
First Quarter Trading Update
__________________________________________
Positive response to new product
"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, 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
% change
GBP million 2019 2018 Reported CER*
FX
------------------------------ ----- ----- --------- -----
Retail revenue 498 479 4 2
Comparable store sales** 4% 3%
------------------------------ ----- ----- --------- -----
*IFRS 15 impact +0.3%, Space -1.5%. For more detail see page 3
**See page 3 for definition
-- 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
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
Business review
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 GBP120m.
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.
Enquiries
Investors and analysts 020 3367 4458
Annabel Gleeson VP, Investor Relations Annabel.Gleeson@burberry.com
Media 020 3367 3764
Andrew Roberts VP, Corporate Relations Andrew.Roberts@burberry.com
----------------- ------------------------- -----------------------------
-- There will be a conference call for investors and analysts to
discuss this update today at 9am (UK time). The dial-in number is
+44 (0)20 3059 5868 and please state that you wish to join the
"First Quarter Trading Update". The conference call can be accessed
live on the Burberry corporate website (www.burberryplc.com), with
a replay available later in the day.
-- The AGM will be held on 17 July 2019
-- The Interim Results for the 26 weeks to 28 September 2019
will be announced on 14 November 2019
Certain statements made in this announcement are forward-looking
statements. Such statements are based on current expectations and
are subject to a number of risks and uncertainties that could cause
actual results to differ materially from any expected future
results in forward-looking statements. Burberry Group plc
undertakes no obligation to update these forward-looking statements
and will not publicly release any revisions it may make to these
forward-looking statements that may result from events or
circumstances arising after the date of this document. Nothing in
this announcement should be construed as a profit forecast. All
persons, wherever located, should consult any additional
disclosures that Burberry Group plc may make in any regulatory
announcements or documents which it publishes. All persons,
wherever located, should take note of these disclosures. This
announcement does not constitute an invitation to underwrite,
subscribe for or otherwise acquire or dispose of any Burberry Group
plc shares, in the UK, or in the US, or under the US Securities Act
1933 or in any other jurisdiction.
Notes to editors
-- Burberry is a global luxury brand with a distinctly British attitude.
-- At 29 June 2019, globally Burberry had 230 retail stores, 147
concessions, 51 outlets and 44 franchise stores, excluding the
impact of pop up stores.
-- Burberry is listed on the London Stock Exchange (BRBY.L) and
is a constituent of the FTSE 100 index. Its ADR symbol is
OTC:BURBY.
-- BURBERRY, the Equestrian Knight Device, the Burberry Check
and the Thomas Burberry Monogram and Print are trademarks belonging
to Burberry.
Constant exchange rates (CER) removes the effect of changes in
exchange rates compared to the prior period. This takes into
account both the impact of the movement in exchange rates on the
translation of overseas subsidiaries' results and also on foreign
currency procurement and sales through the Group's UK supply
chain.
Comparable store sales is the year-on-year change in sales from
stores trading over equivalent time periods and measured at
constant foreign exchange rates. It also includes online sales.
Certain financial data within this announcement have been
rounded.
Cumulative cost savings are savings compared to FY 2016
operating expenses.
Burberry adopted IFRS 15 relating to revenue from contracts with
customers from 1 April 2018. To aid with comparability, we have
separately identified the impact of the revenue difference arising
from its adoption.
Appendix
At 28 June 2019 effective rates, the expected benefit of
year-on-year exchange rate movements on FY 2020 reported adjusted
operating profit is cGBP15m and revenues is cGBP45m. This compares
to guidance given in May for a GBP7m headwind to adjusted operating
profit.
Exchange rates Forecast effective rates Actual average
for exchange rates
FY 2020
GBP1= 28 June 30 April FY 2019
2019 2019
------------ ------------- ----------------
Euro 1.12 1.16 1.13
US Dollar 1.27 1.30 1.31
Chinese Yuan Renminbi 8.73 8.78 8.82
Hong Kong Dollar 9.93 10.23 10.26
Korean Won 1,473 1,520 1,460
------------ ------------- ----------------
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END
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