18 May 2023

BURBERRY GROUP PLC

PRELIMINARY RESULTS FOR 52 WEEKS ENDED 1 APRIL 2023

EXECUTING STRATEGY AND DELIVERING GROWTH
"I am very pleased with what we have achieved this year. We have delivered a strong financial performance, supported by good progress in our core leather goods and outerwear categories, with revenue accelerating in the fourth quarter as growth rebounded in Mainland China. Having appointed Daniel Lee as our new Chief Creative Officer, we have refocused our brand aesthetic and brought his new creative vision to life with a campaign and runway show that have been very well received. At the same time, we have reorganised our supply chain, merchandising and digital teams under new leaders to drive our strategy forward. While the external environment remains uncertain, I am confident we can achieve our FY24 and medium-term targets as we focus on executing our plan to realise Burberry's potential as the modern British luxury brand."
- Jonathan Akeroyd, Chief Executive Officer

*See page 13 for definitions of alternative performance measures

·    FY23 revenue advanced 5% at CER and 10% on a reported basis; comparable store sales increased 7%

·    Adjusted operating profit +8% at CER and +21% reported with margins 19.0% and 20.5% respectively

·    Reported operating profit +21% with margin 21.2%

·    Q4 comparable store sales accelerated to 16% as growth rebounded in Mainland China +13%

o  Group ex Mainland China +17%, EMEIA +27%, Asia Pacific +19%, Americas -7%

·    Strong performance across core outerwear and leather goods categories

o  Leather goods comparable store sales up 12% in FY23 and up 15% in Q4

o  Outerwear comparable store sales up 7% in FY23 and 30% in Q4

·    Excellent response to new brand aesthetic and Daniel Lee's first campaign and debut runway show

·    Reorganised supply chain, merchandising and digital operations under new leaders to drive strategy, and recruited Kate Ferry as our new CFO

·    Agreed to acquire a business from an Italian supplier to strengthen technical outerwear capability

·    Refurbished/opened 60 stores; c.30% of the full price network updated; with a further 7 stores in April

·    Continued to make progress across our social and environmental agenda, including year-on-year reductions in scope 1, 2 and 3 carbon emissions

·    Strong cash conversion at 87% - proposed dividend increased 30%. Planned £400m share buyback to complete in FY24, in line with capital allocation policy

Guidance

·        Maintaining FY24 and medium-term targets while mindful of macroeconomic and geopolitical environment

FY23 is a 52-week year. The comparative period is 53 weeks to 2 April 2022. We have provided CER percentage changes on a 52-week basis while absolute figures are on a reported basis compared with the 53^rd week unless otherwise stated. FY24 is a 52-week year.

All metrics and commentary in the Business and Financial Review exclude adjusting items unless stated otherwise.

The following alternative performance measures are presented in this announcement: CER, adjusted profit measures, comparable sales, free cash flow, cash conversion, adjusted EBITDA and net debt. The definitions of these alternative performance measures are in the Appendix on page 13.

Certain financial data within this announcement have been rounded. Growth rates and ratios are calculated on unrounded numbers.

Enquiries

·        There will be a virtual presentation for investors and analysts today at 9.30am (UK time) that can be viewed live on the Burberry website www.burberryplc.com and can also be accessed live via a listen only dial-in facility, click here to register.  

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

·        Burberry will issue its First Quarter Trading Update on 14 July 2023

·        The AGM will be held on 12 July 2023

Certain statements made in this announcement are forward-looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from any expected future results in forward-looking statements. Burberry Group plc undertakes no obligation to update these forward-looking statements and will not publicly release any revisions it may make to these forward-looking statements that may result from events or circumstances arising after the date of this document. Nothing in this announcement should be construed as a profit forecast. All persons, wherever located, should consult any additional disclosures that Burberry Group plc may make in any regulatory announcements or documents which it publishes. All persons, wherever located, should take note of these disclosures. This announcement does not constitute an invitation to underwrite, subscribe for or otherwise acquire or dispose of any Burberry Group plc shares, in the UK, or in the US, or under the US Securities Act 1933 or in any other jurisdiction.

Burberry is listed on the London Stock Exchange (BRBY.L) and is a constituent of the FTSE 100 index. ADR symbol OTC:BURBY.

BURBERRY, the Equestrian Knight Device, the Burberry Check, and the Thomas Burberry Monogram and Print are trademarks belonging to Burberry.

www.burberryplc.com

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BUSINESS REVIEW

In November 2022, we set out the next phase of our strategy to realise Burberry's potential as the modern British luxury brand with a medium-term target to grow sales to £4bn at CER* and a longer-term ambition to reach £5bn in revenue. The key elements of our plan to drive growth and acceleration are to:

·      Harness the power of the brand

·      Bring all product categories to full potential

·      Strengthen distribution

while continuing to simplify and streamline key processes, deliver on our bold sustainability ambitions, ensure our people are supported and inspired to deliver, and positively impact our communities.

Since then, we have made good progress on executing our plan while delivering a strong financial performance supported by growth in our core leather goods and outerwear product categories and revenue growth accelerating in the fourth quarter as sales rebounded in Mainland China and South Asia Pacific tourist destinations.

In February, we launched the first creative expression of our house values under Daniel Lee, resetting our visual identity with a campaign that featured talent including Skepta, Georgia May Jagger and Son Heung-Min. We followed this with Daniel's debut runway show, set in a custom-built tent in Kennington Park, London and featuring a new aesthetic across all key product categories. The campaign and show were extremely well received by press, generating over 4,000 pieces of global media coverage with an estimated reach of c.4bn.

Our rainwear offer was boosted by the positive reception to Daniel's first campaign, along with VIP dressing at the runway show, both celebrating the iconic Burberry trench coat. As a result, we saw very strong acceleration in heritage rainwear, with comparable store sales doubling in the quarter. Leather goods outperformed in the year as we continued to see strength in women's bags - especially in the Lola and Frances shapes as well as the launch of the vintage Burberry Check line. We are excited to build on this with Daniel's new offer launched at the show, which will be in store from September.

We refurbished or opened 60 stores in the year with a further 7 completed in April. We now have around 30% of our full price stores updated with around 40% in Asia. We aim to update over 50% of stores by FY24 year end with plans on track to complete the roll out of the portfolio by FY26. Financials of the updated stores continue to show both store productivity and AUR up mid-teens percentage against equivalent stores.

We made changes to our operating model to strengthen the alignment between our commercial offering and our new creative vision and hired leaders in new roles to drive the delivery of our medium-term targets. We integrated the responsibility for global e-commerce, digital product and analytics as well as a newly formed innovation function under a new Chief Digital, Customer and Innovation Officer. We formalised the link between planning and merchandising under a new Chief Merchandising Officer with additional responsibility over global planning and pricing. We also brought our supply chain and product development teams together under a new Chief Supply Chain and Industrial Officer to drive greater connectivity, while ensuring end-to-end ownership for delivery. In addition, we appointed Kate Ferry as our new Chief Financial Officer who will join in July.

As part of our plan to bring all product categories to full potential, in March, we entered into an agreement to acquire a business from longstanding Italian supplier, Pattern SpA, which is anticipated to complete in FY24. With this investment, we will secure capacity, build technical outerwear capability, and further embed sustainability into our value chain.

We also continued to progress our decarbonisation agenda, achieving a 9% reduction in our scope 1 and 2 carbon emissions and an 11% year-on-year reduction in our scope 3 emissions versus FY22.

We are delighted to have started the new financial year with the appointment in April of award-winning Chinese actor Chen Kun as our latest ambassador. In addition to his successful acting career, Chen Kun is dedicated to promoting arts and culture as well as using his influence for philanthropy, and we look forward to collaborating with him for future brand events and campaigns.

*Base year FY22 exchange rates

GUIDANCE

We maintain our guidance of:

·      High single-digit revenue CAGR from FY20 base and around 20% adjusted operating profit margin at CER for FY24

·      £4bn sales at FY22 CER in the medium-term

·      Based on 21 April 2023 spot rates we expect a currency headwind of c.£70m on revenue and c.£40m on adjusted operating profit in FY24

SUMMARY INCOME STATEMENT

* Excludes adjusting items. All items below adjusting operating items on a reported basis unless otherwise stated

For detail, see Appendix.

** Includes adjusting finance charge of £2m (FY22: £1m)

FINANCIAL PERFORMANCE

Revenue by channel

·    FY23 Retail sales grew 6% at CER; 10% reported

·    Impact of space -1%

·   Comparable store sales grew 7%, directly affected by COVID-19 restrictions in Mainland China. Excluding Mainland China comparable store sales grew by 17% in Q4, the strongest quarter in the year (Q1 +16%, Q2 + 15%, Q3 +11% and FY +14%).

Comparable store sales growth by region

Asia Pacific saw volatile growth in the year due to COVID-19 related disruption in Mainland China in Q1 and Q3 impacting full-year growth of 2%.

·    Mainland China comparable store sales fell 11% in the year. The significant disruption in Q1 and Q3 (comp store sales -35% and -23% respectively) was only partially offset by Q2 (comp store sales -1%) and the start of recovery in Q4 that saw 13% comparable store sales growth

·    South Korea grew 7% in both the year and Q4, benefiting from over 50% of the full price network updated by the year end

·    Japan also saw strong comparable store sales growth up 27% in the year and 30% in Q4

·    South Asia Pacific rose over 35% in the year with a strong performance in Q4 that increased more than 50%, boosted by returning Chinese tourists

EMEIA had an excellent year with comparable store sales up 27% in FY23 and Q4.

·    The region benefited from strong tourist growth that more than doubled in the year with the share of mix from tourists increasing to over 40% of total sales (less than 25% in FY22) with a strong performance from US, Middle East, and Asia outside of Mainland China

·    Continental Europe outperformed in the region with the UK broadly in line with the region average

Americas fell 3% in the year with a deterioration to -7% in Q4.

·    We continue to see higher AUR categories outperforming, especially rainwear and leather, with pressure on the entry level items. Globally, the Americas customer decreased low single digit in Q4 with the decline in locals broadly offset by tourist spending as Americans transitioned to buying Burberry in EMEIA

By product

·    We maintained our focus on the core leather and outerwear categories with both showing a good performance in the year

·    Outerwear comparable store sales grew 7% in FY23 and 30% in Q4. The strong traction at the end of the period was mainly from rainwear following the brand refresh featuring the heritage range

·    Leather goods comparable store sales grew 12% in the year and 15% in Q4. This was driven by bags especially from the continued success of our Lola campaign and the Frances shape, as well as men's leather goods

·    Ready-to-wear excluding outerwear saw growth broadly in line with the Group average for the year with, women's increasing double digits while men's saw mid-single digit growth

Store footprint

The transformation of our distribution network continued during the year

·    We opened 21 full price stores, closed 25 stores with one outlet opened and two closed

·    Including refurbishments, we increased the number of updated stores by 60

·    Key openings/refurbishments included Northpark Dallas in USA, Taipei 101 and Nanjing Deji Plaza in Mainland China

·    As of 1 April, we have 107 stores in the new design: 79 in Asia including 25 in South Korea and 26 in Mainland China, 21 in EMEIA and 7 in Americas

·    We completed 7 more in April and remain on track to complete the roll out by FY26

·    We remain pleased with the performance of updated stores that saw both store productivity and AUR higher by mid-teens compared with equivalent stores following their openings

Wholesale

·    Wholesale revenue increased 1% at CER (6% at reported rates) with good growth in EMEIA offsetting pressure in Asia travel retail

Licensing

·    Licensing revenue grew 22% at CER and 23% at reported exchange rates

OPERATING PROFIT ANALYSIS

Adjusted operating profit

*Excludes adjusting items

Adjusted operating profit increased 8% at CER and 21% reported with the margin up 60bps and 200bps respectively:

·    Gross margin declined by 80bps at CER with benefits from price increases more than offset by cost inflation. It fell 10bps at reported rates

·    Adjusted net operating expenses rose by 2% at CER

·    Adjusted operating profit came in at £634m including a £78m FX tailwind in FY23

ADJUSTING ITEMS^*

Adjusting items were a net credit of £21m (FY22: £19m net credit).

*For more details see note 7 of the Financial Statements
**Includes a £1m credit (FY22: £16m credit) that has been recognised through COGS

The key adjusting items are as follows:

·     Total credit of £22m from COVID-19 related adjustments with a £1m inventory provision reversal that has now completed, £13m of rent concessions, £2m of Government grants outside of the UK, and £6m reversal of the store impairment provision

·      £16m of restructuring costs

·      Net £19m profit on the sale of a Boston, USA property

ADJUSTED PROFIT BEFORE TAX*

After an adjusted net finance charge of £21m (FY22: £31m), adjusted profit before tax was £613m (FY22: £492m).

*For detail on adjusting items see note 7 of the Financial Statements

TAXATION*

The effective tax rate on adjusted profit was flat at 22.2% (FY22: 22.2%). The reported tax rate on FY23 profit before taxation was 22.4% (FY22: 22.3%).

* For detail see note 9 of the Financial Statements

CASH FLOW

Represented statement of cash flows

The following table is a representation of the cash flows.

Free cash inflow* was £393m in the year (FY22: £340m).

The major components were:

·      Cash generated from operating activities increased to £912m from £909m

o  A working capital outflow of £76m (FY22: £54m inflow)

·      Capital expenditure of £179m (FY22: £161m)

·      Tax cash of £140m, falling £40m compared to the prior year which included one-off payments

Cash net of overdrafts on 1 April 2023 was £961m, compared to £1,177m on 2 April 2022. On 1 April 2023 borrowings were £298m from the bond issue leaving cash net of overdrafts and borrowings of £663m (2 April 2022: £879m). With lease liabilities of £1,123m, net debt in the period was £460m (2 April 2022: £179m). Net Debt/Adjusted EBITDA was 0.5x, at the lower end of our target range of 0.5x to 1.0x. The increase in leverage from 0.2x at the FY22 year-end has primarily been driven by the share buyback programme.

*For a definition of free cash flow and net debt see page 14.

APPENDIX

Detailed guidance for FY24

Note: Guidance based on CER at FY23 rates

* Mix based on FY23

*Excludes the impact of pop up stores

*For additional detail on adjusting items see note 7 of the Financial Statements

*For additional detail on adjusting items see note 7 of the Financial Statements

Alternative performance measures

Alternative performance measures (APMs) are non-GAAP measures. The Board uses the following APMs to describe the Group's financial performance and for internal budgeting, performance monitoring, management remuneration target setting and external reporting purposes.