REG - Burberry Group PLC - Burberry Third Quarter Trading Update

BurberryAnnouncement

18/01/2023 07:00

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RNS Number : 0437N  Burberry Group PLC  18 January 2023

18 January 2023

BURBERRY GROUP PLC

THIRD QUARTER TRADING UPDATE

"Overall, we are pleased with our performance in the third quarter as
double-digit revenue growth outside of Mainland China offset the impact of
COVID-19-related disruption there. Europe in particular continued to perform
well, driven by strong trading over the festive period, and leather goods
delivered another quarter of double-digit growth globally. We remain confident
in our ability to reach our medium-term targets, despite the current
macro-economic environment. We are focused on executing our plan to realise
Burberry's potential as the modern British luxury brand and we look forward to
unveiling Daniel Lee's debut collection for Burberry on our return to London
Fashion Week next month."

- Jonathan Akeroyd, Chief Executive Officer

·      Q3 comparable store sales increased 1% impacted by
COVID-19-related disruption in Mainland China

o  Excluding Mainland China, comparable store sales grew 11%

o  EMEIA comparable store sales grew 19%, Americas -1%, APAC -7% with
Mainland China -23%

·      Strong programme of brand activations supported by pop-ups and
social media driving customer engagement, including outerwear, Festive and
Lunar New Year campaigns

·      Accessories continued to perform well with double-digit
comparable growth in leather goods

o  Lola handbag range continued to see strong growth, supported by new styles
including the Vintage Check Bouclé with the Frances bag and Giant Check also
performing well

·      Women's ready-to-wear comparable sales increased a mid-teen
percentage supported by dresses and knitwear featured in our seasonal
campaigns

·      Outerwear comparable sales grew by a high-single digit outside of
Mainland China

·      New store concept on track to complete 65 stores in FY23

o  15 completed in Q3 FY23 with higher AUR and productivity

·      Share buy-back: £363m of the £400m buy-back completed by the
end of the quarter

RETAIL REVENUE 13 WEEKS ENDED 31 DECEMBER 2022

                          31 December  25 December  % change
 £ million                2022         2021         Reported FX  CER*
 Retail revenue           756          723          +5%          flat
 Comparable store sales*  +1%          +7%

*See page 4 for definition

 

OUTLOOK

Our near and medium-term targets remain unchanged as we continue to target
high-single digit revenue growth with operating leverage ensuring good margin
progression, notwithstanding the current macro environment. Based on the
effective foreign exchange rates as of 30th December 2022, we expect a
currency tailwind of c.£160m on revenue and c.£70m on adjusted operating
profit in FY23.

 

The financial information contained herein is unaudited

BUSINESS REVIEW

Comparable store sales grew 1% in Q3 FY23, despite significant disruption from
both lockdowns and the reopening of Mainland China. Outside of Mainland China
comparable stores sales advanced 11% with EMEIA, Japan, South Korea and South
Asia Pacific all showing double-digit growth.

We started the second half with our outerwear campaign that was supported by
over 50 pop-ups, VIP experiences, influencer campaigns, and a partnership with
Minecraft. This included an activation in Hong Kong S.A.R, China, our first
ever ice rink over the K11 MUSEA promenade. We followed this with our Festive
campaign starring Shakira and Burna Boy called 'The Night Before' which
celebrated the excitement and anticipation of festive preparations. This saw
very strong traction with two joint Instagram posts with Shakira being some of
our most engaging posts to date. We also achieved our best performing
non-collab reel to date. We ended the quarter with our Lunar New Year campaign
- take a leap - inspired by the Year of the Rabbit, featuring a playful
interpretation of the TB monogram.

In December, Burberry won the Metaverse World and Gaming Experience Award at
the 2022 British Fashion Awards, in recognition of our innovation in this
space, including through our recent collaborations with Blankos Block Party
and Minecraft. We were also recently honoured by the 2022 Prix Versailles
Official World Awards for our Imagined Landscapes pop-up store in Jeju, South
Korea. The awards celebrated the best in contemporary architecture,
highlighting innovation and creativity as well as ecological efficiency and
cultural impact.

By product, accessories grew double-digit comparable sales outside of Mainland
China. This was supported by a dedicated campaign and a 360-degree programme
of commercial activations for the Festive period. We launched new styles of
the Lola bag such as the Bouclé and we continued to innovate across all
ranges, seeing strong traction in our house codes. In addition to the Lola,
the Frances bag and the Giant Check also performed well. Men's accessories
categories grew strong double-digit comparable sales with bags increasing over
25% and SLG's up over 15%. Soft accessories over-indexed during this key time
for the accessories category, with the iconic Archive Beige Check cashmere
scarf driving ~60% of sales for the category. Outerwear saw high-single digit
comparable growth outside of Mainland China.

The roll out of the new store concept continued with 15 stores completed in
the quarter including Pacific Place in Hong Kong S.A.R, China and North Park
Centre Dallas, USA leading to 37 for the year to date and 84 stores in the new
concept in total. We remain on track to complete 65 stores in FY23 with our
aim to complete the roll out of the portfolio by FY26. Financials of the new
stores continue to show higher AUR and productivity. We delivered a strong
plan of in-store and digital activations supporting the Festive period,
including the opening of 18 pop-ups, a dedicated gifting hub on Burberry.com
and client events in key flagship stores. These initiatives supported strong
commercial performance, particularly for leather goods.

Our continued commitment to sustainability was recognised across ratings and
benchmarks in the period. Burberry earned an 'A' rating in environmental
non-profit CDP's annual 'A List' for leadership in transparency and
performance to tackle climate change. We also maintained an 'AAA' rating from
the MSCI for the fourth year in a row, highlighting our leadership in supply
chain management and environmental performance. At the same time, we continued
to support our communities throughout the cost-of-living crisis, partnering in
the UK with youth charity, OnSide, to ensure that young people can access
food, warmth and safety in an OnSide Youth Zone this winter.

REGIONAL COMPARABLE SALES PERFORMANCE

We continue to see a strong performance outside of Mainland China, up 11% in
the period. The Group was partially offset by a 23% decline in Mainland China
due to COVID-19 related restrictions. Overall, comparable store sales advanced
1% with a significantly different performance in each region.

·      EMEIA grew 19%, led by sales to tourists. EMEIA nationals grew
low-single digit in the period.

·      Americas fell 1% - a slightly improved performance over the first
two quarters. Sales to nationals were up 3% year-on-year with strong tourist
flows into EMEIA.

·      Asia Pacific fell 7% with Mainland China down 23%. Declines in
Mainland China were partially offset by strong performances in South Korea up
10%, Japan up 28% and SAP up 15%.

The impact of space was -1% in the quarter leading to flat total retail sales
at CER while FX was a positive contribution of 5%. In total retail sales grew
5% year-on-year at reported rates.

 

All metrics and commentary in this presentation are at reported FX and exclude
adjusting items unless stated otherwise.

Constant exchange rates (CER) removes the effect of changes in exchange rates
and the 53rd week in the prior period. The constant exchange rate incorporates
both the impact of the movement in exchange rates on the translation of
overseas subsidiaries' results and on foreign currency procurement and sales
through the Group's UK supply chain.

Comparable sales are 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. This measure is used to strip out the impact of
permanent store openings and closings, or those closures relating to
refurbishments, allowing a comparison of equivalent store performance against
the prior period. 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. Growth
rates and ratios are calculated on unrounded numbers.

 

ENQUIRIES

 Investors and analysts                                    020 3367 3524
 Julian Easthope  VP, Investor Relations                   julian.easthope@burberry.com (mailto:julian.easthope@burberry.com)
 Media                                                     020 3367 3764
 Andrew Roberts   SVP, Corporate Relations and Engagement  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
website www.burberryplc.com (http://www.burberryplc.com) and can also be
accessed live via a listen only dial-in facility, click here
(https://services.choruscall.it/DiamondPassRegistration/register?confirmationNumber=5364533&linkSecurityString=68e5f99b5)
to register.

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

·        Burberry will issue its Preliminary results for the 52 weeks
ending 1 April 2023 on 18 May 2023

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.

Burberry is listed on the London Stock Exchange (BRBY.L) and is a constituent
of the FTSE 100 index. ADR symbol OTC:BURBY. BURBERRY, the Equestrian Knight
Device, the Burberry Check, and the Thomas Burberry Monogram and Print are
trademarks belonging to Burberry.

www.burberryplc.com

LinkedIn: Burberry

Notes to editors

·          Burberry is a British luxury brand, headquartered in
London

·          At 31 December 2022, globally Burberry had 221 retail
stores, 139 concessions, 56 outlets and 38 franchise stores, excluding pop-up
stores.

 

APPENDIX

Based on effective FX rates as of 30 December 2022, there is a c.£160m
tailwind from exchange rate movements on FY23 revenue and a c.£70m tailwind
on adjusted operating profit. This compares to guidance given in November for
a c.£170m tailwind on revenue and a c.£70m tailwind on adjusted operating
profit.

 

 Exchange rates    Forecast effective rates for FY23         Actual average exchange rates
                   30 December 2022       27 October 2022    H1 FY23     H1 FY22     FY22

 £1=
 Euro                       1.16          1.17               1.17        1.16        1.18
 US Dollar                  1.20          1.18               1.21        1.39        1.36
 Chinese Renminbi           8.28          8.29               8.16        8.98        8.73
 Hong Kong Dollar           9.41          9.26               9.50        10.79       10.63
 Korean Won               1,565           1,595              1,579       1,583       1,596

 

 

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