Earnings call transcript: Burberry’s Q1 2025 sees sales dip amid strategic shifts

Burberry Group PLC, with a market capitalization of $6.4 billion, reported a decline in Q1 2025 retail sales, reflecting a 1% year-over-year decrease in comparable sales. The company’s retail revenue fell to £433 million, a 6% decline at reported exchange rates, influenced by a currency headwind and reduced global tourist activity. Despite these challenges, Burberry is focused on brand reactivation and strategic initiatives like the "Burberry Forward" strategy. According to InvestingPro analysis, the stock appears slightly overvalued at current levels, though it has delivered an impressive 27.35% return year-to-date. The stock price saw a modest increase of 0.25%, closing at 1781.5, following the earnings announcement.

Key Takeaways

• Q1 comparable retail sales decreased by 1% year-over-year.
• Retail revenue was down 6%, affected by a 4% currency headwind.
• The Americas showed a 4% growth, contrasting with declines in Greater China and Asia Pacific.
• Burberry launched its Autumn ’25 collection, emphasizing outerwear and scarves.
• The company is undergoing organizational changes to boost efficiency.

Company Performance

Burberry’s performance in Q1 2025 was mixed, with a notable decline in retail sales and revenue. The company faced headwinds from currency fluctuations and reduced global tourist activity, particularly impacting sales in Greater China and the Asia Pacific region. However, the Americas and EMEA regions showed positive growth, indicating some resilience in these markets. Burberry’s strategic focus on product innovation and brand reactivation is central to its efforts to regain market share.

Financial Highlights

• Revenue: £433 million, down 6% year-over-year
• Comparable retail sales: Decreased by 1% year-over-year
• Currency headwind: 4% impact on revenue

Outlook & Guidance

Burberry is prioritizing investments in the first half of the fiscal year, with marketing spend targeting high single digits of revenue. The company expects margin improvement in 2026 and has set a full-year profit consensus around £5 million. Additionally, the forex impact is projected at £85 million in revenue and £15 million in profit. With the next earnings report scheduled for November 13, 2025, investors following InvestingPro’s analysis can access detailed financial health metrics, Fair Value calculations, and exclusive ProTips to better understand Burberry’s transformation journey. The company remains focused on reactivating its brand and acquiring new customers, with a particular emphasis on Gen Z and younger demographics.

Executive Commentary

CEO Josh Schulman emphasized the importance of reigniting brand desire, stating, "Reigniting brand desire is our most important initiative this year." He also highlighted the company’s efforts to reactivate its existing customer base, noting, "We lost a lot of our existing customers... now seeing reactivation." CFO Kate Ferry added, "We’re positioning the business for a return to sustainable, profitable growth."

Risks and Challenges

• Currency fluctuations continue to pose a significant risk to revenue.
• The decline in global tourist activity could impact sales, particularly in regions like Greater China.
• Supply chain optimization remains a challenge amid ongoing restructuring efforts.
• The wholesale market is experiencing a secular decline, affecting Burberry’s partnerships.
• Potential tariff impacts could influence future profitability.

Q&A

During the earnings call, analysts inquired about the early signals from the Autumn ’25 collection, which were reportedly positive. Questions also focused on the company’s pricing strategy in the U.S., where surgical price increases in the mid-single digits are planned. The management reiterated its commitment to brand reactivation and new customer acquisition, while closely monitoring potential tariff impacts on their operations. For comprehensive analysis of Burberry’s financial health, valuation metrics, and expert insights, investors can access the detailed Pro Research Report available exclusively on InvestingPro, which covers over 1,400 top stocks with actionable intelligence for smarter investment decisions.

Full transcript - Burberry Group PLC (BRBY) Q1 2026:

Kate Ferry, CFO, Burberry: Good morning. I’m Kate Ferry, CFO of Burberry. And with me today are Josh Schulman, our CEO and Lauren Wu Lang, Head of Investor Relations. As you’ll have seen, we published our Q1 trading update this morning. There are slides to accompany this call on our corporate website, and a transcript will also be available later today.

In terms of our running order, I’ll go through our performance in the first quarter, and then Josh and I will be happy to take your questions. Our last update was just a couple of months ago, and we’ve continued to make progress on our Burberry forward strategy. Our focus this year remains reigniting brand desire as a key requisite to growing the top line. For the first quarter, comparable retail sales declined 1% versus last year, with a sequential improvement in all regions relative to the previous quarter. During the period, we continued to bring our timeless British luxury brand expression to life through a series of distinctive monthly campaigns, High Summer, Highgrove and Burberry Festival, each celebrating British summertime traditions while designed to speak to different customer archetypes.

We launched our Autumn twenty five collection, the first under the Burberry forward era, focused on our recognizable brand codes and good, better, best pricing within a luxury context. We’ve continued to enhance visual merchandising and storytelling in stores and online, increasing product density and aligning our category authority. And finally, we initiated the organizational changes announced in May to enhance collaboration and agility whilst progressing delivery of our cost efficiency program. Moving on to the quarter’s retail performance on Slide three. As mentioned, comparable store sales were down 1% in the quarter.

The impact from space was a 1% headwind, leading to 2% lower retail sales at constant exchange rates. Currency was a 4% headwind in the quarter, with retail revenue landing at £433,000,000, down 6% at reported exchange rates. Turning now to regional performance. Following the organizational changes announced in May, we’ve now transitioned to our new structure comprising four regions: EMEA, Americas, Greater China and Asia Pacific. In U.

: U.

Kate Ferry, CFO, Burberry: Australia and New Zealand. In Q1, we saw reduced activity by tourists globally, and traffic remained challenged. That said, in Americas, we experienced 4% growth, supported by new local customer growth. EMEA grew 1% with local spend up mid single digit percentage, which helped to offset the decline in tourist spend. Greater China was 5% lower in the quarter with Mainland China down 4%.

Globally, the Chinese customer group performed in line with the region. Asia Pacific saw a 4% decline, driven by Japan, which declined by 10% following a slowdown in tourism. This was partially offset by South Korea as the region returned to growth, up 2%. Moving on to brand initiatives. We kicked off the quarter with our high summer campaign led by Jack Draper and Rosie Huntington Whiteley.

Featuring Burberry check swimwear, shirts and crop jackets, the campaign helped us reach new audiences. Our Highgrove campaign launched in May achieved positive engagement across social platforms supported by our influencer and events strategy to generate local relevance. June saw the launch of Burberry Festival, a series of films and portraits featuring globally recognizable talent alongside our newest brand ambassador, K pop artist Seungmin, strengthening our appeal across key markets. Collectively, these campaigns boosted brand desirability, the metric most closely tied to purchase intent. In terms of product, by category outerwear and scarves continued to outperform the group average during the quarter.

We’re building on the early success of our Check Trim products and the reorders of B clip bags are arriving this summer. We launched our Autumn twenty five collection partway through the quarter,

: the first fully conceived under the

Kate Ferry, CFO, Burberry: Burberry forward era. This collection represents a strategic step in rebuilding our outerwear core, celebrating recognizable brand signifiers and aligning pricing with category authority. Overall, the collection is off to a promising start, with early sell through results representing a significant improvement from last year’s autumn collection, both in our directly operated network and wholesale channel. This newfound momentum in wholesale is giving our key partners further confidence in our turnaround. Our goal is to have a smaller, better quality wholesale business going forward.

In stores, we continue to enhance visual merchandising with the reintroduction of mannequins and cross merchandising to inspire our customers to build their wardrobes. This has been brought to life through our Highgrove Garden installations and our festival window displays. We’ve now piloted the first seven scarf bars, which are already outperforming the rest of the fleet in scarf sales. We remain on track to roll out around 200 scarf bars by year end. E commerce continues to perform strongly with its third quarter of consecutive growth.

Turning now to the outlook for full year 2026. We are still in the early stages of our turnaround, and the macroeconomic environment remains uncertain. In the first half, we’re continuing to prioritize investment and expect to see the impact of our initiatives build as the year progresses. We will deliver margin improvement this year as we build on the early progress we’ve made in reigniting brand desire. We remain confident that we are positioning the business for a return to sustainable, profitable growth.

And with that, we will now be happy to take your question.

Operator: Thank you. Our first question for today comes from Susanna Push of UBS. Your line is now open. Please go ahead.

: Good morning, everyone. Thank you for taking my questions. I’ll stick to three quick ones, I promise. So first of all, would you be able to maybe tell us a little bit about the exit rate or what you’re seeing currently? I know it’s probably not one of your favorite questions, but you’ve seen a very impressive improvement from minus 6% to minus one So I would imagine that June was probably better, but it will be interesting to hear more or less what’s been the cadence of growth throughout the quarter.

Secondly, would you be able to maybe tell us a little bit more about the growth by consumer cluster? Specifically, it seems to me like probably most likely the major consumer nationalities such as Americans and Europeans were actually positive, and probably the only drug are the Chinese. But if you could confirm that, that would be great. And then finally, you had negative space. It seems like you closed some stores.

I know you confirmed the flat space guidance for the full year. But can you tell us a little bit more what are you doing to the stores? Are you or is it a specific region? I

: would

: be most interested to know if you’re basing maybe reshuffling a little bit the mix of your stores and, you know, what is the specific reason for that? Thank you.

Kate Ferry, CFO, Burberry: Morning, Susanna. Thanks for the questions. Perhaps I’ll kick off, and I’ve got Josh with me here as well. I’m sure we’ll interject. So let let let’s start then with the exit rates.

I mean, look. You’re right that June was, a little better, versus the total comp for the quarter. But I would just caveat that with it’s very hard to compare year on year. So, I mean, as always, you’ve got kind of comps from the previous year playing here. We’ve got weak comps in June.

But I think the most important point to make is that we have actually deliberately rephased some media into June this year as compared with last year to really align our marketing with the festival campaign that’s recently launched. So I think combination of comps, more marketing Okay. Does mean that that I’m just mindful of people reading too much into the exit rates. And and and clearly, I’m also gonna flag that q two is a really important quarter for tourism also and and nothing different from what you’re hearing from everywhere else. You know, tourism is is down globally.

You know, that said, there’s no doubt we’re really pleased, obviously, with the quarter on quarter sequential improvement everywhere, which I guess leads into your second question around growth and clusters and and what we’re seeing. So I think, you know, there’s a little bit of a kind of East West story going on here, so better better performance in in Americas and EMEA. You know, still a bit weaker in in Greater China and the rest of Asia, but as I said before, sequential improvement everywhere. I think what we’re seeing is is, you know, EMEA, obviously, that is quite a tourist market. So tourism down, but really encouraged by the fact that locals are spending more.

So positive performance from our locals there. America’s obviously much less of a tourist market, and I think that is really where we’ve been in in encouraged by what we’re seeing from customers there. So not only have we got more returning customers, we’ve also got a good set of new customers in the region. And what’s more, these are customers who have broad customer set. So, you know, we we’ve been really focused in that market.

Fantastic team focused on the kind of good, better, best customer acquisition and and really taking their lead from some of the brand initiatives that that I talked about in the opening remarks. So they’ve been leading some good high end events for VIP customers, more the kind of high growth customer. Likewise, they’ve had some great events with DJs in high traffic malls, which has been really leaning into the great success of the festival campaign. So I think that’s that’s really what’s been driving the performance in The Americas. And then elsewhere, Chinese cluster very much in line with the region.

So the cluster actually has been similar q four to q one. So, again, what you’re seeing is, you know, obviously, tourism piece down, but but a a better local local performance. And your final question, sorry to forget that. You asked me about space. I mean, you know, this is just one quarter, so I wouldn’t really call too much out on space.

We’re still very much guiding to space being neutral for the full year. We were down 1% in the quarter. You know, it was just a factor of not having any new store openings, but we did have, I think, four closures. But this is really part of BAU. We’re we’re constantly reviewing our network as part of normal course of business, and and and, you know, there’s always a bit of movement in quarter.

But I think for the year, nothing to call out. You know, our stores are generally in great locations. As I’ve said before, the issue is not so much the number of of stores. It’s just really improving the productivity within those stores, which we’re absolutely focused on and seeing good early signs with the Burberry forward strategy.

Operator: Thank you. Our next question comes from Ann Law Bismuth of HSBC. Your line is now open. Please go ahead.

Anne Law Bismuth, Analyst, HSBC: Yes. Good morning. I have two questions. The first one is, do you confirm the acceleration expected quarter after quarter? And how do you feel about the low single digit to mid single digit improvement expected in H2?

Will it be mostly driven by the new collection? Or do you have any special initiatives? And my second question is about the restructuring plan. Is it almost done? Or do you still need a few more months to execute on it?

Can you give us an update? And maybe one last question about the performance in Japan and South Korea. Can you give us a bit more kind clarity about it? Thank you very much.

Kate Ferry, CFO, Burberry: Hi, Anne. Thank you. I mean, I think on on on the the question around the comp, like for like, forward, you know, I’m probably not gonna comment too much. We’re only two weeks into the quarter. I think I think the key here is obviously that, you know, we’re seeing good green shoots so far in this quarter.

This is really about continuing to build on the brand initiatives. And most importantly, you know, it’s it’s it’s gonna be the product and the changes that we’ve made there that really start to to feed through. I mean, I I would just reiterate, really, what I said back in May, and and I think you can see the outlook statement is very similar, which the the focus this year is really about reigniting desire. So, you know, I think I’ve always said that this year, top line growth is gonna be more muted. You’re clearly gonna see good margin progression and particularly given some of the inventory initiatives that we undertook last year.

And, you know, this this is really, as I say, the priority is building on the momentum that we’ve seen in both product and brand, you know, investing in the first half, doing what’s right for the business in terms of investment, and then, you know, top line will come. Sorry. Restructuring. That was a a a a a and a third question. Apologies.

So, yeah, on the on the restructuring and and specifically, I mean, if I tackle specifically the the the cost piece, you know, we we we obviously announced just eight weeks ago a kind of significant cost initiative, the restructuring program. So far, nothing to call out in terms of how we saw that playing out. The benefit of that will be very much second half weighted and, as I say, ongoing according to plan at this at this stage. And then just on the regional piece, Japan, again, very similar to what others are seeing given the currency situation there. Japan is is certainly down year on year, but we are encouraged to see that actually Korea is is is positive.

So single digit positive in Korea.

Anne Law Bismuth, Analyst, HSBC: Thank you.

Operator: Thank you. Our next question comes from Antoine Belge of BNP Paribas. Your line is now open. Please go ahead.

Antoine Belge, Analyst, BNP Paribas: Yes. Good morning. Again, it’s Antoine at BNP Exane. So actually, I’ve got three questions. The first one is on the autumn collection.

I think it will be the real first collection with the full, I would say, impact of what Joseph has been trying to and his team has been trying to improve. So in terms of maybe products and signifiers pricing, could you maybe call out the key elements? My second question relates to the operating profit, especially I think you’ve just mentioned that some of the cost savings will be more H2 weighted. So I think the net benefit incremental of the two programs is around €56,000,000 So would it be possible to have a breakdown maybe 1H versus 2H? And overall, sort of profits could be achieved in H1?

Is it going to be relatively minimal? Or could we already see a margin going above the 5% mark in the first half? And finally, just in terms of the average AUR, a lot of moving parts, polo shops maybe going down in terms of pricing, some tranches going up, maybe price increases to offset tariffs. So net net, how much was pricing up or down in the first quarter? Thank you.

Kate Ferry, CFO, Burberry: Thank you, Antoine. Well, I’ve got Josh here with me. So I think perhaps Josh will take the collection piece, and we’ll probably build in a pricing discussion into that. And and then I’ll I’ll talk to you about profit and consensus.

Josh Schulman, CEO, Burberry: Hi, Antoine. So so as Kate said, I’ll start with the the the product. So the autumn collection, as you mentioned, is resonating across all of our customer archetypes globally. And what’s notable is that we have a significantly higher sell through on the autumn collection this year than we had on the same, autumn collection last year. And it it’s really the product strategies that we’ve discussed, that are coming to life and are resonating with our customers.

So first, leading with outerwear and scarves and earning earning authority across the other categories. So once again, outerwear and scarves had sequential improvement and comp improvement as well. Outerwear has really been led by light jackets as you would anticipate for for this time of year. So some examples include the the the Blackpool that has the continuation and the Clapton, which have the continuation of the check trim with a new novelty check trim zipper that has been a best seller. We also talked at, the strategy day about uniting our brand signifiers and leaning in to, some of our beloved brand signifiers.

And so that includes items with check trims. It includes items with our equestrian night design. And importantly, we brought back, a, icon from our heritage, the night stamp, which appears, in many places throughout the collection, on the the Nelson, light jacket. And this archival night stamp, it also appears on different jersey pieces and in hardware, on our Highlands bags, and wherever we have that, that is also resonating with with our customers. And finally, aligning our pricing with category authority.

Your question on AUR, was a good question. I’ll let Kate pick that up. But we’re what we’re seeing is we’re seeing, strength at all levels, of the pyramid at good, better, and best. So, frankly speaking, the autumn collection is playing out even better than we anticipated. And and this is giving our store teams confidence as they’ve been clienteling and calling their customers in.

And it’s also giving our wholesale customers confidence. They are receiving the products, and we’re seeing strong growth, in the in the sellout of our wholesale customers as they’re receiving these products, which is giving them further confidence, in our turnaround.

Kate Ferry, CFO, Burberry: Hi, Antoine. So just on the profit piece, I mean, I think we’re not really changing the guidance that we gave back in May. As per the outlet statement, it it it is definitely, if you like, a a kind of even more h two weighted, than last year in terms of profit because we’re really prioritizing investment in the first half. And I think just, you know, to give a little bit of color on what we mean there is that we’ve certainly phased more consumer facing investment into the first half versus last year. So that might be marketing media, also visual merchandising, a bit of client telling.

And just as the example I I used in answer to another question, you know, in terms of rephasing media even in this quarter to align with the festival collection, for example. So I think it’s it’s very much investment in the first half, and then, you know, we start to see the impact of our of our actions build into the second half. So in terms of, you know, I think h one consensus is for a for a, you know, small profit in the first half. You know, we’re we’re comfortable with that, and we’re likewise comfortable with the full year consensus, which I think is is is full year. It’s a completely 5,000,000.

And I think as per my earlier comments, you know, the priority is really to build on the momentum that we’ve seen in both product and brand. So in terms of investment, we’ll continue to do absolutely what’s what’s right for the business. And that, therefore, is a little bit around, you know, how much of the cost savings are gonna drop through. This will obviously, as we move through the year, that’s gonna a little bit depend on, you know, not only is it about how much we want to invest, there’s also macro considerations, tariff considerations, which is why kind of wrapping all of that up, I would say, will be comfortable with consensus. But you’re absolutely right in terms of the cost savings.

They will be h two weighted. Obviously, we announced the the the transformation back in May, and that was the same day that we announced it internally. And, obviously, since then, we’ve had to go through, you know, the the these, you know, processes are are always tough. It’s always obviously difficult to say goodbye to to colleagues, but we’ve been managing that since May. We we’ve been going through the consultation process in The UK.

Obviously, processes differ region to region, so it’s only really kind of towards the back end of this month and beyond that colleagues are actually exiting the business. So you will see cost savings more h two weighted.

Antoine Belge, Analyst, BNP Paribas: Okay. Thank you to both of you. Very clear. Thank you.

Operator: Thank you. Our next question comes from Grace Smalley of Morgan Stanley. Your line is now open. Please go ahead.

Grace Smalley, Analyst, Morgan Stanley: Hi, good morning. It’s Grace Smalley. Thank you for taking my questions. The first one would just be on marketing, please. So you mentioned that you had kind of several strong marketing campaigns during the quarter and then increased spend in June in particular.

As you look ahead, Josh, what are the sort of things that you’re planning to keep this kind of momentum going on the marketing side and building on these recent strong campaigns that have clearly driven consumer traction? And then Kate, specifically, I think you mentioned that there is more in H1, including more marketing. Could you just detail more precisely the shift in marketing between H1 and H2 and overall what you’re planning for marketing as a potential for sales for the full year or whether that’s just going to be a bit flexible depending on how top line and kind of cost savings progress? And then my second question, just to follow-up on some of those comments on the wholesale side. I appreciate you don’t normally give official wholesale guidance for the second half until November, but just given those comments there on positive feedback from wholesale partners, any sense of how we should be thinking about how wholesale growth in the second half relative to that first half guidance you’ve given of down mid teens?

Thank you very much.

Kate Ferry, CFO, Burberry: Great. Thanks, Grace. Well, I will pass over to Josh to, to answer the marketing one, and I’m sure you’ll have a few comments on wholesale as well. Sure.

Josh Schulman, CEO, Burberry: Okay. So why don’t I take those, and then I’ll turn it back, to you. So, Grace, great to speak with you, and thanks for, acknowledging, all of the work that our, marketing teams are doing to surprise and delight at our existing customers and attract new ones. So clearly, you saw in the quarter the drumbeat of, timeless British luxury narrative storytelling, from High Summer to Highgrove to the Burberry Festival, all with a through line of Britishness and style, but, targeted toward a different, customer archetypes. And and that led both to the sequential improvement in comp sales, but also to seeing our brand desirability increase, by by 11 points, in our in our Kantar survey.

And so, you know, I don’t wanna give away, too much. Our our our our marketing team would would would be upset with me. But what I will say is that you’ll continue to see, this type of narrative storytelling, with different stories both from town and country, at speaking about different British themes. You know, coming up in, toward the August, we’ll be celebrating, the craft, around our trenches. And we’ll be doing a campaign, which was a little bit of a counterpoint to the summer festival, and this is about back to the city, and about a a more polished form of dressing, for for, you know, coming back to London, after a summer of festivals and summer that, you know, this week Burberry is in Ibiza, taking taking over the standard.

But, you know, all good things must come to an end, and we have lots of, lots of beautiful products to wear, coming back to the city for September, that we’ll be showing, in in August. And then, of course, we’ll be lighting up, the beautiful winter fashion show in in September, moving into a bold outerwear expression in October, and then the then we go into, festive and lunar New Year. We’re really, committed to protecting and amplifying, the the marketing and consumer facing spend, and reinvesting in the business to drive growth and reignite desire. As Kate said, reigniting desire for Burberry, is our most important initiative this year. And and I think where we’re really seeing this is in the conversion is in the conversion and in the sell through of the the new autumn collection.

You know, this has been a tough moment for, tourist travel around the world, but what we’re seeing is when it is bringing people in, with these new campaigns, and then our conversion, is improving significantly. In terms of your your question about wholesale, you know, wholesale serves, you know, multiple purposes for us. From a revenue contribution, it’s a relatively small part of our business, but it’s such a good benchmark of our performance against our peers, because, you know, they can buy any product, and they’re really responding to their customer demand. And, you know, we saw a real turnaround, in in in two things. First, in the sell in from the opinion leading wholesale customers, and that started with our winter show sales campaign and from our spring, sales campaign in May.

So the order book was very strong driven by, the the most, important wholesale customers that we want to grow. And now it it really in the last, I’d say, forty five days, they now have a critical mass of the autumn collection on the floor, and we’re starting to see, that their sell out is, at the best level it’s been in three years. And so they are very enthusiastic. I want you to keep in mind, though, that the wholesale sector is in secular decline. And, you know, we will be, you know and we are still planning for wholesale in general to be a smaller, better quality sector of our business, as we continue to exit some of the stores that are no longer appropriate, venues for for luxury or for our brand.

But in the accounts that matter to us, we we’ve we’re seeing the actual end consumer respond to the product, giving the, the buyers more confidence in our turnaround.

Kate Ferry, CFO, Burberry: Yeah. And I think, therefore, you know, wrapping all of those comments up into your, you know, specific guidance question, I think h one guidance remains unchanged, I e, down mid teens. And as usual, we’ll update on the full year in November. But as per Josh’s comments, you know, initial spring summer twenty sixth with that is is is certainly positive. And then just to round all of that off, your specific question on the marketing spend and the shift there, I think the way to look at it is that for the full year, we’re still looking at a high single digit percentage of of revenue, which is absolutely in line with previous years.

This is much more around phasing across the two halves, which again is why we’re talking about more investment in the first half and a more h two weighted profit piece for the year.

Grace Smalley, Analyst, Morgan Stanley: Okay. Very clear. Thank you both.

Operator: Thank you. Our next question comes from Thomas Chauvet from Citi. Your line is now open. Please go ahead.

: Good morning, Keith and Josh. Two questions, please. The first one on wholesale, a follow-up on The U. S. That you know well, Josh.

There were a few recent negative headlines on the performance of Sachs and Neiman Marcus and I think Bergog Goodman as well since the merger. And I think conversely, Nordstrom and Bloomingdale seems to have improved or benefited from such issues. I mean is that performance that you’re seeing captured fully in your mid teens guidance for wholesale in H1? I would assume so. But how do you expect this key account to evolve in the second half?

And on wholesale also, would the European cleanup underway be completely over by the end of fiscal twenty twenty six? And secondly, on supply chain and tariffs, I think 70% of your COGS is euro as of FY 2025. We talked about tariffs with UK at the full year results a couple of months ago. How’s your thinking evolved in light now of potential 30% tariffs for the EU rather than 20 in terms also on how you think about mitigation actions beyond the obvious, which is usually pricing? Thank you.

Kate Ferry, CFO, Burberry: Great. Thank you. Well, why don’t Josh, you probably comment on The US wholesale, and then I’ll take the tariffs.

Josh Schulman, CEO, Burberry: Sure. So, you know, what we’re seeing in in in US wholesale is really the reawakening of, the Burberry brand, within all of the accounts that you mentioned, within the Saks Global portfolio, with Bergdorf at the top of the pyramid, and Saks Saks Fifth Avenue stores and Neiman Marcus stores, in addition to to Nordstrom and Bloomingdale’s. And, you know, we we used to have a very important, presence in in all of those in all of those accounts. And, over over the years, that has been diminished. And and and frankly, you know, just like our directly operated stores, their Burberry business had been very tough these past few years.

And and what’s interesting is with the, with with the arrival of the Autumn Collection, we’re seeing broad based strength. So we’re seeing it, in the women’s ready to wear, and men’s ready to wear, but we’re also seeing a a growth in handbags and shoes. And, you know, this is a this is a great indication for us, because, you you know, here, we’re being judged alongside our peers. And, you know, the sales associates are choosing to lean into Burberry, and the customers are recognizing the the the work that our teams are doing on the product. And and and so, yes, there are, you know, a lot of headlines about a a US wholesale, you know, from from from our, from our vantage point.

You know, we value the partnerships, that we have with the team at Saks Global, with Nordstrom, with Bloomingdale’s, and, all of which are, looking to strengthen their Burberry business, and are and they’re now starting to see, some legitimate green shoots. In terms of of Europe, you know, the situation is a little bit different in Europe. There are a handful of larger important, partners that we have, like the, Mytheresa’s and the the Net Aporte’s. And and there, we’re also seeing a reawakening of, demand for Burberry, which is great. But, you know, the the European wholesale market continues to have a lot of smaller independent stores, that are in a a secular decline.

And and, you know, every time that we we we clean them up, there seems to be more to do. And and it’s ultimately because the you know, this is a network that is really built on brand adjacencies. And as the, as our, colocated brands, the brands that we like to locate with depart some of these smaller multi brand stores, they become inappropriate for us to be there, and and we also close those. So my guess is that we will continue to contract the number of accounts, in Europe, for some time. And, hopefully, some of that will be offset by growth in the strategic accounts that I just mentioned.

Kate Ferry, CFO, Burberry: And then just to pick up on your tariff question, I mean, I think just a reminder, obviously, 19% of our revenues are from The US. So, yes, still certainly a a headwind, but, you know, 81% of our business is is not impacted. And as I said in May, you know, we spent much of last year looking at the supply chain, looking at price elasticity. So in terms of, you know, as as much as one can be prepared, we were. You’ll remember we took quite a surgical approach to price increases in The US, and I think the comp shows that we really definitely understood where we had price elasticity there.

But look, you know, the situation remains dynamic. I mean, if you look over the last few weeks, there have been a number of unofficial announcements, letters sent in the last few weeks. You alluded to, obviously, the EU reciprocal being increased to 30% from the original 20%. But then, of course, you know, there’s also chat about the China reciprocal being kept at 10% permanently. So, you know, many moving parts, some official, some unofficial, and we will continue to monitor and and manage as best we can.

: Thank you, Kate. So there’s no sort of supply chain reorg opportunity there, that goes obviously beyond tariffs that is in the pipeline. You worked on headcount. Is there a sort of supply chain reorg that could address some of the inefficiency you may face in front of a 20% or 30% U. S.

Tariffs for the next three, four years?

Kate Ferry, CFO, Burberry: I mean, I think there’s nothing kind of

: Manufacturing in The US or or or or any anything more creative?

Kate Ferry, CFO, Burberry: I mean, what I would say is that that there’s kind of nothing specific to update you on in that, you know, we work with a global network of suppliers, and we’re always looking at how we can optimize our supply chain. And that that doesn’t change. And as per my comments, actually, over the last year, since Josh arrived, we spent an awful lot of time looking at it. So it’s it’s kind of more part of what we do rather than a kind of new reaction to to to tariffs. So I think, look, you know, we’re we’re as much as one can be confident in your ability to mitigate where you can, You know, we’re doing what what we can, but I think our sourcing has to remain aligned to, you know, our expertise and our good, better, best pricing architecture.

Josh Schulman, CEO, Burberry: I I I would add one other thing is that, in The US in May, we we did some surgical price increases in the mid single digits. And and as you can see from our comp, we had no impact to that. And and so and so that has been encouraging for us.

: Thank you.

Operator: Thank you. Our next question comes from Louise Singlehurst of Goldman Sachs. Your line is now open. Please go ahead.

Louise Singlehurst, Analyst, Goldman Sachs: Good morning, Josh, Kate. Thank you very much for taking my questions. Just two follow ups for me, if I can. Really interested to hear more about you talked about the new campaigns and new audiences, but just the details around like the customer mix recurring, the newness. There’s obviously a lot of newness.

I think you cite The U. S. Being particularly exciting on that basis. And then the second question was just a follow-up on the pricing and the alignment, which you’ve been talking about across the you have authenticity in the category dominance for outerwear, obviously. But when we think about the broader product offer and we go into the autumn twenty five, is that where we will more notably see when we walk into stores about the resetting or the realignment of the pricing?

Or is this step one of many steps to follow over the coming season?

Josh Schulman, CEO, Burberry: Yeah. I’ll I’ll take both of those. So in terms of the the the the campaign, so, you know, clearly, you can see from the campaigns that we are focusing on different elements of Britishness, and then we’re tailoring those to different customer archetypes. So in the season, you know, we started off with high summer with Rosie Whittington Whiteley and Jack Draper, jumping off of a boat in Burberry swimwear. And clearly, that that was, you know, fun and targeting a younger audience.

Then we moved to a more sophisticated, storytelling capsule and more sophisticated, product, with the collaboration with Highgrove that targeted an investor customer and then, back to a a more youthful, version of Britishness, celebrating Burberry Festival culture in June. And so we’re we’re we’re being very deliberate in how we’re in how we’re we’re pulsing these. And in in some ways, you know, you you may see in the in the summer months, a little bit more focus on, reshaping the pyramid of price, and and, you know, some of the good, better, best strategy. You know, in the summer months, we’re focusing more on the good naturally because you have more jersey and t shirts and polo shirts, and you have lightweight jackets that tend to be nylon and opening pricing. You know, as we move into the the auto the the fall and the winter seasons, you know, our next campaign, is going to be back to the city, which focuses more on beautiful tailoring, more dressed up trench coats, you know, for a more elegant, look.

And then, of course, as we go into winter, you’ll have, more outerwear, more cashmeres, more puffers, things like that going into a higher price point, again. So, you know, we’re we’re we’re doing two things at once. We’re rebalancing the cadence of our marketing across our archetypes, and we’re rebalancing the pyramid of product in terms of good, better, best. And I think you’ll see how those evolve over this six month period, and we’re really only about two months into that.

Louise Singlehurst, Analyst, Goldman Sachs: Thank you. That’s very, very clear. Thank you.

Anne Law Bismuth, Analyst, HSBC: And then just on so just

Louise Singlehurst, Analyst, Goldman Sachs: to follow-up on the the new versus kind of recurring customer. I know it’s always tricky because not everyone’s buying every year from from a brand anyway. But in terms of how you would describe the overall cohort, I mean, Josh, when you first started coming in a year ago to today, obviously, presumably, the balance is much more geared towards a newer customer coming in. Is that fair?

Josh Schulman, CEO, Burberry: You you know, frankly speaking, we lost a lot of our existing customers. We were disappointing a a lot of our existing customers. And so what’s great is to see the reactivation of our customer base, which is really we see that through our conversion, and that is happening globally. And we are starting to attract new customers, particularly in The Americas and in EMEA with the with the local customer. I would say that the, most challenging part of our business, has been, in terms of tourists globally.

Louise Singlehurst, Analyst, Goldman Sachs: Great to see. Thank you. Thanks for the color.

Operator: Thank you. Our next question comes from Luca Solcher from Bernstein. Your line is now open. Please go ahead.

0: Yes. Good morning. A question about marketing spend. You said that you’re getting very good signals from conversion and sell through when it comes to the full winter collection. Maybe this is a bit simplistic.

Is that an indication that consumers are getting into the stores and finding a lot better products than they thought? And could this potentially further enhance if you were spending more on communication going forward? But I understand that that instead, you’re planning to spend less in proportion to what you did in the first half. Maybe I misunderstood. I just wonder whether you would embrace this logic and what you think that the data means in terms of conversion and sell through improving.

The second question relates to the Chinese. There’s a lot of contrasting communications about this consumer nationality. I wonder if you can help us make any sense of what is going on and if you could draw any distinctions when you look at the Chinese nationals. Are there any differences in trends within China and outside of China, or are there any differences in trends when you look at different consumer cohorts or in different regions within China that would help us understand what is potentially to be expected from this notionality going forward. And last but not least, given the very important forex gyrations we’ve seen in recent months and especially with the very significant depreciation in the dollar.

Wonder if there’s anything new to anticipate and to say about what the forex impact could be on Balfour going forward. Thank you very much indeed.

Josh Schulman, CEO, Burberry: Hi, Luca. It’s Josh. I’ll take, the marketing spend and, the Chinese customer, and then I’ll hand over to Kate for the for the forex. So you’re absolutely right. So everything you say about what’s happening in terms of, customers coming into our stores worldwide and, finding products that is more aligned with what they expect or surprised and delighted to see from Burberry is driving the conversion.

And so we’re really pleased with, the sell through improvement and the response that we’re seeing to the to the marketing campaigns. And, you know, for the time being, you know, we’re targeting high single digit spend in marketing, to continue for the for for for for the rest of the year. But we also want to keep flexibility, to test and learn and to reinvest, as the as the year goes on. So, you know, and we’re we’re we’re really looking at that. And, you know, it it it’s early days in the turnaround.

And so we’re learning where we should pulse and lean in further. And, of course, for, you know, Burberry is always, weighted toward the second half. And and, you know, having seen, the offer for festive, the offer for Lunar New Year, you you know, those are areas where we want to have, sufficient marketing firepower to invite a broader audience in, to to see, the evolution of of the product. In terms of, the the the Chinese customer, you know, the the the the, the cluster was largely in line with the the region at this time. You know, what we’re basically saying is that the the Chinese customers are shopping more at home.

And, you know, we’re really seeing the decline in, in Chinese tourism, around in other regions around China, so, you know, particularly in particularly in Japan. And within China, we’re we’re seeing, you know, the same range of customer archetypes. In the quarter, we were really interested to see the growth of Gen z and younger customers. And and now some of that may be, because we were really flexing the marketing messages around a more youthful expressions of the brand with high summer and and with the festival. As you know very well, Kishi is coming up in a few weeks.

And so we also have a specific Valentine’s Day capsule that is targeted toward younger Chinese consumers. But it’s also you know, within China too, we have the the same the same hierarchy of, customer archetypes. And and some of the more, investment dressing customers who are coming in for beautiful cashmere coats, and and and for items like that, you know, tend to shop a little bit later, in the year. And and so we’re looking forward to flexing, some of the marketing around the more wardrobing and more cashmere and more luxe items as we head into as we head out of, Chinese Valentine’s Day, and into, the fall and winter seasons. There, we’re anticipating to also get some customers a little a little bit more mature and, higher spending, as we go into, those periods.

Kate Ferry, CFO, Burberry: Okay. And then on the FX, you know, compared to where we were at the end of f y twenty five, as you know, the pound is strengthened against all major currencies except, of course, the euro. So that’s, hence, the new guidance today. So we’re we’re guiding to 85,000,000 impact on revenue, 15 on profit, and that compares with 55 revenue and 10 profit back in May. That was struck actually, our latest guide was was was struck on the June 27.

So, actually, things have reversed a little since then. But, you know, as a guide, as we’ve said to you before, broadly, 5% move in GDP is about a 30,000,000 impact on profit. So I think, you know, we’ll we’ll continue to to continue to update you. But I think the guidance today is is is fair as we sit.

0: Thank you very much, Josh and Kate.

Operator: Thank you. Our next question comes from Charles Scotty from Kepler Cheuvreux. Your line is now open. Please go ahead.

1: Yes, good morning. Thank you very much for taking my questions. I have three. Could you please comment on the comparable store sales growth in the primary DTC channel, I. E, excluding outlets?

I’m just wondering if like during previous quarters, the resiliency has been partly explained by markdowns in outlets. And my second question, you commented on the good performance of outerwear and scarf. What about accessories and more specifically handbags as the price realignment driven renewed traction with customers in this category? And the last question is regarding your beauty license. There are some speculation that Coty might divest some of its licenses with Burberry explicitly mentioned in the press articles.

Do will you have any say in the choice of potential acquirer for your beauty license? And I’m just curious to hear about how your contract with Coty is structured in the event of a of a license transfer. Thank you very much.

Kate Ferry, CFO, Burberry: Hi, Charles. So perhaps I’ll kick off, and then and then and then I know Joshua will chip in as well. So, I mean, I think, as you know, we don’t typically break out performance between channels. But, you know, our focus is obviously driving productivity, profitability across all our stores. So, you know, we’re very focused on on the full price business whilst also optimizing our outlet channels.

And I think, you know, we’ve got the opportunity actually for, you know, higher AURs there. We’ve talked about, you know, the opportunity for margin this year, and that really is about, you know, we’ve got need to bring inventory levels down, shallower discounting, optimizing, you know, both full price and and outlet channels. I didn’t quite catch. It was a bit difficult to hear, but I think that was the nature of your of your first question. On the third one, I mean, look, you know, we’ve got a great relationship with Coty.

We’re a we’re a key partner for them. And as I say, typically, speculate on on various rumors there. But from our perspective, they’re they’re a good partner and will remain. And I think the the other question was on

Josh Schulman, CEO, Burberry: I think it was on the accessory business, if I’m if I’m not mistaken. Is that correct?

1: Yes. Exactly. And especially handbags. Yes. Thank you.

Josh Schulman, CEO, Burberry: Yeah. So, you know, when we met a few months ago, we talked about, the rebalancing of, the accessory business, and in terms of aligning, the pricing with our category authority, in a good, better, best spectrum. And we talked about the success of our b clip bag, which at the time had largely sold out. And now I’m pleased that, the reorders are starting to come in on that bag and, that those are those are working well. In addition, since that time, we’ve launched, a couple of other important new lines, including the Cotswolds, and the Highlands, all of which, cater to different customer archetypes

: and

Josh Schulman, CEO, Burberry: are are priced within a good, better, best range. And we’re, we’re we’re pleased with those launches. We’ve specifically brought our inventories down, significantly in this category to do a to do a reset, and the reset is is going well. A pleasant surprise in the quarter has been the acceleration of our shoe category, where we’re really just getting started to rebuild, that business. But, you know, some of the early best sellers there, have been, the the Burberry Wellies that you see in the festival collection, and, more to come on that front.

1: Thank you very much. Very helpful.

Operator: Thank you. This concludes our Q and A session for today. I’ll hand back over to Kate Ferry for any closing remarks.

Kate Ferry, CFO, Burberry: Thank you. Well, thank you all. We appreciate you joining the call today, and Josh and I will look forward to updating you at our interim results in November.

Operator: This now concludes today’s conference call. Thank you all for attending. You may now disconnect your lines.

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