Burberry Group plc

Good morning, everyone, and welcome to our preliminary results for the 2026 financial year. I'm Josh Schulman, Chief Executive Officer of Burberry, and with me is Kate Ferry, our Chief Financial Officer. One year ago today, we were in an early phase of our Burberry Forward transformation, deeply focused on stabilizing the business. Today, I am pleased to report on our progress. This past year has marked a meaningful inflection for Burberry. I am very proud of what our team has accomplished this year. We have returned to positive comparable sales with sequential momentum throughout the year and particular strength in greater China and the Americas, both of which delivered double-digit comp growth in Q4. We have reignited brand momentum with improved cultural relevance, attracting a new generation of Gen Z customers to the brand. We have asserted our authority in outerwear and scarves as reflected in the outperformance of these categories throughout the year. And as the year progressed, we saw that momentum extend into other categories. And finally, we have improved the quality of our sales, delivering a significant increase in gross margin as well as operating profit, while strengthening our balance sheet with a reduction in leverage. My conviction that our Burberry Forward strategy is the right path to brand relevance and value creation is stronger than ever. I will now turn it over to Kate to take you through our financial results, and then I will update you on our strategy. Over to you, Kate.

Thank you, Josh, and good morning, everyone. I'm really pleased to see the progress we've made with Burberry Forward reflected in our financial performance, particularly in a year where we've navigated macroeconomic uncertainty. Let me start by highlighting four key points from the announcement this morning. Firstly, as Josh articulated, we've returned to comparable sales growth this year, which built sequentially through the year, culminating in plus 5% in Q4. I'd call out particularly strong growth in Greater China, our largest region, and also in the Americas, both up 10% in Q4. Secondly, the quality of the sales growth, combined with our decisive actions to reset inventory, has allowed us to achieve a substantial improvement in gross margin, up 530 basis points at constant exchange rates to 67.9%. Thirdly, adjusted operating profit has improved significantly to £160 million and we're on track to deliver £100 million of annualised savings by FY27, with £80 million already delivered in FY26. We've made these necessary savings thoughtfully, ensuring that we continue to invest for growth, including an increase in marketing spend during the year. And finally, our free cash flow has significantly improved, resulting in a stronger balance sheet with reduced leverage. Our net debt to adjusted EBITDA is now 1.6 times, compared to 2.3 times this time last year. I'll now take you through a more detailed review of performance, starting with revenue by channel, and I'll refer to changes at constant exchange rates. Comparable retail sales growth was 2%, with a 1% reduction in space, resulting in total retail revenue growth of 1% in the year. Wholesale revenue was down 4% in the year, however we saw growth of 3% in the second half, and this second half improvement is an encouraging indication of our key wholesale partners' confidence in our strategy. Licensing declined by 9% in line with our expectations due to the destocking of old fragrance lines in H1 and the longer lead times for our licensees to reflect the Burberry Forward strategy in their offer. As a result, total revenue for the year was stable at constant exchange rates and declined 2% on a reported basis. Turning now to regional performance. Greater China accelerated to plus 10% in Q4, driven by local spend. Growth was 4% in the full year, with momentum building through the quarters. Emir was flat in the year. In Q4, the region declined 2%, reflecting continued weaker tourism. The Middle East is a relatively small part of our business, 2% of global retail sales. Excluding the Middle East, EMEA's Q4 comp would have been minus 1%. The Americas continue to see strong performance with the greatest sequential improvement in Q4, up 10% from plus two in Q3, supported by local spend. Asia Pacific grew 3% in Q4, South Korea performance remains strong, up 13% in line with Q3, supported by both local and tourist spend, particularly from Chinese visitors. Japan declined 6% in Q4, impacted by the continued reduction of inbound tourists. The APAC region delivered growth of 4% in the second half, offsetting declines in the first half, with 2% growth in the full year. Across all regions, we're encouraged by strong conversion in our stores, which is allowing us to offset some of the industry-wide challenges with traffic. Moving on to the income statement and staying with changes at constant exchange rates. As noted earlier, gross margin was 67.9%, up 530 basis points compared to last year. This material improvement is mainly due to decisive one-off actions in the prior year to reset inventory, and we also benefited from a higher quality of sales, with more products selling at full price, resulting in lower levels of markdown. Moving down the P&L, adjusted operating profit was £160 million, a significant improvement from the £26 million reported last year. Adjusted operating profit margin expanded to 6.6%. Adjusting items related to the previously mentioned cost savings plan were £45 million, and we expect around £5 million of one-off costs in FY27, bringing the total to around £50 million. The net finance charge was £66 million, broadly stable compared to the prior year. And finally, adjusted EPS was £15.2, a significant improvement from last year. Free cash flow was 141 million in the year, improving from 65 million last year. Cash generated from operating activities increased by 56 million pounds to 582 million pounds, due primarily to the increase in adjusted operating profit. Working capital saw an inflow of 41 million pounds, driven primarily by an increase in payables and lower inventory levels. Capital expenditure for the period was £113 million. We continue to be disciplined, focusing on strategic investments with the highest return, such as the rollout of the scarf bars. Borrowings were £511 million, a significant reduction from the £738 million last year, following the September repayment of our maturing £300 million sustainability bond. At the end of the period, net debt to adjusted EBITDA was 1.6 times. Now, moving on to the outlook. In FY27, we expect to make further progress on our financial ambitions, including delivering revenue growth and margin expansion. We are, however, mindful of the uncertain geopolitical and macroeconomic environment and its potential impact on consumer confidence. To help you with modelling in FY27, we expect retail space to be broadly stable, wholesale revenue to grow by mid-single-digit percentage in the first half of the year, reflecting continued confidence in our new direction from our key wholesale partners. As mentioned, annualised cost savings will be around £100 million, with adjusting items of around £5 million in relation to the restructuring charge. Capital expenditure is expected to be approximately £120 million. Currency is expected to be a £10 million headwind on both revenue and adjusted operating profit. And finally, the effective tax rate is expected to be between 27% and 30%. As we look ahead, we're encouraged by our performance, which sets us up for the year to come. And I'll now hand over to Josh to share an update on our strategic progress and future opportunities.

Thank you, Kate. When we set out Burberry Forward, we defined a clear framework to build brand relevance and value creation. Our performance this past year reflects disciplined, consistent execution of our strategy across all four pillars with the customer at the center. I am pleased to say our strategy is working and there are opportunities for further growth. Starting with our brand, Our strategy is to consistently communicate timeless British luxury through immersive storytelling juxtaposing heritage and innovation. Our tentpole campaigns anchor our calendar alongside a continuous drumbeat of seasonal and product stories. This year is Burberry's 170th anniversary. To kick off our year-long celebration, we launched Portraits of an Icon, honoring the iconic Burberry Trench. Bringing together 23 global stars from the worlds of film, music, sport, and fashion, ranging from Kate Moss, Tiana Taylor, Jonathan Bailey, Bright, Kendall Jenner, Jack Draper, and Wu Lei, the campaign appeals to a diverse audience. They appeared in a series of bold portraits and short films, showing how the iconic Burberry heritage trench coat not only protects the wearer from the elements, but is also a vessel to express one's personal style. The content drove strong relevance and high engagement scores, powered by social first storytelling. Launching in March, the campaign drove a triple-digit increase in earned engagement versus last year and strong double-digit increases in both earned media value and press coverage. We amplified the campaign online and in stores with striking window displays and pop-ups in key locations, creating energy and visibility around our most iconic product. That's the thing about style.