TIDMBRBY
RNS Number : 0094T
Burberry Group PLC
15 July 2020
15 July 2020
Burberry Group plc
First Quarter Trading Update
Trends improving through quarter
"In Q1, sales were severely impacted by the drop in luxury
demand from COVID-19 and we expect it will take time to return to
pre-crisis levels with the resumption of overseas travel. We are
encouraged by the improving trends in all regions and the promising
exit rate for June. We saw an excellent response to new product
launches in recovering economies as well as online. Demand for
leather goods was particularly strong in Mainland China and Korea,
bringing new, younger luxury customers to the brand. As we enter
the second phase of our strategy, we are sharpening our focus on
product and making other organisational changes to increase our
agility and generate structural savings that we will be able to
reinvest into consumer-facing activities to further strengthen our
luxury positioning ."
Marco Gobbetti, Chief Executive Officer
-- Progressive month on month improvement through the period as
stores reopened. Comparable sales declined 45% in Q1, easing to
-20% in June, while growth in Mainland China and Korea in June was
ahead of pre COVID-19 levels, albeit with some benefit from the
repatriation of sales given COVID-19 travel restrictions
-- Excellent consumer response to new product launches,
including Autumn collection, Pride and Summer Monogram capsules,
and Leather Goods exclusives, including resonating with new,
younger customers
-- Focused on rebounding economies, with initiatives tailored to
each market including a Mainland China leather-goods campaign
driving strong double digit full price growth in leather goods in
Mainland China and Korea
-- Innovated in digital to inspire customers and drive sales both online and offline
-- Organisational changes proposed to increase product focus and
agility and deliver savings of GBP55m, providing further capacity
for investment in consumer facing activities
-- Launched ReBurberry Edit, a curation of styles crafted from sustainable materials
Retail revenue 13 weeks ended June
27 Jun 29 Jun % change
GBP million 2020 2019 Reported FX CER
----------------------- ---------- ------- ----------- ------
Retail revenue 257 498 -48% -49%
Comparable sales* -45% 4%
----------------------- ---------- ------- ----------- ------
*See page 4 for definition
Comparable sales -45% with progressive month by month
improvement as COVID-19 related government restrictions eased
-- Asia Pacific declined 10% in the quarter but returned to
growth in June. Within this, Mainland China grew mid-teens in Q1
but grew ahead of the January pre COVID level of 30% in June,
supported by some repatriation of sales due to the COVID-19 travel
restrictions
-- EMEIA declined around 75%, impacted by lockdown measures and
a significant reduction in travel. June sales improved but
continued to be impacted by a significant headwind due to tourist
flows
-- The Americas declined 70% impacted by lockdown measures.
However, following the easing of restrictions, trends have improved
significantly into June
The financial information contained herein is unaudited
Product trends:
-- All product trends negative, impacted by COVID-19 related store closures
-- Continuous product outperforming benefiting from the addition of iconic continuative product
-- Outperformance of tops, bottoms and small leather goods
-- Leather goods full-price sales up strongly in Mainland China and Korea
Business review
Q1 2021 marks the start of the third year of our journey to
transform Burberry. During this period, we will strengthen the
foundations we have established, adapting to the current
challenging and fast changing environment and positioning the brand
for acceleration and growth in the long-term. Despite the extremely
difficult backdrop resulting from a global pandemic, we have made
good progress in the quarter focusing on strengthening our brand,
localising our plans by market, leveraging our digital platforms
and enhancing our focus on product.
During Q1, we continued to excite our customers with product
launches, including our new Autumn/Winter pre collection, Pride and
Summer Monogram capsules, and Leather Goods exclusives. The
response to these collections has been excellent, including
resonating with new, younger customers and driving strong full
price growth in leather goods in Mainland China and Korea.
Our product launches have been supported by innovative and
highly engaging campaigns. For example our summer monogram
collection campaign included a video set in a CGI geometric world
featuring Kendall Jenner, a curated Spotify playlist and a new
multi-player digital game called B-Surf. The campaign has generated
an exceptional response from press, influencers and consumers with
average reach over 60% higher than our previous monogram capsule
and our most watched video ever on Instagram TV.
We have also been adopting a localised approach by market. For
example, in April we launched a leather goods campaign in Mainland
China. This featured a series of more sustainable pop up stores
incorporating an augmented reality experience, as well as a limited
edition Pocket Bag for influential fashion blogger Mr Bags' WeChat
followers. The reaction was exceptional with the limited edition
bag selling out within a minute of becoming available and Pocket
Bag styles overall selling out within three weeks of the campaign
going live.
Throughout the period, we have continued to focus on digital to
drive performance. Online full price sales grew double digits in
the quarter and we have continued to excite the customer through
innovations like the immersive experiences and B-Surf game
described above. Finally we are also leveraging our digital
capabilities to bring our customers a truly omnichannel experience
optimising our in store sales associate tools to allow remote
customer outreach.
We are also excited that our social retail store developed in
partnership with Tencent, will open in Shenzhen this summer. The
experimental store will offer unique experiences that connect
luxury customers' social and online lives to their physical
environments using technology powered by Tencent.
As we enter the second phase of our strategy, we are making some
organisational changes. As previously announced, we are evolving
our approach to product, creating three new business units covering
Ready-to-Wear, Accessories and Shoes. We intend to pool expertise
within each unit to enhance our product focus, increase our agility
and elevate quality. We are also proposing to further streamline
our office-based functions and improve our retail efficiency in
certain geographies outside the UK.
Subject to consultation, we expect these changes, which include
office space rationalisation, to deliver savings of around GBP35m
in FY 2021, with annualised savings of GBP55m and an associated
one-off restructuring charge of GBP45m. These savings are
incremental to our previously announced GBP140m cumulative cost
saving programme. Conditional on the macroeconomic recovery from
COVID-19 and luxury industry growth, we will be able to reinvest
these savings into consumer-facing activities. These include pop up
stores, visual merchandising, digital activations, events as well
as marketing.
In June, we spoke up in solidarity with the black community,
reaffirming our core belief that there is never a place for racism.
We have made a commitment to foster a culture of inclusion,
equality and belonging at Burberry and have made strong progress in
expanding our training, evolving our policies and setting up
councils to guide us. We have also continued to support LGBTQ+
communities through Pride month and beyond by becoming the first
luxury fashion brand to join the Stonewall Diversity Champions
programme, forming a partnership with UK Black Pride and supporting
the Albert Kennedy Trust. Making strong progress against our
Responsibility agenda, in April we launched the ReBurberry Edit, a
curation of 26 styles from the Spring/Summer 2020 collection made
from the latest innovations in material science.
Financial performance and outlook FY 2021
Throughout Q1 2021 COVID related government restrictions eased
allowing the gradual reopening of our retail store network from
peak closures at the end of March. This underpinned a progressive
improvement in our comparable retail sales growth with June
declining around 20% compared to a 45% decline for the total
quarter.
Looking ahead, in the absence of full year guidance due to the
macroeconomic and global health uncertainty, we are providing an
indication of Q2/H1 2021 performance. The second half, and the
course of the pandemic from here, will largely depend on the
actions governments pursue to control the spread of the virus as
economies restart, including their responses to second viral waves,
as well as the phasing of store re-openings, an easing of travel
restrictions, and the on-going consumer response.
We expect our second quarter (to end September 2020) to continue
to be materially impacted by the pandemic. In retail, tourist flows
are likely to remain negligible, and store operations are
continuing to face significant headwinds, with some remaining
closed and operating with reduced trading hours.
Based on our comp retail sales performance in June 2020 (-20%),
we expect Q2 2021 (ended September 2020) to decline by 15% to 20%.
In wholesale, we are collaborating with our partners to protect the
brand and as a result anticipate H1 2021 sales declining around 40%
to 50%.
Based on this trading assumption, we would expect H1 2021 gross
margin to decline by around 200bps to 300bps year-on-year and
operating expenses in H1 2021 to reduce by a mid-teens percentage
compared to last year.
During this pandemic, we believe it is crucially important to
invest in the Burberry brand. We will continue to embed flexibility
into our plans to allow for investment into consumer facing
activities to drive growth where opportunities present.
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 conference call can
be accessed live on the Burberry corporate website,
www.burberryplc.com with a replay available later in the day.
-- Burberry will announce its Interim results for the 26 weeks
ended 26 September on 12 November
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 27 June 2020, globally Burberry had 215 retail stores, 148
concessions, 54 outlets and 45 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 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. This measure
is used to strip out the impact of 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.
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.
Appendix
Exchange rates Forecast effective rates Actual average exchange
for rates
Remainder of FY 2021
GBP1= 27 June 2020 1 May 2020 FY 2020
------------- ------------ ------------------------
Euro 1.11 1.15 1.14
US Dollar 1.24 1.26 1.27
Chinese Yuan 8.79 8.90 8.88
Hong Kong Dollar 9.62 9.76 9.89
Korean Won 1,498 1,529 1,504
------------- ------------ ------------------------
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END
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