Thank you. Good morning, and welcome to Burberry's First Quarter Trading Update Conference Call.

You will have seen the announcements made earlier this week about the changes to our senior management team, so as usual, today's call will be focused on the first quarter trading. With me this morning is Fay Dodds from our investor relations team.

I will make a few brief comments on this morning's announcement, and then we will be happy to take your questions.

In what remained a challenging external environment, underlying retail revenue in the first quarter was unchanged at constant exchange rates and up 4% at reported rates. Comparable sales were down 3%, with all 3 regions posting low single-digit comp declines.

First, within Asia, Mainland China, for comparable sales for the quarter, unchanged year-on-year. Our performance is currently being impacted by the ongoing elevation of our store network in Beijing, which is our largest market within China.

Excluding Beijing, comparable sales in China remained up by a mid-single-digit percentage. Hong Kong continued to suffer significant double-digit footfall declines, although the market did show some improvement compared to the fourth quarter.

While comparable sales remained down by a double-digit percentage, this was better than the declines of over 20% we had seen for the previous 3 quarters. And excluding Hong Kong and Macau, comparable sales in the region were positive.

Second, in EMEIA, which accounts for over 1/3 of the region's retail revenue, improved particularly in the final weeks of the quarter, to deliver mid-single-digit percentage growth. Continental Europe, however, remained depressed with continued double-digit declines in sales to the traveling luxury customer, particularly in France and Italy, offset in part by growth from domestic customers in all major markets.

And then in the Americas, we continued to experience uneven demand from domestic customers. And spend from traveling luxury customers, which represents over 15% of the market, remained down by a double-digit percentage.

Meanwhile, digital continued to outperform and grew strongly in all regions. And mobile [indiscernible] approaching 60% of traffic to the site and delivered the majority of the growth.

As regards product. In mainline stores, fashion, which tends to have a lower gross margin, outperformed replenishment with a positive customer response to innovation and newness.

So turning now to guidance. There is no change for retail space or licensing revenue from what we said in May.

For wholesale, the response from our customers to the move to one label continues to be positive. However, our outlook for revenue in both fashion and Beauty, particularly in the U.S., is now more cautious for both the first and second halves of the year.

We now expect wholesale revenue to be down over 10% in the first half. This reflects significantly tighter inventory control by U.S.

customers and cautious ordering in the other regions and the elevation of Beauty distribution in certain key markets. Having completed the review of growth drivers to our fashion business that we spoke about in May, we are now carrying out the same exercise for Beauty.

And finally as regards guidance, let me just update you on FX using the rates as of 30th of June. The recent depreciation of sterling means that the expected benefit for financial year 2017 is now about GBP 90 million for retail/wholesale profit when compared to last year's rates, which is about GBP 40 million more than when we spoke in May.

So let me now just update you on our initiatives to deliver enhanced revenue growth and improved efficiency, which are well underway.

Starting with the initiative to drive revenue growth, which is grouped under 3 headings. First, under product, in order to deliver greater visibility for fashion and newness, we have reduced the number of SKUs for main markets by about 15%.

And in marketing, you will have seen that the main campaign is now more product focused and features the patchwork bag. Secondly, under retail excellence, we've increased investment in training, with regional conferences planned for our store management teams over the summer focusing on customer cultivation.

And as we look to elevate our service, our growing team of Burberry Private Client sales associates, whose productivity is significantly above the average, delivered an increased number of personal appointments in the quarter. And third, under e-commerce, the relaunch of burberry.com with improved content and functionality is scheduled to be launched in the autumn as planned.

And the customer app facilitating mobile checkout in particular is also on schedule. And then turning to process, our plans to improve efficiency through changes in our ways of working are well underway.

And as a result, we remain confident in delivering the financial goals for this year and through 2019 as we outlined in May.

And finally, I should just let you know that we will shortly be starting the previously announced share buyback program of up to GBP 150 million.

So in conclusion. At this early stage in the year, we continue to operate in a challenging external environment where underlying cost pressures persist, but against this background, we have remained focused on managing the business day to day while implementing the initiatives announced in May to deliver enhanced revenue growth through focusing on key products, retail productivity and e-commerce; and improved efficiency through changes to our ways of working.

So with that, Fay and I would now be happy to take your questions.

I've got 3 questions, if I may. Firstly, you said that you're happy with the consensus PBT of GBP 413 million.

Would it be fair to assume that this reflects low-single-digits like-for-like for the year? And is there anything that you're seeing currently that suggests that like-for-like can't return to positive trends in Q2 and particularly given the 10 percentage points easier comp base?

Then secondly, just on wholesale. You've guided that down over 10% now in H1.

What's the main delta there between the U.S. and Beauty within that?

And can you talk to your early indications for H2 here and also the split between the sort of core wholesale business and Beauty as well? And finally, I appreciate it's a trading -- a Q1 trading call, but you've obviously outlined the plans for increased sales densities more in line with the peers.

Can you just talk to, with the management changes, will the new CEO be spearheading this retail excellence process when he comes in; and what previous experience he has here in his many years in the industry? And do you still think that you may need to strengthen headcount in retail further down the organization at all?

Okay, Helen. Do you want to take the one on consensus, Fay?

And then I'll take wholesale.

Yes. I mean what we've said this morning is that, now that most of the analysts have actually included the FX benefit, consensus is about GBP 413 million.

We are not going to particularly comment on what that includes in terms of like-for-likes. I mean it is very rare for us to do that.

And then turning to our wholesale guidance. What we're saying now is that, as we look forward to H1, we had guided, as we said, to around 10%.

We're now saying that will be above negative 10% both in fashion and in Beauty, and they're probably around and about the same. I mean what's happened, I think, is that we've seen that Beauty wholesalers are also reacting to the external environment.

And they're destocking, I think, not just for us but for other fragrance brands. I mean, importantly, our sellout on our new products of My Burberry and Mr.

Burberry remains strong. It's the sell-in that's being impacted.

And now we're expecting Beauty revenues to be down by in the -- something like around 10% across the year and probably broadly split equally sort of half-on-half, something like that. And then in terms of retail expertise, Fay?

Yes. I mean, Helen, as you know, we did a huge amount of work over 6 months -- last 6 to 9 months identifying the opportunities to improve retail productivity.

That is well underway, under Christopher's leadership, with the existing team, but I'm sure, as Marco joins -- he is a luxury retail person through and through, and he will be able to add to that program.

And just on that Q2 like-for-like and that 10 percentage points easier comp base, just following up on that. Is there anything you're seeing that doesn't suggest that, that shouldn't return to positive?

I think, Helen, we've all been caught out with the weak comp argument before. Remember we are doing that with Hong Kong.

I don't think it will get much better in Hong Kong because of the weak comps, say. And I mean this is an early stage for the year.

I think the most important thing to note is that Christopher talked in his quotes about things being -- remaining very challenging.

Carol, Fay, I have 3 question, please. The first one, I'd like to have a bit more color on your minus 3% LFL.

Could you split perhaps ASP and volumes, perhaps outlets versus mainline stores? And if we think of LFL by nationality, what is the slight improvement coming from in terms of customer cluster?

Is it from the Chinese customer improving sequentially? That's my first question.

Secondly, on FX and pricing. Obviously, the sterling but also the euro have moved quite a lot, versus the dollar, recently.

Have you taken or will you implement price increase in both the U.K. and Continental Europe to reduce the price gap with Asia and the U.S.?

Are you happy with the gap as it has moved in recent weeks? And finally, still an FX-related question: If you're happy with consensus PBT of about GBP 415 million -- or GBP 413 million, I believe this means you're not reinvesting any of the additional GBP 40 million FX benefit into the business.

Is that a fair assumption?

Okay, Thomas, so in terms of the minus 3% like-for-like, the split between ASP and volume, ASP may be up just a tad, but it's volumes that are down. We don't ever split out the split between mainline and outlets, so nothing specific to say.

You used to, but...

Yes, I don't think we have for a little while now.

Okay, well, did outlet outperform mainline stores...

No, no, same. And then in terms of nationality, what we're saying is -- I mean you were asking.

I mean, if we look by region, what we are saying is that, the U.K., we saw return to positive growth. Remember, for us, about 50% a tourist market.

And even within domestic, we've probably got lots of expats too. You're asking, I mean, if we talk about the Chinese in particular.

We had said that we have seen Chinese -- growth from the Chinese slow overall as we went through quarters 3 and 4 last year, and that just slowed a little bit more than it had in Q4. Other than that, by region, I don't think there's very much to call out specifically.

All regions improved just a little bit. We've talked about Hong Kong improving to now not to be down over 20% but -- and China impacted by Beijing, but other than that, I think a little bit improvement.

And I would say we feel that that's the initiatives we spoke to you about beginning to kick in, be it around product in the stores, be it around retail service or products marketing. And then in terms of FX and the impact on pricing, we've chatted before about the fact that we have a global pricing strategy.

We don't tend to make immediate reactions when FX rates move. Clearly, there has been a significant shift, and we'll wait until that's settled and then make any price adjustments that may be appropriate, always looking to see also what our peers are doing.

So nothing new to call out in terms of pricing today. And then on your point on consensus and the FX impacts, clearly, there has been a GBP 40 million upgrade at 30th of June rates.

Remember we manage the business day to day on an underlying basis, and therefore whilst the FX moves affect reported profit, that doesn't necessarily change any investment decisions or anything else in terms of the way we are managing the business, which we always look to deliver growth on an underlying basis.

Luca Solca from Exane BNP Paribas. I wonder.

There's -- there have been major changes since we last spoke, and I wonder what Brexit could mean for Burberry. Are you considering or envisaging any changes to the organization or the way that you conduct your business to adjust to this scenario going forward?

As a second question and continuing with the big changes coming on, I wasn't clear when the new CEO is going to join Burberry. I wonder if you could give us a bit more of a detail on that.

And lastly, I was wondering whether you see any differences in sales trends when you look at your assortment and divide it by price point.

Yes, okay, Luca. So in terms of Brexit, as you know, this wasn't the outcome necessarily that we would have been hoping for, but that said, we now need to move on.

We're a global company. And in the short term, we don't see any -- other than the FX benefit, which we've called out today, we don't see any discernible impacts on our operations globally.

I think it's far too early to call out what the longer-term impacts may be. And as that becomes clearer, we will obviously respond to make sure that we continue to optimize and deliver on our strategies, but I think it's still very early days.

And we're just focusing on continuing to manage the business day to day and on those growth opportunities ahead of us, but we'll keep you posted as we get more clarity, along with everyone else, on what this really means. In terms of the CEO role, Fay?

Yes. So I mean, in terms of when Marco is able to join us, it will be sometime in 2017, as we said in Monday's release.

And then just in terms of sales trends by product, the one thing we are calling out today is just that we saw fashion outperform replenishment in this quarter, which I think is important given we know how important newness and fashion is to the luxury consumer. So that's probably the only thing, but in terms of what that meant for ASP, again nothing significant to call out.

Obviously, today's call, as you rightly said, is focused on the Q1 updates, but I think, Carol -- after the big announcements, definitely a thank you to Carol. We'll no doubt be chatting to you later on this year, but take your well-deserved break coming in 2017 for you...

Thank you, Louise.

In terms of the questions, I've got simple ones. U.K., obviously much better towards the end of the period, no surprises, but can you just give us a bit of -- a bit more color on then, if there's any scope to increase prices going forwards given the currency?

And then secondly, on U.S. travelers down double digits, did that change at all over the period?

And then my last question, on domestic U.S., obviously still tough. And we can see that in the -- reflected in the U.S.

wholesale comment, but any change in the promotional environment that you've seen? Is there anything on the inventory position to highlight?

Yes, so in terms of the U.K., we did say it improved towards the end of the quarter. I don't think we will be -- as I said to Luca just now, I don't think we will be changing prices in the immediate short term.

But we'll obviously keep that under review, depending on where sterling settles, but it has been moving, [indiscernible] as you've seen. In terms of what's underpinning that improved performance, I -- we do believe it is the strategies that we've put in place beginning now to kick in.

So we particularly saw a pickup in domestics across EMEIA. And in -- that's very much about the focus we have on our Burberry Private Clients; our CVM program; our improved retail disciplines, which I think is helping with conversion; continued strength in digital.

And also, I think we've got traction in those key areas with product focus, be it around bags with the rucksack, outerwear in terms of lightweight cashmere and lace and entry-price products. So I think it's a number of -- there's not one big callout.

I think it's a number of those initiatives now really beginning to kick in. In terms of U.S.

travelers, Fay, I don't...

Yes, I mean, just to remind you that, for us, the Americas is about 80% local, 20% tourist. I mean we still saw tourist down double digit in the first quarter, very similar to the fourth quarter.

And in terms of the U.S. domestics, they were broadly unchanged year-on-year.

In terms of your question about promotional activity, I mean, the market as a whole remained quite promotional, but we actually ran a shorter shopper sale in the U.S. And I think you had a question on inventory: At March, we talked about it being 10% up, with a lot of the increase due to being either currencies and stock or replenishments.

And we're pretty relaxed about the inventory position at the moment.

Two questions, please. The first is on, back to FX.

You talked about the GBP 90 million benefit. Presumably, that's a bit of a mix between translation benefits and transaction costs.

Could you maybe talk about whether there is a drag on COGS from the stronger euro this year or whether more of the negative impact from currency should come through into the next financial year? And secondly, can you just confirm that all your PRP is based at constant currency rather than reported?

Yes, so in terms of the FX benefit, as you say, the majority of that, Warwick, this year is coming from translation. There is part of it.

There is an adverse on procurement, principally on U.S. dollar where it's just the way our hedging timing works.

As we sit today, the U.S. portion of our sort of hedged procurement has been impacted versus the procurement rates for last year, but by far, the most significant majority is around translation.

And remember, for us, with the 40% sterling cost base, that means we're getting more of that benefit coming through. In terms of PRP, everything is done at constant exchange rates, so nothing significant to call out there other than the one measure in the ESP, the long-term incentive plan, where the ROIC, the return on capital, measure is actually done at a reported rate.

And sorry, back on the procurement. So it could be a sort of tens of millions drag from the dollar this year on COGS.

It's obviously being more than offset by other things [ph].

I would say -- wouldn't say tens of millions. I would say around that sort of number but not tens of millions.

And sorry. Just on FX, so everyone's clear.

Don't forget the rates that we put in the back of the announcement include 3 months of basically pre-Brexit rates and then 9 months on the rates at the 30th of June.

Three quick questions. And I was just wondering, if Hong Kong down in the teens or so in Q4, how the profitability in Hong Kong compares today with global average.

Secondly is just a quick question on the shape of the quarter. Was June materially different to Q1 figures?

You mentioned U.K., but I was just wondering about other regions or key markets. And in wholesale, has the travel retail in Asia component changed within this revised wholesale guidance?

Rogerio, so in terms of Hong Kong, we did say it's got slightly better, albeit still down double digits. All of our stores there still remain very profitable, and they still are some of the most profitable stores that we have.

So no change to what we have been saying previously. In terms of Q1 and trends, I don't think there's anything specific that we'd call out.

We're saying all regions just did slightly better but no significant shifts. And in terms of travel retail, again nothing -- really the biggest movement in our wholesale guidance is largely in relation to the U.S.

No worries. Three questions from my side, please.

The first one is on SKUs. You're talking about reduction.

I just want to get a clarification here. Is that apply to all collection, or just on the fashion [indiscernible] items?

The second one is on wholesale. I was wondering if there is a self-inflicted impact as well coming from the consolidation of the 3 labels into a single one and also wondering how much of the GBP 90 million benefit to your profit before tax from FX do you think will crystalize and locked in for the year.

All right, so Dan, in terms of the SKUs, we're saying 15%. And there will be more to come as we go through the following years, but that's pretty much right across all of the collection and we'll continue to reduce further as we go forward.

In terms of wholesale, I said when I opened the call that absolutely no impact from the 3-label consolidation. The response from our wholesale partners in the U.S.

has been very positive. What we're saying now is that we're just seeing a -- remember H1 is not impacted at all by label consolidation, and that's where we're seeing it down over 10%.

And we're just saying we now see similar trends for H2, but we do not believe in any way that has been impacted by the consolidation. And then your last question, sorry, I didn't quite catch what you were asking.

I think it was about how much of the GBP 90 million FX benefit has been banked in the first quarter.

Correct.

And clearly, a lot of that is half 2 weighted.

Yes. And don't forget, in the first quarter, so the number we're calling out this morning is only the retail number but it is very much weighted towards the second half.

Two reasons: one, because the quarter, as Fay said, has already been baked in. And secondly, given we are an H2-weighted business, a more significant portion of that will come in the second half.

Carol, Fay, just 2 questions. First of all, you're obviously calling out that fashion outperformed replenishment.

Firstly, is that because you promoted more? I know you said you didn't in the U.S., but was this on a global basis?

And also, how should we think about the gross margin pressure? Because obviously your replenishment products are higher gross margin.

And then the second question is: I know you just said that your wholesale partners have reacted positively to the brand collapse [ph], but can you give us an update in terms of retail? So when are you actually going to be starting to change those stores over?

Maybe can you talk about, a bit about the trial stores and how they're performing?

Yes, so I mean, in terms of fashion outperforming replenishment, it will have an impact on gross margin but clearly will also drive, we believe, top line outperformance. So in terms of pound millions, we'll be positive overall.

And I think it's just the reason it's outperformed in this quarter is because we are now -- we talked about the fact that the stores looked a little -- it was difficult to see the newness in the stores, and we very much changed the merchandising. We've reduced the SKUs.

The way in which people are now -- a customer's able to come into the shop and see that newness and fashion, I think, is resonating really well. But in terms of wholesale, as I said, we do not believe there's any impacts from the label consolidation.

In terms of our own retail, that's beginning to roll out right now, with full implementation in the autumn. And we've talked to you last year about the trial stores.

Now we're moving more away from those trial stores and just looking to absolutely roll this out globally. So that's happening as we speak and will be fully implemented by the autumn.

And what sort of percentage of stores have got that, the new way of merchandising, i.e., all the product categories together, then? And...

It's literally happening. It's a sort of work in progress, Annabel, because this is the season when we actually switch over.

So we've -- so I mean, if you go into the stores now, you will begin to see it, but as I said, it's really by the time we get to the autumn that it will be fully implemented. We're doing it globally.

It's not on a test-store basis anymore. It's just as the collection rolls out.

Okay, so thank you very much. And we look forward to speaking to you again on the 18th of October with our first half trading update.

Thank you.