Burberry Group PLC suspends dividend payments following disappointing Q1 performance

Burberry Group PLC (LON:BRBY) has announced its first quarter trading update.

“Our Q1 FY25 performance is disappointing. We moved quickly with our creative transition in a luxury market that is proving more challenging than expected. The weakness we highlighted coming into FY25 has deepened and if the current trend persists through our Q2, we expect to report an operating loss for our first half. In light of current trading, we have decided to suspend dividend payments in respect of FY25. We are taking decisive action to rebalance our offer to be more familiar to Burberry’s core customers whilst delivering relevant newness. We expect the actions we are taking, including cost savings, to start to deliver an improvement in our second half and to strengthen our competitive position and underpin long-term growth.”

Gerry Murphy, Chair of Burberry

RETAIL REVENUE 13 WEEKS ENDED 29 JUNE

*See page 3 for definition

Comparable store sales by region

*Asia Pacific consists of: Mainland China -21%, South Asia Pacific -38%, Japan +6%, South Korea -26%

We believe there is an opportunity to reconnect with our core customer base and capitalise on the enduring appeal of Burberry’s iconic products and brand whilst delivering relevant newness. Against a backdrop of slowing luxury demand across all key regions, our immediate focus is on:

·      Rebalancing our product offer to include a broader everyday luxury offer and a more complete assortment across key categories

·      Refining our brand communication to emphasise more of the timeless, classic attributes that Burberry is known for. Our refocused marketing plans include a dedicated outerwear campaign to be launched globally in October, building on the established resilience of our house icons

·      Improving customer conversion online with a more edited assortment and better functionality. The refresh of our website will be completed by the end of August

·      Driving operational efficiencies and delivering cost savings to offset the impact of inflation.

Burberry also separately announced today the appointment of Joshua Schulman as Chief Executive Officer and Executive Director, replacing Jonathan Akeroyd who is stepping down and leaving the Company with immediate effect by mutual agreement with the Board.

OUTLOOK

The slowdown in trading we experienced in Q1 FY25 continued into July. If this trend were to continue through the current quarter, we would expect to report a H1 FY25 operating loss and FY25 operating profit to be below current consensus. As we navigate this period, we have decided to suspend dividend payments in respect of FY25 in order to maintain a strong balance sheet and our capacity to invest in Burberry Group’s long term growth¹.

We expect the actions we are taking to start to deliver an improvement in our second half and to strengthen our competitive position and underpin long-term growth.

In FY25, we expect: 

•       Retail space to be broadly stable

•       Wholesale revenue to decline by around 25% in H1 and decline by around 30% for the full year

•       Capital expenditure to be around £150m  

•       A currency headwind of c.£55m to revenue and c.£20m to operating profit in FY25, based on foreign exchange rates effective as of 28 June 2024.

1 There is no change to the final dividend for the period ended 30 March 2024, which is currently scheduled for payment 2 August 2024 (subject to approval at AGM on 16 July 2024).

REGIONAL COMPARABLE SALES PERFORMANCE

We are operating against a backdrop of slowing luxury demand with all key regions impacted by macroeconomic uncertainty and contributing to the sector slowdown.

In this context, Q1 FY25 comparable store sales fell 21%. All regions declined outside of Japan:

·      Asia Pacific decreased 23% with Mainland China -21%, South Asia Pacific -38%, South Korea -26% and Japan +6%.

o  Globally, the Chinese customer group also declined but held up better than Mainland China as spend was diverted offshore.

o  Japan continued to grow, benefitting from strong tourism spend mainly from Chinese and near shore customers in Asia, whilst locals remained soft.

·      Americas decreased 23%, driven by declining locals. Globally, the Americas customer group performed broadly in line with the region.

·      EMEIA fell 16% with local spend deteriorating versus last quarter. Tourists accounted for just over half of retail revenues but declined by a high single digit percentage.

By product, outerwear and scarves continued to outperform globally.

The contribution from space was 1%, leading to a 20% decline in retail sales at constant exchange rates.

Currency was a 2% headwind this quarter, with retail revenue landing at £458m, down 22% at reported exchange rates.

The financial information contained herein is unaudited

All metrics and commentary in this presentation are at reported FX and exclude adjusting items unless stated otherwise.

Constant exchange rates (CER) removes the effect of changes in exchange rates. The constant exchange rate incorporates both the impact of the movement in exchange rates on the translation of overseas subsidiaries’ results and on foreign currency procurement and sales through the Group’s UK supply chain.

Comparable store sales are the year-on-year change in sales from stores trading over equivalent time periods and measured at constant foreign exchange rates. It also includes online sales. This measure is used to strip out the impact of permanent store openings and closings, or those closures relating to refurbishments, allowing a comparison of equivalent store performance against the prior period.

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

This announcement contains information that qualified or may have qualified as inside information for the purposes of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 (“MAR”). The person responsible for arranging the release of this announcement on behalf of Burberry Group plc is Gemma Parsons, Company Secretary.

This trading update constitutes Burberry Group’s quarterly trading update which was originally scheduled for 19 July 2024.