Burberry Group plc

Good morning. I'm Kate Ferry, CFO of Burberry, and with me today are Josh Schulman, our CEO, and Joe Kennedy, Head of Investor Relations. As you will 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 running order, I'll go through our performance in the first quarter and then Josh and I will be happy to take your questions. We have continued to make progress with our Burberry Forward strategy this quarter. Comparable retail sales grew 5% versus last year, led by continued strength in Americas and Greater China. We sustained brand momentum through culturally relevant storytelling and activations, driving sales and engagement across key markets. We are cementing our authority in outerwear and scarves with outerwear growing double digits in the quarter, supported by demand for heritage rainwear, lightweight jackets and seasonal products. We are also encouraged by the performance of our silk scarves. At the same time we're extending our product authority into ready to wear and women's bags. Overall and for the first time in three years we saw growth across our women's wear, men's wear, accessories and children's wear divisions. We're seeing a positive customer response to our product and pricing strategy. We are successfully offering value for money in a luxury context across each category with good, better, best pricing tiers. This is supporting our quality of sales through growth in full price and lower markdown year on year. We grew our customer base in the quarter, with Gen Z customers up double digit for the group. We continue to improve store productivity through clienteling and cross-merchandising, supported by the roll-out of category destinations, including 97 polo galleries launched by Father's Day. e-commerce showed good growth up mid-teens in the quarter and finally we have increased half one fy27 wholesale guidance reflecting the positive response from our partners Moving on to the quarter's retail performance. As mentioned, comparable retail sales grew 5% in the quarter. The contribution from space was a 1% headwind, resulting in retail sales growth of 4% at constant exchange rates. Currency represented a 1% tailwind, with retail revenue landing at £455 million, up 5% at reported exchange rates. Turning now to regional performance. Americas delivered the strongest performance in the quarter, with comparable retail sales growth of 12%. This was supported by local spend and broad-based customer acquisition. Mother's Day was particularly successful for us in Americas, driving customer engagement and growth in our bags business. Greater China grew 9%, supported by local spend and particularly good growth in Gen Z customers. While the operating environment in China remains mixed, our actions are driving out performance. Asia Pacific grew 3% in the quarter. South Korea continued to perform strongly, growing 11% on a more challenging comparative base, with growth supported by both local demand and tourist spend. Meanwhile, Japan declined 2%, impacted by continued weakness in inbound tourism from Chinese visitors. Emir declined 3%, reflecting the ongoing impact of the Middle East conflict and lower tourist spending. Tourism in Europe was impacted by the Middle East conflict. However, despite that, we've seen good trends from American visitors and encouraging full price sales. Excluding the Middle East, the region declined by 1%. Turning now to our strategic progress across brand, product and distribution. On brand, marketing investment is sustaining brand momentum and supporting sales. Our Portraits of an Icon campaign brought new customers to our brand, with a 19% increase in new rainwear customers. Our High Summer campaign featuring the Hunza G swimwear collaboration supported a doubling of swimwear sales in the quarter, and a good sport supported growth in house check bags and polos. In addition to global campaigns, we have continued to celebrate relevant local content with the launch of the first installment of a three-part short documentary series created in partnership with Chinese National Geography. The series showcases brand ambassador Chen Kun exploring China's natural landscapes in Burberry's signature outerwear. and to complement our high summer campaign and swimwear collection, we extended our brand codes through hotel takeovers in Antibes, Bangkok and Athens. In product, we continued to build on our authority in the categories where Burberry has the greatest authenticity. Outerwear grew double digit during the quarter, supported by strong demand for heritage and trans-seasonal products, including summer weight outerwear such as our tropical gabardine range and our short Mayfair trench. We've also been encouraged by the performance of silk scarves in these warmer months. We're extending our momentum across product categories outside of our hero categories, with particularly strong performance in knitwear, polos and swimwear in this quarter. And we're seeing good performance in women's bags overall, driven by growth across several families, including the Cotswolds, the Housecheck and Horseshoe. In distribution, we continue to make choiceful adjustments to our store network, including investing in a new location on Via Monte Napoleone in Milan, which is set to open in FY28. The rollout of our category destinations remains on track, supporting store productivity and cross-category merchandising opportunities. We launched 97 polo galleries by Father's Day and will launch trench destinations and cashmere shops in the second half of the year. Finally, we continued the rollout of a clienteling tool. This tool enables a more intuitive and user-friendly experience for our client advisors, while also allowing improved planning and productivity in store and a more engaging customer experience at scale. Turning now to the outlook. As we look ahead, we are encouraged by the progress of Burberry Forward and will build on it to drive performance and deliver sustainable long-term value. In the full year, we expect to make further progress on our financial ambitions, including delivering revenue growth and margin expansion, in line with expectations. We remain mindful of the uncertain geopolitical and macroeconomic environment and its potential impact on consumer confidence. To help you with modelling, in FY27 retail space is expected to be broadly stable. As I noted at the start of the call, wholesale revenue is expected to grow by a high single digit percentage in the first half of FY27, an increase from the mid single digit expected at the start of the year. Annualised cost savings are expected to reach £100 million of which £80 million were delivered in FY26. We expect restructuring charges of around £5 million and capital expenditure of approximately £120 million. Based on the 26th of June spot rates, currency is expected to provide a circa 20 million tail winter revenue and have broadly neutral impact to adjusted operating profit. We continue to expect an adjusted effective tax rate of between 27 and 30%. As we move through the year, we remain confident that we can build on the progress we have made in quality of sales, continue to improve performance and drive sustainable long-term value. And with that, we will now be happy to take your questions.

If you would like to ask a question, you may do so by pressing star followed by one on your telephone keypad now. If you would like to withdraw your question, please press star followed by two. When preparing to ask a question, please ensure your phone is unmuted locally. To confirm that, star followed by one to ask the question. First question comes from Anne-Laure Bismuth with HSBC. Your line is open, please go ahead. Anne-Laure Bismuth with HSBC. Your line is open, please go ahead.

Anne-Laure Bismuth with HSBC. Your line is open, please go ahead. Good morning. I have two questions, please. The first one is on the sales by nationality. So can we go back to the performance by client cluster and share a bit more colors on the growth by nationality, particularly for the Chinese cluster and the evolution between onshore and offshore versus Q4? And my second question is about the retail like-for-like performance for the rest of the year. So as you mentioned, you expect to deliver a new growth in line with consensus, which is consensus at plus 5% for the full year. but implying roughly the same growth for the rest of the year. But the basis of comparison is getting tougher through the rest of the year. So what gives you confidence you can continue to deliver a solid performance through the rest of the year? What are the elements in terms of product category, full price sales that is supporting that outlook? Thank you very much.

Hi morning, perhaps I'll start with the clusters and then we'll talk about the outlook. So look, in terms of clusters, I mean, the first thing I would say is that the comp growth overall, we're certainly seeing a really good growth in local customers everywhere. If we look at regions, I mean, you'll have seen America's was very strong, both in the region and by cluster growth. We saw growth in locals and in tourists. And the one thing I would call out there is that certainly we've seen Americans traveling to EMEA. So I think the strength of the brand locally is actually having a really good halo effect in that they're coming to Europe and they're really wanting to shop with Burberry. The EMEA region was down, but the EMEA cluster was up. Again, if I look at the region, I would call that locals improved. So they were down in Q4, but locals were up in Q1. No surprise, you've heard it from everyone, tourists in the EMEA region were down. But really, that's very much the impact of less Asians coming over. Clearly, with the Middle East conflict, that is having an impact on that travel hub. So we're seeing less Tourists from Greater China and APAC. But as I've just said, American tourists in EMEA were certainly very positive. In the Middle East region, clearly now we're dealing with one month of impact, with three months of impact, sorry, rather than one. But we did see a bit of an improvement in locals from Q4 to Q1. Greater China, very much driven by locals and intra region tourist shopping. and the cluster there, you know, we talked about it being up mid single digit in Q4, no change there, still up mid single digit in Q1 and the APAC region driven by both locals and tourists.

Do you want me to take the second part?

Yes, absolutely, go ahead. No worries, hello Anne-Laure.

Today happens to be my second anniversary at Burberry, in fact. And sitting here today with our fourth consecutive quarter of positive comps, we're looking forward with clarity and confidence that the Burberry Forward strategy is working. This was our first print. where we had women's, men's, accessories and children's wear, all four of our divisions of positive comping together. And we get the confidence because we've had a very deliberate product strategy and we're seeing the benefits of that strategy and the building blocks of that strategy Thank you so much for having me. for all four seasons of the year. So, you know, in this quarter, we had very strong sales of our new tropical gabardine introduction. On the backs of Portrait of an Icon, we were also selling these lighter weight tropical gabardine items in the quarter. Shorter trenches, like our Mayfair Jacket. and then of course, all of our lightweight nylon jackets as well. This is the peak time of year and you can see the growth that we've had in outerwear was really from those different building blocks. In scarves, again, this is a category where we have a lot of historic credibility and I've said many times, We have the most opportunity where we have the most authenticity and the authority that we have in cashmere scarves. We've been very deliberate about extending that authority to silk scarves, which were really a highlight in this quarter as well. and likewise, we've had a very deliberate merchandising strategy around the summer categories. So whether that was swimwear where a brilliant predecessor of mine, Rosemary Bravo was the first one to put Kate Moss in a Burberry check bikini and make this a 12 month a year business. We built on that heritage this quarter with the Hunza G collaboration, which helped double our swimwear business for women and for men. In men's casual ready to wear, a polo shirt is something where we had great authority in our Eddie Polo shirt. I remember talking to all of you a few years ago and saying that we had taken that out of the collection at one time. Now it's heroed and available in our polo galleries in 26 options. And those moves are also driving productivity in our stores. When we introduced the scarf bars, when we introduced the polo galleries, we're seeing productivity growth in our store network, which I know has been something very, We'll be building on that with destinations for trenches going forward. Also, outside of our core, I have been very reticent to talk about this over the last quarters until we had real are all proof points. But now handbags, women's handbags, are becoming a more meaningful part of the business. And this has been a very deliberate strategy of finding our sweet spot with good, better, best pricing in a luxury context. We started the quarter, or the middle of the quarter, A very positive Mother's Day in the Americas where we were up double digits in the handbag category. But we have strength in women's handbags now across the geographies. And that's attracting new customers to the brand. I think all of these initiatives help reaffirm my confidence of Burberry's place in the market as a luxury brand with broad universal appeal. As the luxury customer is looking for great value for money, whether that's a scarf for 195 pounds or a beautiful cashmere trench, for £4,000 or a Leather Trench for £8,000. They want great value for money and to feel like they're getting a product with real authenticity. And so there's never been a better time to be Burberry and to have our unique position in the market.

Thank you very much.

We now turn to Lucas Solker with Bernstein Society General Group. Your line is open, please go ahead.

Thank you very much Josh. You were referring to space productivity improving. I wonder if you could give us a little bit more granularity on that front and how you are satisfied with both traction in what you're bringing to the market as well as right sizing Some of the stores that were diluting retail space productivity as far as I understood. My second question is on brand excitement and getting Burberry at the center of the stage. I thought the initiative you're taking in China is impressive. It dovetails with the DNA of the brand. I wonder if you have thought about a pipeline of initiatives like this that could potentially re-energize the excitement and the buzz around Burberry. My understanding is that you've done a lot to get the foundation correct, to get the market position correct, to go back to Britishness and the icons. Now that you have the foundation right, you could potentially work on that to get Burberry even more exciting. And I wonder if you have any input that you could share on that front. Lastly, my usual focus, I guess, how is off-price proceeding? And are we right to understand that this is now less important than it had been in the past? And can you give us any granularity on that? Thank you.

Yeah. All good questions. Yeah. Do you want me to take that, Kate? Or do you want to start?

Yeah, fine. I can start with the productivity and space. Perfect. So, yeah, just on your first point, Luca, I mean, obviously with Compact Plus 5 in Q1 and Q4, space slightly down. Absolutely indicates the positive trajectory of our store productivity and look we've guided broadly flat space for the year but within that we've always been very clear that there will be movement as you saw in the last quarter so absolutely moving out of non-productive stores adjusting space where we need to. Do you want to take Josh the second?

Yeah absolutely. So in terms of brand excitement. So you're absolutely right. We have worked really hard to build the foundation and we are very excited about the momentum we're having in the marketplace. We had a extraordinary fashion show for this winter collection and the campaign that accompanies it, I believe will attract new customers to our brand. We saw that also with our portraits of an icon. and a number of others. We also had a global campaign, specifically, which had 23 global celebrities and we used that as really an anchor to our 170th anniversary celebration. As we move through the year, we have some particular other initiatives that are happening. Burberry is this unique British brand that has so many stories to tell. and, you know, we are really at the nexus of speaking to our heritage and innovation. So in the fall, we will have a we will have a A special display on the trench at the V&A in London. And then as we move later in the year, we will cap off our 170th year with an extraordinary exhibit in Shanghai. To keep that drumbeat of activities with an emphasis, yes, on our hometown in London, but also on the Chinese customer and the American customer. And so we're very excited about this large scale exhibition that we will be doing in Shanghai later this year. Having built a strong foundation, we are going forward with confidence that the best is yet to come. In terms of the off price component, I think throughout our business, what you'll notice is the quality of sales improving. Whether it's in our full price channel or in our outlet channel, the quality of sales is improving. We had less markdowns for this season because we had higher full price sell-throughs. The customer is liking what they're seeing at full price, which is not requiring the amount of discounting and the type of markdown activity we did last year. So that is very much under control. And while we don't comment on the specifics of the outlet performance versus the full price performance, I would say that the outlet villages, particularly in Europe, continue to be very challenged with traffic. And so the performance that you're seeing is really led by the full price channel. a little more granularity on the full price channel and particularly within EMEA because that is a diverse market. We are seeing double digit growth right now in our flagships in London and Paris. And those are being fueled by both the local customer but also an influx of the American tourists. And so we're seeing the halo from the marketing investment that we have done in the US literally traveling across the pond as those customers are spending more, engaging with us more, In these cities and, you know, as a signal of our confidence, you know, today we're announcing our new flagship in Milan via Montenapoleone. This is a return to Montenapoleone where we left a few years ago. to a really prime space right near the corner of Via Gesu. And you'll see the latest expression of Burberry in that environment. You also made a comment about the space reallocation in terms of productivity. We have several good examples of that around the world. one relatively close to home in EMEA where we exited a large aging store that was not particularly productive in Brussels and we moved to a better location which is smaller and this new store has some of the visual merchandising and product destinations like the Scarf Bar and the Polo Gallery. And we're driving a much higher productivity in this space. And so you'll see examples of that really like that throughout the world, including at our Regent Street flagship, where we will have more to share Thank you very much indeed. To see you soon, Luca.

We now turn to Antoine Belge with BNP Paribas. Your line is open. Please go ahead.

Yep. Good morning. It's Antoine Belge at BNP Paribas. Two questions. That's, I think, the game. First of all, you highlighted that the performance that you're achieving is really reaching out to most categories but by region and I understand that the macro might be different we have a very strong US and in China you are regaining consumers especially Gen Z but Europe the local consumer seems to be a bit lagging behind which I think is not really new even though it's always been a bit tougher for Burberry to convince English, French and Italians Just to mention a few. So I don't know if there is something that would explain why you're doing much better in the US and greater China than Europe or if you have any thoughts on that. And the second question is about the share price reaction today on an inline number. So it seems that there could be a seasonality in the margins, starting with the gross margin. If maybe we could understand why that's the case, especially since from the previous question, the sales are quite good. So I'm not sure I understand why the margin, especially in H1, would be maybe a bit below what people expected. And also, since you're happily confirming the consensus for the EBIT for the full year, which I think is 246, Could you maybe mention some kind of EBIT figure that could be sensible in H1 and H2? And I know it's usually not the podium or the audience for today, but in light of the sharp price reaction, I think it's probably what is on our clients' mind. So thank you very much.

Morning Antoine. Just on your first point, I'll probably point you back to some of the comments that Joshua's just made around actually we're seeing really strong growth in European cities. And actually what we are seeing is that locals are positive across the world. And I think if you're listening to my comments about clusters, you know, calling out in particular in EMEA where we are now seeing locals up. and of course they were they were down in Q4 so I would say quite the reverse actually we're seeing really good traction in our in our European cities really the reason for the EMEA you know negative overall comp is of course the tourist situation and that that really you know we're seeing strong American tourists as Josh mentioned it's really the lack of Asians of course with the disruption of the Middle East travel hub that really is continuing to affect tourist flow into EMEA. So I think really actually encouraged by performance in European cities. So look, on the second point on the gross margin phasing, I would take you back to this point that we've just talked about around an improvement in quality of sales overall. So that's stronger full price, lower markdown, clearly feeding into margin and for FY27 we absolutely expect to achieve another year of gross margin expansion so that guidance remains. I think what you're referring to really is a phasing point and this is actually about the fact that we are now you know returning to a much more normalised phasing and historically pre all of the disruption of the past couple of years we've always generated a higher gross margin in the second half as compared with the first half and actually this reflects you know there is a seasonal nature to the business we do have more revenue in h2 versus h1 and we do tend to build up inventory ahead of our peak period and therefore naturally you're going to get a little bit more provisioning in the first half as well so you know growing which is what we're now into growth mode we are growing this business The business is normalising, so you would expect higher gross margin in the second half versus the first half. But I would say for the full year, all as expected, you will see margin growth. So I think that really is going to play into a higher profit in the second half versus the first half. In terms of consensus, Yes, we're happy with the 246. There's a broad range out there. This is just Q1. You probably wouldn't expect me to start trying to move consensus at this stage. But, you know, are we feeling more confident, you know, whether it's in the short and indeed, more importantly, the longer term trajectory for Burberry? Absolutely. You know, just to reiterate some of the points that Josh has made, we are continuing to see We're seeing improvement quarter on quarter. We're seeing more and more proof points that the strategy is working and therefore whilst we are not changing consensus at this early stage of the year, we are certainly increasing in our confidence in Burberry Forward.

Maybe just to follow up very quickly, so Grossmargie understands stronger in H2 This is H1, but for H1 of this year, will it be down year on year compared to H1 of last year?

It may be down slightly. I mean, you know, probably may be down ever so slightly.

All right. Thank you very much.

We now turn to Thomas Chauvet with Citi. Your line is open. Please go ahead.

Good morning, Joshua. Thanks for taking my question. The first one on China versus Chinese. It's been three consecutive quarters that Greater China LFL that performed the Chinese cluster by about five percentage points. So that suggests Chinese travelers spend outside Greater China remains quite negative, maybe in Europe and Japan. Do you think it could reflect a shift in shopping preferences where Chinese consumers are responding positively to initiatives in China, so localized marketing, client events, and perhaps the price gap is irrelevant and the Chinese consumer starts to ignore the higher retail price they face when they shop at home versus abroad. My second question on licensing, could you comment on the Coty, the stocking of old Burberry fragrances, lines that was a drag on royalty sales and profit last year, will that be largely over After the first half, I see consensus licensing is still plus one for the year. Do you also update us on your relationship with Coty at the time that just returned the Gucci license to pairing a year earlier than planned? Does that put you in a position of strength with Coty as one of their most important partners to strengthen the business from here or to reconsider certain aspects of the relationship of the contract? Thank you.

Thank you, Thomas. Josh, do you want to talk a bit about the China market and then our dynamics of licensing?

Sure. I think what we're seeing in China is actually very positive. And we are very pleased to see our product and marketing continuing to resonate in one of our largest and most important markets. and we're seeing their response both to our big global initiatives like Portrait of an Icon, which was very focused on our trench category. They were among the regions which were first on the tropical gabardine trenches, which have contributed a great deal in this quarter. And of course, lightweight jackets as well as an anchor. And we also, in addition to our large global activations, we have done this localized content. which also is generating positive brand sentiment in the market. I think what we're seeing is simply a consequence of the travel patterns. And we have seen disruption in the typical Chinese and Asian travel patterns to Europe ever since the start of the Middle East war. and frankly speaking, what I've also heard anecdotally, and this is broader than Burberry, but that the Chinese customer which pre-COVID was spending a lot of time shopping in Europe, I think we hear this from our department store partners in Europe as well, that this isn't the era of the big Chinese tour groups coming to Europe and it's more individual shoppers. And so the volumes of tourists are down coming to Europe, but they're finding what they want at home. And frankly, when you walk the malls in China, you're getting in some cases the best assortment in the world too. and you know it happens to be we just launched our Chinese Valentine's Day capsule this week and you have all of these capsule collections that ourselves and peer brands are doing that are giving the Chinese customer more and more reason to shop at home and we welcome that. We will welcome the Chinese consumer wherever they want to shop.

And then just on your second question, Thomas, so you'll obviously remember that licensing revenue did decline 9% in FY26. And that was impacted a little bit by the soft fragrance market. But as we pulled out at the time, there's also this lag in brand alignment between our licensing partners and the current Burberry Forward. I mean, we've addressed that. So we definitely expect an improvement from the minus nine. But for the full year, we probably still expect a small decline. So I would call low single digit for the full year. And on the relationship point, Josh, do you want to pick up on that?

Yeah, you know, we don't comment on the specifics of our contractual agreements or our discussions. But what I would say is that we are working very closely with Marcus Strobel and his team. And specifically, as Kate said, there is a lag time in the license categories to reflect the evolving brand expression. And our goal is to work closely with them during this period. Thank you. We now turn to Carol Maggio with Barclays.

Your line is open, please go ahead.

Hi, good morning. Two questions on my end as well. The first one, can you come back maybe on the key retail metrics, such as AUR, traffic, sales conversion, and just share how these metrics have evolved in this first quarter. And the second question, just to come back on the topic of the growth margin. So as you said, we might have some slowdown in H1. But anything to share on OPEX and the EBIT margin for the third house? Anything here to keep in mind? Thank you.

Yes. Hi, Carol. So I think I'd start in terms of metrics, reasonably similar trends to what we saw in Q4. So really very encouraged by what we're seeing in terms of conversion. So, you know, product resonating. and you know when people are coming into stores they're clearly finding more product that they like so conversion very strong. AUR small positive in the quarter I think we're still saying for the full year probably AUR neutral but again slight positive in the quarter. I think fair to say you know traffic is as it is for the whole industry Traffic remains challenging but of course you know we're very pleased with our result and that is all down to very strong conversion. In terms of OPEX, so look again no change to the full year guidance here, we remain committed to broadly flat OPEX for the year. I think as we you know start to get into the real detail or the modelling detail or detailed plans of our customer facing investment for the year we may well spend a little bit more towards the end of the first half I mean I'm thinking kind of right towards the end of the first half because of course we want to prepare for peak trading periods so for festive for Lunar New Year so potentially a little bit more OPEX than H1 last year but again I'm really getting into the detail here and we're just laying out our plans our plans for the year but the key is no change to our expectations of marketing investment for the full year absolutely committed to flat hot picks for the year and gross margin expansion and revenue growth thank you we now turn to Zuzana Puz with UBS your line is open please go ahead

Morning, thank you for taking my questions.

I'll stick to two as well.

So maybe first of all, to follow up on the wholesale outlook, I mean, it's pretty encouraging that you're expecting to grow high single digits.

Can you maybe tell us, you know, I mean, which specific region is driving that?

I mean, I guess it's usually seen as a bit of a lead indicator of the brand momentum. So yeah, if you could just tell us if maybe there's anything one-off in nature in there, that would be helpful. And then Secondly, maybe coming back to profits. I guess part of the, I mean, we are all seeing on our screens the share reaction, right? I think part of it is, as I think Antoine mentioned earlier, is the fading, but then also the EBIT outlook, which you expect to be unchanged despite more positive effects. And obviously also that wholesale upgrade. So I'm just wondering, you know, I mean, Is there really like a small underlying downgrade in there, which clearly, I guess that's how the market understands it, given the share price reaction, or if you're just, if you can tell us if you're just being extra cautious, that'd be very helpful. Thank you.

You want to take the wholesale one and give it more flavor there, Josh, and then I'll talk to consensus.

Sure. So indeed, we are very pleased with the wholesale numbers. and even more than the numbers, we're pleased with the underlying sentiment and what we hear from the wholesale partners. You know, this is one of the few areas where we can get an objective benchmarking of our performance versus our peers. You know, because when The teams from Burberry stores come into our showroom. You know, they have an open to buy and they will tell us what they think, but they have to buy Burberry. You know, our wholesale partners can buy any luxury brand. And, you know, they have been voting for Burberry with their open to buy. And I think it's a couple of things. I think one is the strategy is working. and they're seeing higher full price sell-throughs from Burberry and they really loved some of the innovations and newness that they saw in our collections. So particularly, we have a cashmere shop that will be in our flagship stores and in many of our wholesale partners that will be anchoring our assortment for the festive period. and there was a lot of excitement there. There was a lot of excitement for new directional outerwear shapes that were linked to what Daniel put on the runway for the winter show. The styles that were derived from the runway expression. So, you know, all of that was really positive. You know, from a geographic point of view, we're seeing it across the board. You know, obviously, America wholesale is very important to us. And we've strengthened our presence there across our partners. You know, the situation with Saks Global, now the exemplar, has stabilized. We're actually going to be in fewer doors year on year with that group. But overall, even in fewer doors in America, across all of our partners, this is another story of quality of sales. We had a strong increase in our America's order book notwithstanding a tighter, better distribution. And going around the world, there's a significant consolidation of the main wholesale partners. So in Asia, the duty-free channel in China has really consolidated with the China Duty Free Group. And we have a terrific relationship with the China Duty Free Group. And again, that's based on the strong performance in their market. And picking up on what Thomas was mentioning before about Chinese shopping regionally, we're also seeing strong growth in Hong Kong and Macau, which are now being operated through Chinese partners in the duty-free area. And so that has been very positive for us as well. And then in Europe, there's been a big consolidation with the central group and they are very strong partners with us and a consolidation with Lux Experience and so having these strong larger partners who we're working with around the world, coupled with the most opinion leading boutiques in key markets in America and Europe, all basically voting with their open to buy for Burberry, even though wholesale is only about 12% of our business, we consider this leading indicator to be a great sign of the brand momentum and our resonance with the consumer.

Just to follow on from that and the question on consensus, I mean, as you've just heard, you know, firstly, we are very encouraged by the wholesale results. Yes, clearly, there's an underlying upgrade there. On FX, again, you're right, sitting here today, it's certainly less of a headwind than it was Just eight weeks ago, but it is a moment in time. And actually, I think that the pound over the last last few days, you know, it's literally strengthening as we speak. So I think it's just too early in the year to move the outlook. There's a very broad range in consensus. And I just want to state, you know, is absolutely no underlying upgrade. In fact, quite the opposite. You know, you asked me about being being cautious, I think I would you know prefer to be cautious just three months into the year but am I encouraged by how we've started the year? Absolutely and I think you know our focus now is on execution and on delivering revenue growth and margin expansion this year and beyond.

Sorry, can I just follow up? Because I think maybe you may have said it back then that you said that there is no underlying upgrade. Did you mean there's absolutely no underlying downgrade? Sorry, apologies.

I actually meant, yes, I meant as it was your question that there was no, apologies, there's no downgrade at all. So I think my point being we're encouraged by wholesale. FX is a moment in time. We're really encouraged by our performance. So absolutely no downgrade. Apologies. Thank you for clarifying that.

Excellent, thank you so much.

We now turn to Grace Morley with Morgan Stanley. Your line is open, please go ahead. Grace, your line is open.

Hi, can you hear me? Yeah, we've got you. Hi Grace. Hi, thank you so much. So my first question please would just be, I appreciate it's a sales call, but just to touch base on an update on your medium term margin outlook. So Kate, very clear from your comments on this year on the margin expansion you expect, but if you could also just come back to the medium term margins and walk us through your competence on Burberry's medium term margin trajectory and the competence that you have to return to a high teen margin over time. and how we should think about the building blocks to get there. So sort of what top line growth we need and how it's split between gross margin and OPEX leverage from here. So more one on the multi-year margin story than this year. And then, sorry, just to come back again on this H1, H2 gross margin dynamic, just given the amount of questions we're getting on it this morning. Just on the inventory provisioning, can I just confirm that your comments on Thank you so much. Absolutely. I mean, look, I think firstly in terms of the long-term

I hope you've picked up from our comments today that our confidence in the long term trajectory of this business is certainly increasing. The strategy is working. I think with every time we come to talk to you, we have more and more proof points that Burberry Forward is delivering. And ultimately, you know, it is this that is going to drive the revenue growth on the margin. Absolutely. You know, we've stated an ambition to get back to 70 percent gross margin. We were there just a few years ago. you saw a really good uptick in the year just reported and we will continue with gradual improvement back towards the 70% likewise on OPEX you know we've guided to broadly flat OPEX this year and you know then you will really start to see the leverage coming through so I think all the building blocks that we laid out for the year just reported remain and we are you know As I say, our confidence is certainly growing on that. On the margin point, we are very comfortable with our inventory position. And I think, as you've just heard, the quality of sales is really the point that we want to land today. Lower markdown year on year, certainly less discounting. you know productivity is growing so so you are absolutely right this is just a point that we are now returning if you like to a more normalized level of provisioning so don't forget that during FY25 we we raised significant inventory provisions you'll remember that was and we recognized the gross margin impact at the time then of course FY26 first half gross margin did benefit from the sale of the inventory that had already been provided for in an earlier period and that just naturally creates tougher year-on-year comps for H1 this year for full year 27 so you know your comments are absolutely right that we are it's not to do with inventory positions we're very comfortable we're in a cleaner position than we have ever been

Great, thank you very much for clarifying.

We now turn to Charles Louis Scotty with Kepler Chevro. Your line is open, please go ahead.

Good morning, thank you for taking my questions. I have two, one on the Middle East and one on e-commerce. The first one, you mentioned that trading with local customers in the Middle East improved during Q2. Was this improvement gradual on a month-by-month basis throughout the quarter? And also, could you give us an indication of where local demand currently stands versus last year? And what level of impact have you assumed in your budget for the next three quarters? And secondly, on e-commerce, it seems to be very brilliant. Could you remind us how large this channel is? Thank you. So perhaps I'll just take the Middle East one first. So just as a reminder, the Middle East is just 2% of our

Global Sales. When the conflict initially kicked off, we did have some stores closed, but they quickly all reopened. But generally, the Middle East for us, it's therefore not that material. And it is very much a tourist market. So I did make some comments that the local performance has improved. Quarter on quarter, but really the main dynamic there is, of course, the influx of tourists.

Sorry, the second question on e-commerce. Do you want me to take that? So we're really pleased with the traction that we have in e-commerce. And in many cases, it's the front door. for Burberry. And as you will recall, several years back, Burberry was famous for its e-commerce business. And so we have been rebuilding that and we're seeing very good traction there. It's a high single digits of sales. This is the eighth quarter of consecutive growth We started to see the response to Burberry Forward earliest in the e-commerce channel. The channel is particularly strong in the Americas and we're starting to see a younger customer come in through the e-commerce channel. A lot of what we have been doing there is about enhancing the customer journey with more personalization and making sure that the content is really engaging and shoppable. So a great example is how we used to style. Our product in in a very almost clinical manner. And now we've been doing much more robust styling. We've been doing category destinations. And, and the category destinations. It's something like when we launched our portrait of the icon campaign, the best place to go was to our e commerce site because we changed the experience around trench to show the full variety and to really have our heritage trench, an area for our tropical gabardine trench so you have stronger storytelling, better visualization and a 360 degree approach. We've also brought more the blend of art and science here. to target our customers. And the good, better, best strategy is really working in e-commerce. When you go through and you look at the assortment, there are really key recruitment drivers here. And it's a place where we can bring to life ideas, creative ideas like our Hunza G collaboration, which was the anchor collaboration to our summer shop. So in a quarter like this, we saw an important uplift in transactions. And we're looking forward to build on this with all of our initiatives for the autumn and winter ahead. Thank you.

This concludes our Q&A session for today. I'll now hand back over to Kate Ferry for any closing remarks.

Thank you all of you for joining us this morning and we'll look forward to updating you again with our half one results post the summer.