Burberry Group plc (BRBY) Earnings Call Transcript & Summary

Good morning. I'm Kate Ferry, CFO of Burberry. And with me today are Josh Schulman, our CEO; and Lauren Wu Leng, Head of Investor Relations. As you'll 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 our running order, I'll go through our performance in the first quarter, and then Josh and I will be happy to take your questions. Our last update was just a couple of months ago, and we've continued to make progress on our Burberry Forward strategy. Our focus this year remains reigniting brand desire as a key requisite to growing the top line. For the first quarter, comparable retail sales declined 1% versus last year with a sequential improvement in all regions relative to the previous quarter. During the period, we continued to bring our timeless British luxury brand expression to life through a series of distinctive monthly campaigns, High Summer, Highgrove and Burberry Festival, each celebrating British summertime traditions while designed to speak to different customer archetypes. We launched our Autumn '25 collection, the first under the Burberry Forward era, focused on our recognizable brand codes and good-better-best pricing within a luxury context. We've continued to enhance visual merchandising and storytelling in stores and online, increasing product density and aligning our category authority. And finally, we initiated the organizational changes announced in May to enhance collaboration and agility whilst progressing delivery of our cost efficiency program. Moving on to the quarter's retail performance on Slide 3. As mentioned, comparable store sales were down 1% in the quarter. The impact from space was a 1% headwind, leading to 2% lower retail sales at constant exchange rates. Currency was a 4% headwind in the quarter, with retail revenue landing at GBP 433 million, down 6% at reported exchange rates. Turning now to regional performance. Following the organizational changes announced in May, we've now transitioned to our new structure comprising 4 regions: EMEA, Americas, Greater China and Asia Pacific. Greater China includes Mainland China, Hong Kong, Macau and the Taiwan area. Asia Pacific consists of the rest of Asia, including Japan, South Korea, Southeast Asia, Australia and New Zealand. In Q1, we saw reduced activity by tourists globally and traffic remained challenged. That said, in Americas, we experienced 4% growth, supported by new local customer growth. EMEA grew 1% with local spend up mid-single-digit percentage, which helped to offset the decline in tourist spend. Greater China was 5% lower in the quarter, with Mainland China down 4%. Globally, the Chinese customer group performed in line with the region. Asia Pacific saw a 4% decline, driven by Japan, which declined by 10% following a slowdown in tourism. This was partially offset by South Korea as the region returned to growth, up 2%. Moving on to brand initiatives. We kicked off the quarter with our High Summer campaign led by Jack Draper and Rosie Huntington-Whiteley, featuring Burberry check swimwear, shirts and cropped jackets, the campaign helped us reach new audiences. Our Highgrove campaign launched in May achieved positive engagement across social platforms, supported by our influencer and event strategy to generate local relevance. June saw the launch of Burberry Festival, a series of films and portraits featuring globally recognizable talent alongside our newest brand ambassador, K-pop artist Seungmin, strengthening our appeal across key markets. Collectively, these campaigns boosted brand desirability, the metric most closely tied to purchase intent. In terms of product, by category, Outerwear and Scarves continued to outperform the group average during the quarter. We're building on the early success of our check trim products and the reorders of B Clip bags are arriving this summer. We launched our Autumn '25 collection partway through the quarter, the first fully conceived under the Burberry Forward era. This collection represents a strategic step in rebuilding our outerwear core, celebrating recognizable brand signifiers and aligning pricing with category authority. Overall, the collection is off to a promising start with early sell-through results representing a significant improvement from last year's autumn collection, both in our directly operated network and wholesale channel. This newfound momentum in wholesale is giving our key partners further confidence in our turnaround. Our goal is to have a smaller, better quality wholesale business going forward. In stores, we continue to enhance visual merchandising with the reintroduction of manikins and cross-merchandising to inspire our customers to build their wardrobes. This has been brought to life through our Highgrove garden installations and our festival window displays. We've now piloted the first 7 scarf bars, which are already outperforming the rest of the fleet in scarf sales. We remain on track to roll out around 200 scarf bars by year-end. E-commerce continues to perform strongly with its third quarter of consecutive growth. Turning now to the outlook for full year '26. We are still in the early stages of our turnaround and the macroeconomic environment remains uncertain. In the first half, we're continuing to prioritize investment and expect to see the impact of our initiatives build as the year progresses. We will deliver margin improvement this year as we build on the early progress we've made in reigniting brand desire. We remain confident that we are positioning the business for a return to sustainable, profitable growth. And with that, we will now be happy to take your questions.

[Operator Instructions]. Our first question for today comes from Zuzanna Pusz of UBS.

I'll stick to 3 quick ones, I promise. So first of all, would you be able to maybe tell us a little bit about the exit rate or what you're seeing currently? I know it's probably not one of your favorite questions, but you've seen a very impressive improvement from minus 6% to minus 1%. So I would imagine that June was probably better, but it would be interesting to hear more or less what's been the cadence of growth throughout the quarter. Secondly, would you be able to maybe tell us a little bit more about the growth by consumer cluster? Specifically, it seems to me like probably most likely the major consumer nationalities such as Americas and Europeans were actually positive and probably the only drag are the Chinese. But if you could confirm that, that would be great. And then finally, you had negative space. It seems like you closed some stores. I know you confirmed the flat space guidance for the full year. But can you tell us a little bit more what are you doing to the stores? Are you -- or is it a specific region? I would be most interested to know if you're basically maybe reshuffling a little bit the mix of your stores? And what is the specific reason for that?

Zuzanna, thanks for the questions. Perhaps I'll kick off and I've got Josh with me here as well. I'm sure will interject. So let's start then with the exit rates. I mean, look, you're right that June was a little better versus the total comp for the quarter. But I would just caveat that with -- it's very hard to compare year-on-year. So I mean, as always, you've got kind of comps from the previous year playing here. We've got weaker comps in June. But I think the most important point to make is that we have actually deliberately rephased some media into June this year as compared with last year to really align our marketing with the festival campaign that's recently launched. So I think combination of comps, more marketing does mean that I'm just mindful of people reading too much into the exit rates. And clearly, I'm also going to flag that Q2 is a really important quarter for tourism also and nothing different from what you're hearing from everywhere else. Tourism is down globally. That said, there's no doubt we're really pleased, obviously, with the quarter-on-quarter sequential improvement everywhere, which I guess leads into your second question around growth and clusters and what we're seeing. So I think there's a little bit of a kind of East-West story going on here, so better performance in Americas and EMEA, still a bit weaker in Greater China and the rest of Asia. But as I said before, sequential improvement everywhere. I think what we're seeing is EMEA, obviously, that is quite a tourist market. So tourism down, but really encouraged by the fact that locals are spending more. So positive performance from our locals there. Americas is obviously much less of a tourist market. And I think that is really where we've been encouraged by what we're seeing from customers there. So not only have we got more returning customers, we've also got a good set of new customers in the region. And what's more, these are customers from a broad customer set. So we've been really focused in that market, a fantastic team focused on the kind of good-better-best customer acquisition and really taking their lead from some of the brand initiatives that I talked about in the opening remarks. So they've been leading some good high-end events for VIP customers, more the kind of high-growth customer. Likewise, they've had some great events with DJ's in high-traffic malls, which has been really leaning into the great success of the festival campaign. So I think that's really what's been driving the performance in the Americas. And then elsewhere, Chinese cluster very much in line with the region. So the cluster actually has been similar Q4 to Q1. So again, what you're seeing is obviously, tourism piece down, but a better local performance. And your final question, sorry, to forget that, you asked me about space. I mean this is just 1 quarter. So I wouldn't really call too much out on space. We're still very much guiding to space being neutral for the full year. We were down 1% in the quarter. It was just a factor of not having any new store openings, but we did have, I think, 4 closures, but this is really part of BAU. We're constantly reviewing our network as part of normal course of business, and there's always a bit of movement in the quarter. But I think for the year, nothing to call out. Our stores are generally in great locations. As I've said before, the issue is not so much the number of stores. It's just really improving the productivity within those stores, which we're absolutely focused on and seeing good early signs with the Burberry Forward strategy.

Our next question comes from Anne-Laure Bismuth of HSBC.

I have 2 questions. The first one is, do you confirm the acceleration expected quarter after quarter? And how do you feel about the low single digit to mid-single-digit improvement expected in H2? Will it be mostly driven by the new collection? Or do you have any special initiatives? And my second question is about the restructuring plan. Is it almost done? Or do you still need a few more months to execute on it? Can you give us an update? And maybe one last question about the performance in Japan and South Korea. Can you give us a bit more granularity about it?

Thank you. I mean I think on the question around [ the comp ] like-for-like look forward, I'm probably not going to comment too much. We're only 2 weeks into the quarter. I think the key here is obviously that we're seeing good green shoots so far in this quarter. This is really about continuing to build on the brand initiatives and most importantly, it's going to be the product and the changes that we've made there that really start to feed through. I mean I would just reiterate really what I said back in May, and I think you can see the outlook statement is very similar, which the focus this year is really about reigniting desire. So I think I've always said that this year, top line growth is going to be more muted. You're clearly going to see good margin progression and particularly given some of the inventory initiatives that we undertook last year. And this is really as I say, the priority is building on the momentum that we've seen in both product and brand, investing in the first half, doing what's right for the business in terms of investment and then top line will come. Sorry, restructuring. There was a second and a third question, apologies. So yes, on the restructuring and specifically, I mean, if I tackle specifically the cost piece, we obviously announced just 8 weeks ago a kind of significant cost initiative, the restructuring program. So far, nothing to call out in terms of how we saw that playing out. The benefit of that will be very much second half weighted. And as I say, all going according to plan at this stage. And then just on the regional piece, Japan, again, very similar to what others are seeing, given the currency situation there. Japan is certainly down year-on-year, but we are encouraged to see that actually Korea is positive, so single-digit positive in Korea.

Our next question comes from Antoine Belge of BNP Paribas.

It's Antoine at BNP Exane. So actually, I've got 3 questions. The first one is on the autumn collection. I think it will be the real first collection with the full, I would say, impact of what Josh has been trying to and his team has been trying to improve. So in terms of maybe products and [ signifiers ] and pricing, could you maybe call out the key elements? My second question relates to the operating profit, especially, I think you just mentioned that some of the cost savings will be more H2 weighted. So I think the net benefit incremental of the 2 programs is around GBP 56 million. So would it be possible to have a breakdown maybe 1H versus 2H? And overall, what sort of profit could be achieved in H1? Is it going to be relatively minimal? Or could we already see a margin going above the 5% mark in the first half? And finally, just in terms of the average AUR, so a lot of moving parts, Polo shirts maybe going down in terms of pricing, some tranches going up, maybe price increases to offset tariffs. So net-net, how much was pricing up or down in the first quarter?

Thank you, Antoine. Well, I've got Josh here with me. So I think perhaps Josh will take the collection piece, and we'll probably build in a pricing discussion into that. And then I'll talk to you about profit and consensus.

Antoine, so as Kate said, I'll start with the product. So the autumn collection, as you mentioned, is resonating across all of our customer archetypes globally. And what's notable is that we have a significantly higher sell-through on the autumn collection this year than we had on the same autumn collection last year. And it's really the product strategies that we've discussed that are coming to life and are resonating with our customers. So first, leading with Outerwear and Scarves and earning authority across the other categories. So once again, Outerwear and Scarves had a sequential improvement and comp improvement as well. Outerwear has really been led by light jackets as you would anticipate for this time of year. So some examples include the Blackpool that has the continuation and the Clapton, which have the continuation of the Check Trim with a new novelty Check Trim Zipper that has been a best seller. We also talked at the Strategy Day about uniting our brand signifiers and leaning into some of our beloved brand signifiers. And so that includes items with Check Trims. It includes items with our Equestrian Knight Design. And importantly, we brought back an icon from our heritage, the Knight Stamp, which appears in many places throughout the collection, including on the Nelson Light jacket. And this archival Knight Stamp, it also appears on different jersey pieces and in hardware on our Highlands bags. And wherever we have that, that is also resonating with our customers. And finally, aligning our pricing with category authority. Your question on AUR was a good question. I'll let Kate pick that up. But what we're seeing is we're seeing strength at all levels of the pyramid at good, better and best. So frankly speaking, the autumn collection is playing out even better than we anticipated. And this is giving our store teams confidence as they've been clienteling and calling their customers in. And it's also giving our wholesale customers confidence. They are receiving the products, and we're seeing strong growth in the sellout of our wholesale customers as they're receiving these products, which is giving them further confidence in our turnaround.

Antoine, so just on the profit piece, I mean, I think we're not really changing the guidance that we gave back in May. As per the outlook statement, it is definitely, if you like, a kind of even more H2 weighted than last year in terms of profit because we're really prioritizing investment in the first half. And I think just to give a little bit of color on what we mean there is that we've certainly phased more consumer-facing investment into the first half versus last year. So that might be marketing, media, also visual merchandising, a bit of clienteling. And just as the example I used in answer to another question in terms of rephasing media even in this quarter to align with the festival collection, for example. So I think it's very much investment in the first half and then we start to see the impact of our actions build into the second half. So in terms of -- I think H1 consensus is for a small profit in the first half. We're comfortable with that, and we're likewise comfortable with the full year consensus, which I think full year is GBP 3 million to GBP 5 million. And I think as per my earlier comments, the priority is really to build on the momentum that we've seen in both product and brand. So in terms of investment, we'll continue to do absolutely what's right for the business. And that, therefore, is a little bit around how much of the cost savings are going to drop through. This will, obviously, as we move through the year, that's going to a little bit depend on not only is it about how much we want to invest, there's also macro considerations, tariff considerations, which is why kind of wrapping all of that up, I would say, broadly comfortable with consensus. But you're absolutely right in terms of the cost savings, they will be H2 weighted. Obviously, we announced the transformation back in May, and that was the same day that we announced it internally. And obviously, since then, we've had to go through -- these processes are always tough. It's always obviously difficult to say goodbye to colleagues, but we've been managing that since May. We've been going through the consultation process in the U.K. Obviously, processes differ region to region. So it's only really kind of towards the back end of this month and beyond that colleagues are actually exiting the business. So you will see cost savings more H2 weighted.

Our next question comes from Grace Smalley of Morgan Stanley.

It's Grace Smalley. The first one would just be on marketing, please. So you mentioned that you had kind of several strong marketing campaigns during the quarter and I think increased spend in June in particular. As you look ahead, Josh, what are the sort of things that you're planning to keep this kind of momentum going on the marketing side and building on these recent strong campaigns that have clearly driven consumer traction? And then, Kate, specifically, I think you mentioned that there is more investments in H1, including more marketing. Could you just detail more precisely the shift in marketing between H1 and H2 and overall, what you're planning for marketing as a percentage of sales for the full year or whether that's just going to be a bit flexible depending on how top line and kind of cost savings progress? And then my second question, just to follow up on some of those comments on the wholesale side. I appreciate you don't normally give official wholesale guidance for the second half until November. But just given those comments there on positive feedback from wholesale partners, any sense of how we should be thinking about wholesale growth in the second half relative to that first half guidance you've given of down mid-teens?

Great. Thanks, Grace. Well, I will pass over to Josh to answer the marketing one, and I'm sure you have a few comments on wholesale as well.

Okay. So why don't I take those, and then I'll turn it back to you. So Grace, great to speak with you, and thanks for acknowledging all of the work that our marketing teams are doing to surprise and delight our existing customers and attract new ones. So clearly, you saw in the quarter the drumbeat of timeless British luxury narrative storytelling from High Summer to Highgrove to the Burberry Festival, all with a through line of Britishness and style, but targeted toward different customer archetypes. And that led both to the sequential improvement in comp sales, but also to seeing our brand desirability increase by 11 points in our Kantar survey. And so I don't want to give away too much. Our marketing team would be upset with me. But what I will say is that you'll continue to see this type of narrative storytelling with different stories, both from town and country speaking about different British themes. Coming up in -- toward the end of August, we'll be celebrating the craft around our trenches. And we'll be doing a campaign, which was a little bit of a counterpoint to the summer festival, and this is about back to the city. and about a more polished form of dressing for coming back to London after a summer of festivals and summer that -- this week, Burberry is in Ibiza taking over the standard, but all good things must come to an end. And we have lots of beautiful products to wear coming back to the city for September that we'll be showing in August. And then, of course, we'll be lighting up the beautiful winter fashion show in September, moving into a bold outerwear expression in October and then we go into festive and Lunar New Year. We're really committed to protecting and amplifying the marketing and consumer-facing spend and reinvesting in the business to drive growth and reignite desire. As Kate said, reigniting desire for Burberry is our most important initiative this year. And I think where we're really seeing this is in the conversion, is in the conversion and in the sell-through of the new autumn collection. This has been a tough moment for tourist travel around the world. But what we're seeing is when -- it is bringing people in with these new campaigns and then our conversion is improving significantly. In terms of your question about wholesale, wholesale serves multiple purposes for us. From a revenue contribution, it's a relatively small part of our business, but it's such a good benchmark of our performance against our peers because they can buy any product, and they're really responding to their customer demand. And we saw a real turnaround in 2 things. First, in the sell-in from the opinion-leading wholesale customers. And that started with our winter show sales campaign and from our spring sales campaign in May. So the order book was very strong, driven by the most important wholesale customers that we want to grow. And now really in the last, I'd say, 45 days, they now have a critical mass of the autumn collection on the floor. And we are starting to see that their sellout is at the best level it's been in 3 years. And so they are very enthusiastic. I want you to keep in mind, though, that the wholesale sector is in secular decline, and we will be -- and we are still planning for wholesale in general to be a smaller, better quality sector of our business as we continue to exit some of the stores that are no longer appropriate venues for luxury or for our brand. But in the accounts that matter to us, we're seeing the actual end consumer respond to the product, giving the buyers more confidence in our turnaround.

Yes. And I think, therefore, wrapping all of those comments up into your specific guidance question, I think H1 guidance remains unchanged, i.e., down mid-teens. And as usual, we'll update on the full year in November. But as per Josh's comments, initial spring/summer '26 is certainly positive. And then just to round all of that off, your specific question on the marketing spend and the shift there. I think the way to look at it is that for the full year, we're still looking at a high single-digit percentage of revenue, which is absolutely in line with previous years. This is much more around phasing across the 2 halves, which again is why we're talking about more investment in the first half and a more H2 weighted profit piece for the year.

Our next question comes from Thomas Chauvet from Citi.

Kate and Josh, two questions, please. The first one on wholesale, a follow-up on the U.S. that you know well, Josh. There were a few recent negative headlines on the performance of Saks and Neiman Marcus and I think Bergdorf Goodman as well since the merger. And I think conversely, Nordstrom and Bloomingdale's seems to have improved or benefited from Saks issues. I mean, is that performance that you're seeing captured fully in your mid-teens guidance for wholesale in H1? I would assume so. But how do you expect this key account to evolve in the second half? And on wholesale, also, would the European cleanup underway be completely over by the end of fiscal '26? And secondly, on supply chain and tariffs, I think 70% of your COGS is euro as of FY '25. We talked about tariffs with you, Kate, at the full year results a couple of months ago. How has your thinking evolved in light of potential 30% tariffs for the EU rather than 20%? In terms also on how you think about mitigation actions beyond the obvious, which is usually pricing?

Thank you. Well, why don't Josh probably comment on the U.S. wholesale, and I'll take the tariffs.

Sure. So what we're seeing in U.S. wholesale is really the reawakening of the Burberry brand within all of the accounts that you mentioned within the Saks Global portfolio with Bergdorf at the top of the pyramid and Saks Fifth Avenue stores and Neiman Marcus stores in addition to Nordstrom and Bloomingdale's. And we used to have a very important presence in all of those accounts. And over the years, that has been diminished. And frankly, just like our directly operated stores, their Burberry business had been very tough these past few years. And what's interesting is with the arrival of the autumn collection, we're seeing broad-based strength. So we're seeing it in the women's ready-to-wear and men's ready-to-wear, but we're also seeing a growth in handbags and shoes. And this is a great indication for us because here, we're being judged alongside our peers. And the sales associates are choosing to lean into Burberry and the customers are recognizing the work that our teams are doing on the product. And so yes, there are a lot of headlines about a U.S. wholesale. From our vantage point, we value the partnerships that we have with the team at Saks Global, with Nordstrom, with Bloomingdale's and all of which are looking to strengthen their Burberry business, and they're now starting to see some legitimate green shoots. In terms of Europe, the situation is a little bit different in Europe. There are a handful of larger important partners that we have like the Mytheresas (sic) [ Mytheresa ] and the Net-a-Porters (sic) [ Net-a-Porter ]. And there, we're also seeing a reawakening of demand for Burberry, which is great. But the European wholesale market continues to have a lot of smaller independent stores that are in a secular decline. And every time that we clean them up, there seems to be more to do. And it's ultimately because the this is a network that is really built on brand adjacencies. And as the -- as our co-located brands, the brands that we like to locate with depart some of these smaller multi-brand stores, they become inappropriate for us to be there, and we also close those. So my guess is that we will continue to contract the number of accounts in Europe for some time. And hopefully, some of that will be offset by growth in the strategic accounts that I just mentioned.

And then just to pick up on your tariff question. I mean, I think just a reminder, obviously, 19% of our revenues are from the U.S. So yes, still certainly a headwind, but 81% of our business is not impacted. And as I said in May, we spent much of last year looking at the supply chain, looking at price elasticity. So in terms of as much as one can be prepared, we were. You'll remember, we took quite a surgical approach to price increases in the U.S. and I think the comp shows that we really definitely understood where we had price elasticity there. But look, the situation remains dynamic. I mean, if you look over the last few weeks, there have been a number of unofficial announcements, letters sent in the last few weeks. You alluded to, obviously, the EU reciprocal being increased to 30% from the original 20%. But then, of course, there's also chat about the China reciprocal being kept at 10% permanently. So many moving parts, some official, some unofficial, and we will continue to monitor and manage as best we can.

Kate. So there's no sort of supply chain reorg opportunity there that goes obviously beyond tariffs that is in the pipeline. You've worked on headcount. Is there a sort of supply chain reorg that could address some of the inefficiency you may face in front of a 20% or 30% U.S. tariff for the next 3, 4 years?

I mean, I think there's nothing kind of...

Manufacturing in the U.S. or anything more creative?

I mean what I would say is that there's kind of nothing specific to update you on in that -- we work with a global network of suppliers, and we're always looking at how we can optimize our supply chain, and that doesn't change. And as per my comments actually over the last year, particularly since Josh arrived, we spent an awful lot of time looking at it. So it's kind of more part of what we do rather than a kind of reaction to tariffs. So I think, look, we're as much as one can be confident in your ability to mitigate where you can. We're doing what we can, but I think our sourcing has to remain aligned to our expertise and our good-better-best pricing architecture.

I would add one other thing is that in the U.S. in May, we did some surgical price increases in the mid-single digits. And as you can see from our comp, we had no impact to that. And so that has been encouraging for us.

Our next question comes from Louise Singlehurst of Goldman Sachs.

Josh, Kate, just 2 follow-ups for me, if I can. Really interested to hear more about -- you talked about the new campaigns and new audiences. But just the details around [ whether it's ] the customer mix recurring the newness. There's obviously a lot of newness. I think you cite the U.S. being particularly exciting on that basis. And then the second question was just a follow-up on the pricing and the alignment, which you've been talking about across the -- you have authenticity and the category dominance for Outerwear, obviously. But when we think about the broader product offer and we go into the autumn '25, is that where we will more noticeably see when we walk into stores about the resetting or the realignment of the pricing? Or is this step one of many steps to follow over the coming seasons?

Yes, I'll take both of those. So in terms of the campaign, so clearly, you can see from the campaigns that we are focusing on different elements of Britishness and then we're tailoring those to different customer archetypes. So in the season, we started off with High Summer with Rosie Huntington-Whiteley and Jack Draper jumping off of a boat in Burberry swimwear. And clearly, that was fun and targeting a younger audience. Then we moved to a more sophisticated storytelling capsule and more sophisticated product with the collaboration with Highgrove that targeted an investor customer and then back to a more youthful version of Britishness celebrating Burberry Festival culture in June. And so we're being very deliberate in how we're pulsing these. And in some ways, you may see in the summer months a little bit more focus on reshaping the pyramid of price and some of the good-better-best strategy. In the summer months, we're focusing more on the good naturally because you have more jersey and T-shirts and Polo shirts and you have lightweight jackets that tend to be nylon and opening pricing. As we move into the fall and the winter seasons, our next campaign is going to be back to the city, which focuses more on beautiful tailoring, more dressed up trench coats for a more elegant look. And then, of course, as we go into winter, you'll have more outerwear, more cashmeres, more puffers, things like that going into a higher price point again. So we're doing 2 things at once. We're rebalancing the cadence of our marketing across our archetypes, and we're rebalancing the pyramid of product in terms of good, better, best. And I think you'll see how those evolve over this 6-month period, and we're really only about 2 months into that.

That's very clear. And then just on -- just to follow up on the new versus kind of recurring customer. And I know it's always tricky because not everyone is buying every year from a brand anyway. But in terms of how you would describe the overall cohort, I mean, Josh, when you first started coming in a year ago to today, obviously, presumably the balance is much more geared towards the newer customer coming in. Is that fair?

Frankly speaking, we lost a lot of our existing customers. We were disappointing a lot of our existing customers. And so what's great is to see the reactivation of our customer base, which is really -- we see that through our conversion, and that is happening globally. And we are starting to attract new customers, particularly in the Americas and in EMEA with the local customer. I would say that the most challenging part of our business has been in terms of tourists globally.

Our next question comes from Luca Solca from Bernstein.

A question about marketing spend. You said that you're getting very good signals from conversion and sell-through when it comes to the fall/winter collection. Maybe this is a bit simplistic. Isn't that an indication that consumers are getting into the stores and finding a lot better products than they thought? And could this potentially further enhanced if you were spending more on communication going forward? But I understand that instead, you're planning to spend less in proportion to what you did in the first half. Maybe I misunderstood. I just wonder whether you would embrace this logic and what you think that the data means in terms of conversion and sell-through improving? The second question relates to the Chinese. There's a lot of contrasting communications about this consumer nationality. I wonder if you can help us make any sense of what is going on? And if you could draw any distinctions when you look at the Chinese nationals? Are there any differences in trends within China and outside of China? Or are there any differences in trends when you look at different consumer cohorts or in different regions within China that would help us understand what is potentially to be expected from this nationality going forward? And last but not least, given the very important ForEx gyrations we've seen in recent months and especially with the very significant depreciation in the dollar, I wonder if there's anything new to anticipate and to say about what the ForEx impact could be on Burberry going forward?

Luca, it's Josh. I'll take the marketing spend and the Chinese customer, and then I'll hand over to Kate for the ForEx. So you're absolutely right. So everything you say about what's happening in terms of customers coming into our stores worldwide and finding products that is more aligned with what they expect or surprised and delighted to see from Burberry is driving the conversion. And so we're really pleased with the sell-through improvement and the response that we're seeing to the marketing campaigns. And for the time being, we're targeting high single-digit spend in marketing to continue for the rest of the year. But we also want to keep flexibility to test and learn and to reinvest as the year goes on. And we're really looking at that. And it's early days in the turnaround. And so we're learning where we should pulse and lean in further. And of course, for Burberry is always weighted toward the second half. And having seen the offer for festive, the offer for Lunar New Year, those are areas where we want to have sufficient marketing firepower to invite a broader audience in to see the evolution of the product. In terms of the Chinese customer, the cluster was largely in line with the region at this time. What we're basically seeing is that the Chinese customers are shopping more at home. And we're really seeing the decline in Chinese tourism in other regions around China, so particularly in Japan. And within China, we're seeing the same range of customer archetypes. In the quarter, we were really interested to see the growth of Gen Z and younger customers. And now some of that may be because we were really flexing the marketing messages around more youthful expressions of the brand with high summer and with the festival. As you know very well, Qixi is coming up in a few weeks. And so we also have a specific Valentine's Day capsule that is targeted toward younger Chinese consumers. But it's also -- within China, too, we have the same hierarchy of customer archetypes. And some of the more investment dressing customers who are coming in for beautiful cashmere coats and for items like that tend to shop a little bit later in the year. And so we're looking forward to flexing some of the marketing around the more wardrobing and more cashmere and more luxe items as we head into -- as we head out of Chinese Valentine's Day and into the fall and winter seasons. There, we're anticipating to also get some customers a little bit more mature and higher spending as we go into those periods.

Okay. And then on the FX, compared to where we were at the end of FY '25, as you know, the pound has strengthened [ against all ] major currencies, except, of course, the euro. So that's hence the new guidance today. So we're guiding to GBP 85 million impact on revenue, GBP 15 million on profit, and that compares with GBP 55 million revenue and GBP 10 million profit back in May. That was struck -- actually, our latest guidance was struck on the 27th of June. So actually, things have reversed a little since then. But as a guide, as we've said to you before, broadly, 5% move in GDP is about a GBP 30 million impact on profit. So I think we'll to continue to update you. But I think the guidance today is fair as we sit.

Our next question comes from Charles Scotti from Kepler Cheuvreux.

I have 3. Could you please comment on the comparable store sales growth in the primary DTC channel, i.e., excluding outlets? I'm just wondering if like during previous quarters, the resiliency has been partly explained by markdowns in outlets. My second question, you commented on the good performance of Outerwear and Scarves. What about Accessories and more specifically Handbags as the price realignment driven a renewed traction with customers in this category? And the last question is regarding your beauty license. There are some speculation that Coty might divest some of its licenses with Burberry explicitly mentioned in the press articles. Would you have any say in the choice of a potential acquirer for your beauty license? And I'm just curious to hear about how your contract with Coty is structured in the event of a license transfer?

Charles. So perhaps I'll kick off, and then I know Josh will chip in as well. So I mean, I think, as you know, we don't typically break out performance between channels. But our focus is obviously driving productivity, profitability across all our stores. So we're very focused on the full price business whilst also optimizing our outlet channels. And I think we've got the opportunity actually for higher AURs there. We've talked about the opportunity for margin this year. And that really is about we've got to bring inventory levels down, shallower discounting, optimizing both full price and outlet channels. I didn't quite catch. It was a bit difficult to hear, but I think that was the nature of your first question. On the third one, I mean, look, we've got a great relationship with Coty. We're a key partner for them. And as I say, typically speculate on various rumors there. But from our perspective, they're a good partner and will remain so. And I think the other question was on...

I think it was on the Accessory business, if I'm not mistaken. Is that correct?

Yes, exactly and especially Handbags, yes.

Yes. So when we met a few months ago, we talked about the rebalancing of the Accessory business and in terms of aligning the pricing with our category authority in a good-better-best spectrum. And we talked about the success of our B Clip bag, which at the time had largely sold out. And now I'm pleased that the reorders are starting to come in on that bag and that those are working well. In addition, since that time, we've launched a couple of other important new lines, including the Cotswolds and the Highlands, all of which cater to different customer archetypes and are priced within a good-better-best range. And we're pleased with those launches. We've specifically brought our inventories down significantly in this category to do a reset and the reset is going well. A pleasant surprise in the quarter has been the acceleration of our Shoe category, where we're really just getting started to rebuild that business. But some of the early best sellers there have been the Burberry Wellies that you see in the festival collection and more to come on that front.

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

Thank you. Well, thank you all. We appreciate you joining the call today, and Josh and I will look forward to updating you at our interim results in November.

This now concludes today's conference call. Thank you all for attending. You may now disconnect your lines.