REG - Burberry Group PLC - Burberry First Quarter Trading Update

BurberryAnnouncement

15/07/2022 07:00

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RNS Number : 5713S  Burberry Group PLC  15 July 2022

15 July 2022

 

Burberry Group plc

First Quarter Trading Update

 Continued investment in brand and product

"Our performance in the quarter continued to be impacted by lockdowns in
Mainland China but I was pleased to see our more localised approach drive
recovery in EMEIA, where spending by local clients was above pre-pandemic
levels. Our focus categories, leather goods and outerwear continued to perform
well outside of Mainland China and our programme of brand activations boosted
customer engagement. While the current macro-economic environment creates some
near-term uncertainty, we are confident we can build on our platform for
growth."

- Jonathan Akeroyd, Chief Executive Officer

·    Q1 comparable store sales increased 1% impacted by lockdowns in
Mainland China

o  Excluding Mainland China, comparable store sales grew 16%

o  EMEIA comparable store sales grew 47%

·    Double-digit comparable growth in leather goods and outerwear outside
Mainland China

o  Lola handbag range performing well, supported by new shapes

o  Good performance from rainwear and jackets

·    Strong programme of brand activations driving customer engagement,
including Lola campaign, pop-ups and pop-ins, and TB Summer Monogram takeovers

·    First in our sector to receive SBTi approval for our target to reach
net zero emissions by 2040

·    Built on community commitments with a three-day celebration of
creativity for Pride and hosting cultural runways for graduates of our
Burberry Inspire programme

·    Commenced the share buy back with the full £400m expected to be
completed by the financial year end

Retail revenue 13 weeks ended 2 July

                          2 July  26 June  % change
 £ million                2022    2021     Reported FX  CER*
 Retail revenue           505     479      +5%          flat
 Comparable store sales*  +1%     +90%

*See page 4 for definition

Outlook

We continue to target high-single digit revenue growth* and 20% margins* in
the medium term. While the current macro-economic environment creates some
near-term uncertainty, our performance in Mainland China has been encouraging
since our stores reopened in June and we are actively managing the headwind
from inflation. Based on the effective FX rates as of 11(th) July, we now
expect a currency tail wind of c.£190m on revenue and c.£90m adjusted
operating profit in FY23.

* at CER

The financial information contained herein is unaudited

Business review

Despite significant disruption from lockdowns in Mainland China, comparable
store sales advanced 1% in Q1 FY23. Growth was strongest in EMEIA, where our
more localised approach drove an increase in spending by clients in their home
markets to above pre-pandemic levels. This approach, together with increased
tourist spend from the Americas has helped to mostly offset lower sales to
Asian and especially Chinese tourists. Our focus categories, leather goods and
outerwear, continued to perform well outside of Mainland China.

During the quarter, we continued to invest in brand and product, generating a
high level of engagement on social media as well as driving traffic to our
website and adding almost half a million new profiles to our global customer
database.

In April, we expanded our Lola handbag range and supported it with a series of
pop-ups and pop-ins as well as a campaign, starring Bella Hadid, Lourdes Leon,
Jourdan Dunn and Ella Richards. Alongside this, we introduced a virtual
collection on online gaming platform Roblox. Created with one of the Roblox
community's most established digital fashion designers, @Builder_Boy, the
exclusive Lola range features experimental designs inspired by our
longstanding affinity for the outdoors.

In May, we launched our seasonal TB Summer Monogram collection with a new
campaign starring Gisele Bündchen. The collection united two of Burberry's
icons to form a bold print merging the classic Check with the TB Monogram. To
support this, we are staging a series of branded takeovers, the first of which
is at Loulou Ramatuelle beach club in Saint Tropez for which we have created a
bespoke iteration of the collection that is only available at a pop-up store
in the resort. We also celebrated the launch of the collection at Neiman
Marcus, wrapping the exterior of its store in Atlanta in the TB Monogram and
opening a pop-up inside.

Our new product launches and seasonal collections performed strongly. Leather
goods comparable sales grew 21% outside of Mainland China, led by the Lola
handbag range. The TB family also performed well, supported by the Frances
shape from the same family. Outerwear comparable sales advanced 19% outside of
Mainland China, driven by rainwear and jackets.

In June, we partnered again with Mythical Games to launch a new NFT collection
in their flagship title, Blankos Block Party. Our second NFT collection
included a limited-edition Burberry Blanko, a unicorn named Minny B, as well
as a selection of Burberry branded in-game accessories which players can add
to their virtual portfolio. As part of the collaboration, we created a bespoke
social space within the game, a cabana style resort named 'The Oasis', where
players can come together to connect, explore and enjoy a unique virtual
experience.

More recently, we welcomed the South Korean Premier League footballer Son
Heung-min to the Burberry family as our new brand ambassador. This was greeted
with a significant amount of social media attention with the post achieving
our highest level of engagement on Instagram - some 21% ahead of the previous
peak.

At the same time, we continue to elevate the customer experience in stores,
rolling out our new design concept to six more locations in the quarter,
including two stores in Japan, one in Hong Kong S.A.R., China and three in
EMEIA. We remain on track to achieve our target of adding 65 newly designed
stores in FY23 to the 47 we rolled out last year.

During the quarter, we also maintained our support for our communities.

We were proud to be an official partner of The Queen's Jubilee Pageant,
celebrating Her Majesty's extraordinary 70 years of service. As part of this,
we shared messages of support at 80 bus stops along the route in London from
children at Armley Park Primary School, a beneficiary of our partnership with
Marcus Rashford MBE, the National Literacy Trust and Macmillan Children's
Books. To mark the occasion, we designed a limited-edition commemorative
scarf. We also sponsored the Superbloom floral tribute at the Tower of London,
alongside which we created a large floating meadow that we moored on the River
Thames. All plants from the meadow will be replanted by Burberry volunteers
within local community projects across the city.

For Pride, we teamed up with media partner Dazed to host a three-day
celebration of creativity and community on Whitby Street in London. Alongside
workshops, panels and performances by some of the UK's brightest creative
talent, we commissioned a large-scale mural by interdisciplinary artist Jota
Mombaça and a poem by performance poet, trans visibility campaigner and model
Kai-Isaiah Jamal. We also donated to charities providing resources to the
LGBTQ+ community, including longstanding partners Stonewall and the Albert
Kennedy Trust.

As part of our commitment to empowering young people, we hosted cultural
runways in the UK and US, celebrating the achievements of students who
participated in Burberry Inspire. The programme, which is funded by The
Burberry Foundation, has provided arts and cultural learning experiences for
underrepresented young people since 2018. In May, graduates of our New York
programme performed before an audience of teachers, family members and special
guests at the Gerald W Lynch Theatre in Manhattan. Our Yorkshire cohort
showcased their dance, film and visual arts projects at Leeds Playhouse this
week.

We recognise that the long-term success of our business depends on investing
in the environmental sustainability of our operations, the resilience of our
supply chains and our management of climate change impacts. This month we
became the first in our sector to receive SBTi approval for our net-zero
target, (to reach net zero emissions by FY 2040), in accordance with the
Global Corporate Net Zero Standard launched in Nov 2021.

Regional performance

We have seen strong recovery in Q1 FY23 outside of Mainland China with
comparable store sales up 16%. This was offset by a 35% decline in Mainland
China due to restrictions and store closures put in place to control COVID-19
outbreaks. Overall, comparable store sales advanced 1% in the period with a
significantly different performance in each region.

·    Asia Pacific fell 16% with Mainland China down 35%. We started the
quarter with around 40% of the distribution disrupted by lockdowns in Mainland
China, including our digital hub. Disruption continued for the first two
months but all stores were fully reopened by the end of the period. Declines
in Mainland China were partially offset by strong performances in the
recovering markets of Japan and SAP.

·    EMEIA grew 47% as the business annualised the lockdowns in Q1 FY22.
Sales to local clients were strong at above pre-pandemic levels, and sales to
American tourists rebounded.

·    Americas decreased 4% slowing against very tough comparatives. We saw
good growth in outerwear with bags also outperforming.

Space was a 1% headwind in the quarter while FX was a positive contribution of
5%. In total reported retail sales grew 5% YoY at reported rates.

 

Enquiries

 Investors and analysts                                                          020 3367 4458
 Julian Easthope                      VP, Investor                               Julian.Easthope@burberry.com
 Relations
 Media                                                                           020 3367 3764

 Andrew Roberts                     SVP, 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 conference call can be
accessed live on the Burberry corporate website, www.burberryplc.com
(https://burberry.sharepoint.com/sites/InvestorRelations/Shared%20Documents/FIRST%20QUARTER%20TRADING%20UPDATE/Q1%20Update%202022/Announcement/www.burberryplc.com)
with a replay available later in the day.

·      Burberry will announce its Interim results for the 26 weeks
ending 1 October 2022 on 17 November 2022

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 British luxury brand, headquartered in London

·      At 2 July 2022, globally Burberry had 220 retail stores, 142
concessions, 57 outlets and 38 franchise stores, excluding 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. The measurement of comparable sales has not
excluded stores temporarily closed as a result of the COVID-19 outbreak.

Certain financial data within this announcement have been rounded.

Appendix

Based on effective FX rates as of 11 July 2022, there is a c.£90m tailwind
from exchange rate movements on FY23 adjusted operating profit and a c.£190m
tailwind on revenue. This compares to guidance given in May for a £159m
tailwind to revenue and a £92m tailwind to adjusted operating profit.

 

 Exchange rates    Forecast average effective rates  Spot rates  Actual average exchange rates
 £1=               11 July 2022                      6 May 2022  FY22
 Euro              1.18                              1.17        1.18
 US Dollar         1.20                              1.24        1.36
 Chinese Yuan      8.03                              8.21        8.73
 Hong Kong Dollar  9.45                              9.70        10.63
 Korean Won        1,557                             1,553       1,596

 

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