1H17 SALES RESULTS

British luxury giant Burberry reported a 1H17 total group revenue decline of 4% at constant currencies, to £1,159 million (up 5% in reported currency), slightly below the consensus estimate of £1,163 million. Total results were negatively impacted by weakness in the Americas region and the Beauty and Women’s Apparel categories. Total retail sales increased 2% year over year at constant currencies (up 11% at reported currency) to £859 million. Wholesale sales declined by 14% year over year at constant currencies (down 6% at reported currency) to £287 million in 1H17. Licensing revenues, fell by 54% at constant currencies (down 51% as reported) to £13 million. 1H17 sales in Asia Pacific declined by 1% year over year at constant currencies. Hong Kong continued to experience negative footfall in 1H17, with comparable sales down a double-digit percentage. Excluding Hong Kong and Macau, comparable sales in the region were positive in 1H17. Revenues were down 12% at constant currencies in the Americas, and up 1% year over year in constant currencies in Europe, the Middle East, India and Africa. Sales in the UK jumped 30% in the second quarter, due to the depreciation of the British pound making luxury goods more affordable for international travelers. Excluding Beauty, wholesale revenues at constant currency in Europe, the Middle East, India, Africa and Asia Pacific were broadly flat. However, the Americas segment saw a significant decline, reflecting destocking by wholesale customers and further strategic brand elevation.

FY17 OUTLOOK

For FY17, net new space additions are expected to contribute low single-digit percentage sales growth in the retail division. Around 15 store openings are planned, with a similar number of closures. Burberry expects total wholesale revenues to decline in the mid-teens percentages year over year at constant currencies for 2H17, reflecting similar revenue trends to those reported in 1H17. Total licensing revenue in FY17 is expected to decline about £20 million at constant currencies, down from £42 million in FY16, primarily reflecting the expiry of the Japanese Burberry licences. Burberry expects FY17 constant-currency adjusted profit before tax to remain stable.