Burberry Aktie

good morning, everyone, and welcome to our preliminary results for the 2026 financial year. I'm Josh Schulman, Chief Executive Officer of Burberry. And with me is Kate Ferry, our Chief Financial Officer.

One year ago today, we were in an early phase of our Burberry Forward transformation, deeply focused on stabilizing the business. Today, I am pleased to report on our progress.

This past year, has marked a meaningful inflection for Burberry. I am very proud of what our team has accomplished this year. We have returned to positive comparable sales with sequential momentum throughout the year and particular strength in Greater China and the Americas, both of which delivered double-digit comp growth in Q4.

We have reignited brand momentum with improved cultural relevance, attracting a new generation of Gen Z customers to the brand.

We have asserted our authority in outerwear and scarves, as reflected in the outperformance of these categories throughout the year. And as the year progressed, we saw that momentum extend into other categories.

And finally, we have improved the quality of our sales. delivering a significant increase in gross margin as well as operating profit while strengthening our balance sheet with a reduction in leverage.

My conviction that our Burberry Forward strategy is the right path to brand relevance and value creation is stronger than ever.

I will now turn it over to Kate to take you through our financial results, and then I will update you on our strategy. Over to you, Kate.

Thank you, Josh, and good morning, everyone. I'm really pleased to see the progress we've made with Burberry Forward reflected in our financial performance, particularly in a year where we've navigated macroeconomic uncertainty.

Let me start by highlighting 4 key points from the announcement this morning. Firstly, as Josh articulated, we've returned to comparable sales growth this year, which built sequentially through the year, culminating in plus 5% in Q4.

I'd call out particularly strong growth in Greater China, our largest region and also in the Americas, both up 10% in Q4.

Secondly, the quality of the sales growth, combined with our decisive actions to reset inventory has allowed us to achieve a substantial improvement in gross margin up 530 basis points at constant exchange rates to 67.9%.

Thirdly, adjusted operating profit has improved significantly to GBP 160 million and we're on track to deliver GBP 100 million of annualized savings by FY '27 with GBP 80 million already delivered in FY '26.

We've made these necessary savings thoughtfully ensuring that we continue to invest for growth, including an increase in marketing spend during the year.

And finally, our free cash flow has significantly improved resulting in a stronger balance sheet with reduced leverage. Our net debt to adjusted EBITDA is now 1.6x compared to 2.3x this time last year.

I'll now take you through a more detailed review of performance, starting with revenue by channel, and I'll refer to changes at constant exchange rates.

Comparable retail sales growth was 2% with a 1% reduction in space, resulting in total retail revenue growth of 1% in the year.

Wholesale revenue was down 4% in the year. However, we saw growth of 3% in the second half. And this second half improvement is an encouraging indication of our key wholesale partners confidence in our strategy.

Licensing declined by 9%, in line with our expectations due to the destocking of old fragrance lines in H1 and the longer lead times for our licensees to reflect the Burberry Forward strategy in their offer. As a result, total revenue for the year was stable at constant exchange rates and declined 2% on a reported basis.

Turning now to regional performance. Greater China accelerated to plus 10% in Q4, driven by local spend. Growth was 4% in the full year, with momentum building through the quarters.

EMEA was flat in the year. In Q4, the region declined 2%, reflecting continued weaker tourism.

The Middle East is a relatively small part of our business, 2% of global retail sales. Excluding the Middle East, EMEA's Q4 comp would have been minus 1%.

The Americas continue to see strong performance with the greatest sequential improvement in Q4, up 10% from plus 2% in Q3, supported by local spend.

Asia Pacific grew 3% in Q4. South Korea performance remained strong, up 13%, in line with Q3, supported by both local and tourist spend, particularly from Chinese visitors. Japan declined 6% in Q4, impacted by the continued reduction of inbound tourists. The APAC region delivered growth of 4% in the second half offsetting declines in the first half with 2% growth in the full year.

Across all regions, we're encouraged by strong conversion in our stores, which is allowing us to offset some of the industry-wide challenges with traffic.

Moving on to the income statement and staying with changes at constant exchange rates. As noted earlier, gross margin was 67.9%, up 530 basis points compared to last year. This material improvement is mainly due to decisive one-off actions in the prior year to reset inventory and we also benefited from a higher quality of sales with more product selling at full price resulting in lower levels of markdown.

Moving down the P&L. Adjusted operating profit was GBP 160 million, a significant improvement from the GBP 26 million reported last year.

Adjusted operating profit margin expanded to 6.6%.

Adjusting items related to the previously mentioned cost savings plan were GBP 45 million and we expect around GBP 5 million of one-off costs in FY '27, bringing the total to around GBP 50 million.

The net finance charge was GBP 66 million, broadly stable compared to the prior year.

And finally, adjusted EPS was 15.2p, a significant improvement from last year.

Free cash flow was GBP 141 million in the year, improving from GBP 65 million last year. Cash generated from operating activities increased by GBP 56 million to GBP 582 million due primarily to the increase in adjusted operating profit.

Working capital saw an inflow of GBP 41 million, driven primarily by an increase in payables and lower inventory levels.

Capital expenditure for the period was GBP 113 million. We continue to be disciplined, focusing on strategic investments with the highest return, such as the rollout of the scarf bars.

Borrowings were GBP 511 million, a significant reduction from the GBP 738 million last year following the September repayment of our maturing GBP 300 million sustainability bond.

At the end of the period, net debt to adjusted EBITDA was 1.6x.

Now moving on to the outlook. In FY '27, we expect to make further progress on our financial ambitions, including delivering revenue growth and margin expansion. We are, however, mindful of the uncertain geopolitical and macroeconomic environment and its potential impact on consumer confidence.

To help you with modeling in FY '27, we expect retail space to be broadly stable. Wholesale revenue to grow by mid-single-digit percentage in the first half of the year, reflecting continued confidence in our new direction from our key wholesale partners.

As mentioned, annualized cost savings will be around GBP 100 million with adjusting items of around GBP 5 million in relation to the restructuring charge.

Capital expenditure is expected to be approximately GBP 120 million.

Currency is expected to be a GBP 10 million headwind on both revenue and adjusted operating profit.

And finally, the effective tax rate is expected to be between 27% and 30%.

As we look ahead, we're encouraged by our performance, which sets us up for the year to come. And I'll now hand over to Josh to share an update on our strategic progress and future opportunities.

Thank you, Kate. When we set out Burberry Forward, we defined a clear framework to build brand relevance and value creation. Our performance this past year reflects disciplined, consistent execution of our strategy across all 4 pillars with the customer at the center. I am pleased to say our strategy is working, and there are opportunities for further growth.

Starting with our brand. Our strategy is to consistently communicate timeless British luxury through immersive storytelling, juxtaposing heritage and innovation. Our tentpole campaigns anchor our calendar alongside a continuous drumbeat of seasonal and product stories.

This year is Burberry's 170th anniversary. To kick off our year-long celebration, we launched portraits of an icon honoring the iconic Burberry trench, bringing together 23 global stars from the worlds of film, music, sport and fashion, ranging from Kate Moss, Teyana Taylor, Jonathan Bailey, Bright, Kendall Jenner, Jack Draper and Wu Lei, the campaign appeals to a diverse audience. They appeared in a series of bold portraits and short films, showing how the iconic Burberry heritage trench coat not only protects the wearer from the elements, but is also a vessel to express one's personal style. The content drove strong relevance and high engagement scores powered by social first storytelling. Launching in March, the campaign drove a triple-digit increase in earned engagement versus last year and strong double-digit increases in both earned media value and press coverage.

We amplified the campaign online and in-stores with striking window displays and pop-ups in key locations, creating energy and visibility around our most iconic product.

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More recently, we kicked off our high summer campaign, led by British actor, Simone Ashley and Tom Blythe as they capture life at the Lido. It's a clear expression of how our brand codes translate into the warmer months from the iconic Burberry check bikini to our best-selling men's Eddie Polo shirt.

We were also very excited to partner with British swimwear Pioneer, Hunza G, on a new swimwear collaboration. The collaboration brings together their signature Ultra stretch fabric with our Burberry colors in check, combining heritage and size inclusivity. The capsule launched just a few weeks ago, and we're extremely happy with the sell-throughs and our key wholesale accounts have been reaching out for additional stock.

Together, these campaigns underscore Burberry's enduring relevance in all kinds of weather. As summer approaches, we will launch a further campaign, capturing the unique energy and atmosphere of global sporting events with some of the world's most stylish fans.

Throughout the year, we will continue to celebrate Burberry's 170 years of British heritage through culturally relevant partnerships. In March, we launched a collaboration with the Royal Collection Trust. This included rainwear and scarves inspired by Queen Elizabeth, the second iconic wardrobe. We are also building on our partnership with the V&A with a dedicated activation this autumn that charts the evolution of our trench code. I hope to see all of you there as we celebrate the heritage of our most iconic product in September ahead of London Fashion Week.

Throughout the world, we are seeing our Burberry Forward brand strategy, resonate with customers.

I want to specifically share how we're using the power of the brand to drive growth in the world's 2 most important luxury markets, Greater China and the Americas. In both markets, we've harnessed the energy from their respective best of holiday activations as catalysts for broad-based customer engagement and acquisition. We've then followed up with a robust drumbeat of activities tailored to the markets. It's especially important to win in China, our largest market, representing over 30% of our retail sales. We made great progress over the course of the year in Greater China, which led our regions in overall customer acquisition, supported by strong double-digit growth in Gen Z, balancing investment across global campaigns and localized storytelling brings Burberry to life in a culturally relevant way. We launched our Lunar New Year content in December, which created great momentum.

Next up was portraits of the icon featuring a global cast, including prominent Chinese talent. Together, those efforts drove a 10% comp in Q4.

Looking ahead, we are further augmenting our China marketing calendar with a series of Burberry expeditions documentary films produced in partnership with Chinese National Geography, featuring local talent in seasonal outerwear, exploring China's natural landscape and historic sites.

In our second half, we will be bringing a large-scale brand experience to Shanghai as an extraordinary finality to our 170th year celebrations. We look forward to continuing to win in this most important market.

And in the Americas, we are harnessing the power of the brand with a client-centric approach. As you may recall, we had an outsized investment during the festive period, including the one-of-a-kind takeover of the Bloomingdale's flagship facade in New York City.

Building on this momentum, the team embarked on a series of local activations, including an installation by the artist, Serra Morris at the Miami Design District store. Further activations included an immersive winter pop-up at the historic Hotel Jerome in Aspen, bringing our iconic Burberry house codes to luxury customers in the mountains. And of course, we had Portrait of an Icon celebrations in locations across America, including our flagship on Rodeo Drive in Beverly Hills.

The balance between global and local, retail and wholesale as well as the strength of our team's execution on the ground has delivered a significant acceleration over the past 2 quarters and a 10% comp in Q4.

Looking forward, we are going to continue our focus on these 2 must-win markets while applying lessons to the rest of the world.

Moving to product. Our pinnacle moment is the fashion show. And for Winter 26, Daniel captured the energy of London after dark in a spectacular venue outside the iconic Tower Bridge, anchored by a range of outerwear, combining elegance and functionality. The collection received a great response from the press and from our retail partners.

In addition to the extraordinary pieces from the runway, some of which you see in the room right now, we are cascading the ideas and branding motives from the show across the broader commercial collection. And actually in the room right now, you see many of our runway styles and items from the commercial collection and see how they seamlessly come together.

The Winter 26 runway is a cohesive expression of timeless British luxury from start to finish. The extraordinary runway items speak to an opinionated fashion client and many of the commercial silhouettes inspired by the show to a broader array of luxury customers. We received very positive feedback from our opinion-leading wholesale partners across America and Europe, delivering the largest wholesale order increases within the Burberry Forward era. What we're announcing is the power of design, product and our marketing teams working together reigniting desire among our luxury customers.

Our hero categories continued to outperform in the year, scarves and outerwear both double -- up double digits in the second half. This year, we introduced new outerwear styles and also strengthen the trans-seasonal appeal of our iconic trench with the reintroduction of a lighter tropical gabardine, perfect for the warmer winter climates, warm -- perfect for warmer climates. Sorry.

To cement our authority, we are amplifying our quilts and down assortment for the upcoming autumn and winter seasons. And we have also reinforced our authority in cashmere and wool scarves and we are now expanding our lightweight silk scarf assortment to build a truly year-round offer. We see a significant runway of growth and opportunity in all of these categories.

Having asserted our authority in scarves and outerwear, we are pleased that this momentum is now extending into other categories. Our total accessory category was positive in the year with leather goods sequentially improving in the second half. We also saw growth from our wardrobing classifications in ready-to-wear, including knitwear, which we will build on in the second half by opening cashmere destinations in stores around the world.

In the first phase of Burberry Forward, our goal has been to align our pricing with our category authority. This year, we will continue to sharpen our price architecture to drive value for money in a luxury context.

In each category, we have a compelling offer at each price tier. So every customer can find the right option.

In trenchcoats, we have a range from our nylon taffeta Kensington trench at just over GBP 1,000 to our leather nubuck Castleford trench at almost GBP 7,000. And in scarves, we start with a skinny silk scarf at GBP 195 and go all the way up to our pinnacle cashmere capes over GBP 2,500.

Our merchants are ensuring that within each category, we have a range of product at good, better, best price points in a luxury context. The items on this page, whether they're in the good or the best category are some of the most important recruitment items in our business.

Our license categories are on longer lead times, and we are excited that in FY '27, we are finally starting to align our licensees with the Burberry Forward brand expression.

In beauty, you can see how we have updated our campaign imagery to feature British music sensation, Olivia Dean, capturing per useful energy in iconic Burberry trench against a recognizable London landscape. And in eyewear, we have moved with a niche -- we have moved from a niche aesthetic without a clear connection to our brand codes to a more recognizable and desirable expression that is consistent with our fashion message.

Across both beauty and eyewear, our latest campaigns now incorporate the same brand codes that you see across our portfolio, and we'll be benefiting from significant incremental marketing investment by our partners.

As we move from defense to offense and as we return to growth, we are evolving our operations to capture increased demand. At the same time, we are going to retain our discipline on inventory.

With deeper customer insights, we are making more focused bets, strengthening our speed to market improving our product availability and supporting our margin expansion. This will be supported by AI-enabled planning and inventory optimization to help drive efficiency and growth.

To underpin this growth, we have commenced a 2-year renovation of our Castleford factory in Yorkshire, the home of the iconic Burberry trench coat. The investment will modernize the site supporting the preservation and development of specialist skills, reaffirming our long-standing commitment to British manufacturing and craftsmanship.

Moving to distribution. Our strategy is about prominence productivity and profitability. This year, we made progress on driving our productivity and profitability in part due to our category destinations. We have rolled out over 200 scarf bars. These have become focal points of our stores, combining category authority with a sense of discovery. Collectively, these are exceeding their plan and driving store productivity.

Our polo calories started to launch in Q4, and we will have around 100 of them by Father's Day in June. These fixtures highlight the breadth of our men's polo offering. The Eddie polo remains a favorite and is now available in 23 colors, just in time for Father's Day.

Looking ahead, we will be launching our first trench destinations this year in an interactive concept that highlights our iconic product and helps the customer discover which style best fits their lifestyle. We will also be opening dedicated shops for cashmere in the second half, bringing together cashmere outerwear, knitwear and accessories in a dedicated environment.

By fiscal year-end, we expect to have nearly 400 category destinations across our store network, reinforcing our authority in our key categories.

We are amplifying clienteling, balancing, magic and logic, creating better connections between our client advisers and our customers.

In the second half of this past year, we piloted clienteling initiatives, including more sophisticated customer segmentation and AI-enabled recommendations to enhance their interactions and improve customer engagement. The pilot already had an impact on our performance in Q4, a positive impact on our performance in Q4, and we're now in the process of rolling out this new clienteling tool.

Looking forward, we're accelerating our investment in personalization with tailored messages and experiences at every touch point.

During the year, we built momentum in our e-commerce business, up in the high teens in Q4. We're seeing growth from an improved site experience, more robust styling and engaging storytelling. There is more we will do with this momentum.

In the year ahead, we are doubling down to accelerate growth. As this channel offers the greatest visibility across our full product range, it is the perfect place for us to showcase our product authority and our value for money in a luxury context, whether it's category destinations for tropical gabardine or for our summer shop, to my left, featuring broad assortments of swimwear, raffia bags and the perfect outfits for the warmer months ahead, we are leaning into the unique power of the digital channel to capture a broader luxury audience.

While wholesale remains a relatively small part of our brand. It is important for driving discovery and an opportunity for us to benchmark ourselves against other brands. As Kate mentioned, we were encouraged by the improvement in our wholesale performance, which is building confidence among our partners.

Our key partners are activating the brand, such as this recent trench activation at Net-A-Porter here in London. And our mobile scarf bars are popping up at luxury department stores and travel retail locations around the world.

At the same time, Instant's enhanced in-store environments across partners, including Saks Global, Bloomingdale's, Nordstrom and Gallery Lafayette are driving stronger sell-throughs. We plan to continue these strong partnerships to attract new customers to our brand.

All of this is underpinned by a high-performing culture. At the heart of our culture, is a creative and commercial alchemy that is powering our profitable growth. We've strengthened our design teams, our merchandising teams, our product development teams and our marketing teams with senior leaders that focus on our customer. You can see the results on our runway, and you can see it in our stores -- in our assortment with a more cohesive and coherent product range.

We continue to uphold our commitments to social and environmental responsibility. This remains an integral part of who we are, and it is important to our colleagues and our customers around the world.

Over the past year, we have made significant progress guided by our Burberry Forward strategy. We are seeing the impact on our business and our financial performance. We have returned to comparable sales growth with improved brand momentum and strong performance in outerwear and scarves, now extending to other categories.

Going forward, we are now focused on delivering sustainable, profitable growth, operating with greater discipline across the organization, driven by a mindset of saving to reinvest and fuel growth.

We're just getting started. My conviction that our strategy is the right path for brand relevance and value creation has only strengthened and I am more confident than ever that this extraordinary 170-year-old brand will continue to thrive as we progress toward our ambition of returning to GBP 3 billion in sales and beyond.

Just before we start Q&A, where Kate and I will take your questions. I want to introduce everyone to Jo Kennedy, who joined us in March and we'll be covering for Lauren Wu Leng's maternity cover for the year, and she is also off to a great start.

Thank you, Josh. Good morning, everyone. We will now take questions from our sell-side analysts in the room today and also those who join us online. If I could ask you to limit yourself to 2 questions so that we have time to get around as many people as possible. And if you wouldn't mind taking a name and firm before we get going.

All right. And I will start with -- can we go with Carol, please and then Grace.

Carole Madjo from Barclays. Two questions, please. The first one, can you maybe share some color on the key retail KPIs around Q4 traffic conversion volume and how we should think about those KPIs evolving in the year to come?

And the second question is around China. So here, strong performance that we saw in the fourth quarter. I feel like maybe the brand is quite strong around fall/winter, so scarves.

I'm sorry?

It seems like the brand is very strong around fall/winter with scarves, trench range. So winter were working quite well apparently. But how should we think about the spring/summer collection in China? Do you feel like the brand has the same traction level when it comes to the light wear option, basically?

Yes. Kate, why don't you start with the KPIs and then I can share a little bit about the seasonality and specifically in China.

Great. So yes, when we think about the KPIs or indeed what we call the retail equation that you referred to, look, first of all, traffic, it has been challenging as it has been for the whole sector. But I think what we've been particularly pleased with is conversion. So the -- as per some of the comments that you've just heard from Josh, it's certainly good brand momentum, the products we're resonating. So when people are coming into our stores, they are really enjoying what they see.

In terms of the AUR, for the year, slightly down. I think we've talked about that before, very much in line with the plan because that was all about aligning our pricing with our category authority. But I would say, as we've moved through the year, that is very much stabilized. And I think looking ahead, I don't expect to be a headwind next year. So I think those are the moving parts.

In terms of looking ahead, I think we're starting FY '27 with great momentum. And as per my closing comments a moment ago, we're feeling confident around revenue and margin growth in the year ahead.

And then -- thank you, Kate. and then on China, clearly, we're very pleased with what we're seeing there in terms of our momentum and the way the brand is resonating with a broad luxury audience in China. The customer acquisition we're seeing there this double-digit growth in Gen Z gives us great confidence for the future because we're really bringing in a whole new generation of people to discover and love Burberry. And clearly, our core categories of outerwear and scarves have been pivotal in that for the past 2 years, the Burberry scarf has been a social media sensation in China and has really driven a new generation of young customers. That was really amplified by our significantly increased investment over Lunar New Year, which had a much broader media plan, and we had much more content because we had 4 major Chinese talents headline the Lunar New Year campaign.

In terms of the strength that we have in the winter season and particularly around the gifting season around Christmas in the West and Lunar New Year in the East. One thing I think people don't fully appreciate about Burberry is that we're a year-round business. Actually, 1 of our peaks for rainwear is in the spring. March is an incredibly important month for trench coats and for rainwear. And it's no accident that was strategically timed our Portraits of the Icon trench campaign. And again, distorting investment in that peak time for us turned out to be a very good investment. And to call attention to our core category in the spring.

I was also reflecting earlier today how 1 of my predecessors, Rose Marie Bravo, was particularly genius in many things, but specifically, she was the 1 who was responsible for putting Kate Moss in a Burberry bikini. And I think it was 2001, 2002 timing. And all of a sudden, she had Stella Tennant in a trench coat and Kate Moss in bikini and Burberry was for all kinds of weather.

So while other companies based in outerwear may be more of a winter business, I think as you can see in this room from our summer shop to my left and from our winter runway to my right, you can see that Burberry is really for all kinds of weather.

Grace Smalley from Morgan Stanley. My first question would be on marketing. I think 1 of the concerns we hear from investors is that some of the initial progress you've made on top line has really been driven by an increased marketing spend and whether that's sustainable as you move forward and you want to move towards your margin targets. I guess how do you think about that as a concern? And is it fair to think that outside of marketing, there's also a number of initiatives to drive incremental top line gains going forward, whether it be on product or whether it be on your store initiatives?

And then my second question would just be on the store fleet. You outlined sort of a number of the kind of store productivity initiatives. But now that you're further in the Burberry Forward plan, how are you thinking about the health of the store fleet, the number of stores? I know you have closed some stores this year and also the location of the stores as well.

Okay. So clearly, the marketing has been a signature factor of our turnaround and incredibly important to get a strong message out there that is very consistent. And Jonathan Kiman, who's our Chief Marketing Officer, always reminds me about repetition, repetition, repetition. And because we know that there are many people that we need to get this message out to. So we have been investing a high single-digit percent of sales in marketing, and we will continue to do so. And it's -- having a drumbeat, like I said, a big global efforts and then piercing that drumbeat with localized content and also disruption like the Hunza G capsule. So it's consistency and with a little bit of disruption to make people take another look at Burberry for all kinds of weather.

And so far, that investment is paying off. We're seeing that. When we get the customers to the store, as Kate said, we're having an excellent conversion, which is really driven by the improvements that we've made in product.

So like I said, we're just getting started, and we have a lot of growth levers ahead. Those come from a product first. And of course, our core categories still have room for growth. People said a year ago, "Oh, scarves, that's a mature business for mature customers." We reignited the category, and with the scarf bars that are driving productivity with the amount of attention on that category. And now that's a category that many of our peers want a piece of, but it had been a category that hadn't been such a focus in the past.

Beyond our core, as I mentioned, we're starting to see the momentum extend into other categories. So we've seen growth in the overall accessory categories. And now we're seeing green shoots in leather goods, which is really encouraging. I don't want to say too much about it because I know we've kind of overpromised and under delivered on this in the past. And -- but we're really building. We're really about building sustainable growth across the wardrobing categories across the accessory categories. And we're encouraged by the signs that we have from our customers.

In terms of the store fleet, as we've discussed, we have great locations around the world. And so they're certainly prominent. Where we have room to improve is on the productivity and the profitability. And so every year, we have a closure of some stores and we opened some stores. I think this year was 12. Net 12. So obviously, we are exiting stores, which either are in locations that are no longer appropriate or have profitability challenges. And in some cases, when it's a center location, we just want to exit, we'll exit. But in other cases, we will find a more profitable alternative to showcase the product.

A great example is in Brussels. We had an aging oversized store that was -- had a very long lease. We were very happy to leave our former location. We've opened in a smaller location, a more updated concept. You walk right in, you see a beautiful scarf bar, and it really reflects our latest thinking. And it's doing quite well and will contribute positively.

If we can go to Thomas. And then [indiscernible].

Thomas Chauvet from Citi. Two questions, please. The first 1 on your gross margin, significant expansion to 500 bps to 68% for the year. A lot of that had to do with the prior year pressures and the inventory exit. We know that. How do you see gross margin expansion from here in terms of the pace in the coming years and the drivers, is it all about improving full prices further? Or do you see other levers to return to 70% GM from pricing to perhaps rethinking the product manufacturing, supply chain vendor management? Any 70% cap, by the way, as you or your predecessor Kate used to say in the past?

And secondly, on your capital allocation framework. I think historically, you had an interesting slide to give the priorities. It feels that priorities is organic investment for the year ahead. But can you talk a little bit about other capital allocation priorities between acquisition of suppliers and vertical integration and of course, dividends and share buyback, what do you need to see to reinstate the dividend and to return to the traditional GBP 150 million per annum buyback you used to do?

Thank you. So look, if we start with the gross margin, you're right. We've talked a lot over the last few quarters around expecting quite a significant improvement this year, and that was all down to the decisive action that we took on inventory back in FY '25. So I think we've guided to 300, 350 improvement this year. We have obviously done significantly better than that. And really, that is driven by, as I mentioned, it's really higher sell-throughs, lower markdown. And that really is down to the product that is really resonating with our customers.

So I think we're certainly ahead of where we hoped we'd be at nearly 68%. I think what you should expect from here, we've given this target of over the medium term. Let's not forget, we were only there just a few years ago. So I think it is absolutely achievable. And I would now just assume a kind of gradual improvement back to that 70% really.

And as to whether we can go beyond, I mean, I think we've put out there the GBP 3 billion, 70% high-teens operating margin. We're very focused on getting there. But I think certainly, GBP 3 billion and beyond is what I would say.

I think the second point on your capital allocation, look, we've not moved away from that framework at all. We are really pleased with the free cash flow that we've seen this year. You can see some significant deleverage. But you're right, you said it in your comments, we are -- strategy is working. We've got great momentum. And I think the most important thing in the short term is to have that firepower to really invest in Burberry Forward and to keep driving that momentum.

That said, our intention is absolutely to reinstate the dividend. We know that's important to our shareholders. And we will -- as soon as we're ready, we will message that's clearly a decision for the Board.

And then as to longer-term initiatives, we'll communicate those as and when we're ready. But I think short term, good free cash flow, you'll continue to see that investing in the business and dividend as and when we are ready.

On the gross margin piece, it's really about the quality of sales, even the exit of inventory and then coupled with the lower markdowns, higher full price sell-through speaks to the product acceptance speaks to that this is a better quality business than it was a year ago.

Thank you. Harrison [indiscernible].

Harrison from Berenberg. Two questions, if I may. So firstly, impact of Saks. Can you help me size that either the top line or anything on the sizing of debt. Just had a few questions from investors on that?

And then secondly, on discounting. So you're talking about the quality of full price sell through. Could you discuss it by regions, especially China and the U.S. are these regional bright spots for that?

And then maybe a little bit on outlets like are you going to sustain the exposure at 13% of stores, give or take?

So with Saks, Saks was and remains a very important wholesale partner for us. We've worked with Saks Fifth Avenue and Bergdorf Goodman and Neiman Marcus for many years. We were able to settle that situation with them as a critical vendor, and we have moved forward with them and in fact, are reinforcing our presence in their stores. We have a strong relationship with the whole team there, and they are among the wholesale partners who are very enthusiastic about the next phase of Burberry Forward.

Beyond that, in terms of the full price sell through, clearly, you can see the momentum that we're having in Americas in China. But it was really globally that on a sell-through basis that we had a much better quarter in a much better year this year versus the prior year. There has been a really broad product acceptance on a global basis.

I would also highlight Korea. Well, Korea will never be as big as the Americas or China. We've had 2 consecutive quarters with 13% growth. And what we understand from our team there, that there is a small impact of Chinese tourism, but it is mostly our local customers, and it's mostly that we're taking market share in what is a mature but dynamic market. And so that is very encouraging.

In terms of our outlet business, you are right that our outlet network is about 13% of our store count. Broadly speaking, we are okay with that. I think you'd also notice that the quality of sales is changing in outlet to because we've exited the most difficult merchandise from our full price channel a year ago. So when we are now in our normal cadence, we don't have to discount as much either in the full price channel or in the outlet channel. And so that's positive again and the sign of just a better quality business all around.

Great. Can we go with Chiara please and then Chris.

It's Chiara Battistini from JPMorgan. The first question I had is on OpEx and how to think about spending as we go into fiscal '27. We're coming also towards the end of the cost-saving plan and you've been delivering very well on that. But thinking about the shape of the OpEx and the balance between the savings and investments also to continue to support the brand. I was wondering if you could help us thinking about that bridge?

And then the second question may be shorter term on how the Q2 started calendar Q2, given the overall environment that remains quite volatile and to explore that seem to be remaining under pressure. So any color on current trading would be great.

Chiara, yes, so I mean, you've seen, obviously, this year, we're really pleased that we've delivered our cost savings plan as anticipated. And that's been really helpful because it has enabled us to certainly invest in the consumer-facing areas. As Josh alluded to, we have in terms of actual pounds millions, we have spent more on marketing year-on-year. And of course, as ever, helped us mitigate the usual additional costs such as inflation.

Moving forward, we remain incredibly focused on OpEx. Clearly, we have a high fixed base but where we can, very focused on OpEx. We've got another GBP 20 million of savings to come through. And I think our ambition will be to continue to mitigate inflation where possible and any other one-off costs that may come in and very much protecting that consumer-facing spend. And as Josh talked about, we are committed to the high single-digit percentage spend on marketing.

Look, in terms of current trading, I think I'll probably do my usual can't comment on current trading. But the only thing I would say is we've been really pleased with how Mother's Day has gone in the U.S. Obviously, that's a really important period. And likewise, I would say that Golden Week is also -- we're really pleased with our performance there as well.

Great. And then Chris.

It's Chris Huang from -- Hello. Can you hear me?

Yes.

Yes, perfect. It's Chris Huang from UBS. I will stick to 2 as well. The first one, could you please also just come back to the performance between the outlet and full price channels. You have mentioned improving quality of sales growth, but is it fair to say that maybe for price is growing mid-single digit and outlets, is it in the positive or negative territory? That's my first one.

Secondly, on like-for-like, you did plus 2 in FY '26. Just trying to better understand the drivers behind that. Obviously, you mentioned that AUR was a bit of a headwind in this year. But could you provide some quantitative color on that number in terms of how much volumes were up? How much was price? How much was mix?

Kate, do you want to take the second part? And then I'll to back on that outlook.

Okay. So I mean I think in terms of AUR small down. I think we've talked kind of low single digit. That's for the year. And as per my earlier comments, though, as we move through the year, certainly, it's stabilized, and I wouldn't see that being a headwind. I think we've given kind of good detail regionally in terms of the comp. And within that, I think fair to say that traffic has been reasonably challenging and really no different from what I said before. It's really a conversion that has been a big driver here. So conversion really strong traffic a little bit more challenging and AUR as we move through the year, stabilizing. So as I say, it's back to resonating and it's now about getting more customers into store.

So on outlet and full price, as you know, we don't report separately, and we usually don't give separate color on the 2. But what I will say is that the traffic in the outlet villages, particularly in EMEA has been more challenging. And so I think that is universal between us and our peers.

Great. Do we have anyone else? Piral and then Maria, and I think we will have to close it.

Piral Dadhania from RBC. Can I ask 2 qualitative questions, please? The first 1 is on the customer profile. Joshua, when you took over last year, I think you spent a lot of time thinking about the 5 segments of the customer. Could you -- and I don't think you've mentioned it in your prepared remarks. So could you give us an update on how your progress on recruiting those key customers that you were maybe lacking in the past is going, please?

And then the second question was on ready-to-wear yes. So strong momentum in leather goods in carves and obviously, outerwear. Could you maybe give us an update on how the ready-to-wear business is going and whether that was positive in fiscal '26?

Yes, absolutely. So in terms of the customer segments, the customer -- that customer segmentation continues to be at the heart of the work that Paul Price, our Chief Merchant, is doing with his teams and with our design teams. And that framework has been really a quiet catalyst in helping us in our turnaround. The opinionated customer, we have a handful of them. and they are important to our business. And they are even more inspired by the recent shows that Daniel has done. And so I had the great pleasure of hosting a dinner after our fashion show at the Tower of London. And it was wonderful to see our customers' engagement with the pinnacle of our brand. And those customers are spending more and leaning further in.

Where we were lacking were in some of these other segments. So you have the investor customer who is a more classic customer who likes very fine things and the conservative customer who has a very similar aesthetic but doesn't necessarily spend as much or as frequently. You will see in our stores this autumn/winter, you'll see a much expanded assortment of cashmere that -- and the reason why we're expanding it is because what we had in store this year literally sold out. So a beautiful cashmere knitwear, beautiful cashmere coats, our Kensington trench coat comes in cashmere. And that is priced around GBP 3,200. And that offers great value for money in a luxury context because our competitors are offering cashmere coats, GBP 4,000, GBP 5,000, GBP 6,000, GBP 7,000. And when we sold out on those cash mirror coats fairly early in the season, we started thinking about how can we amplify this category because there are a few players that are very focused on cashmere. But don't necessarily do it with the kind of fun spirit that we have and the Britishness that we have, and they don't necessarily have the same price value quality relationship.

And so that's an area where we actually ran out of product this year. And because we started to see the investor customer come back, we started to see the conservative customer come back, and we didn't have enough inventory to service them. So that's 1 of the reasons why I'm optimistic about next year because I know where we ran out of product this year.

And then if we look at the headiness customer and the aspiring customer. I think what we've been doing with Gen Z is really important there, how we've been bringing a new generation into the fold. And what is so interesting to me is often people think, "Oh, Gen Z, you're going to have to do something very different than your core." And what they are responding to is our core, is that Burberry scarf or the Burberry polo as the most important recruitment items in the business. So heroing them. And I said something -- and I think I've said it at most of our get togethers about how we have the most opportunity where we have the most authenticity. And we're acquiring this younger cohort of customers to a very significant extent in China, but it's happening globally now on the back of our most authentic product. And so that is giving us a great confidence.

In terms of ready-to-wear, again, a great example is knitwear. In your mind -- in my mind, at least, I always kind of think Burberry had an important knitwear presence and because it should. But we never really have capitalized on it. And with our authority in cashmere scarves and soft fabrics and shouldn't we have a powerful presence in knitwear. And so that's how we're thinking about ready-to-wear about like where are the areas where we have authority, where can we complete the look. And I wasn't going to share all of that in terms of what's coming in the next collections, but a lot of that is informed by this first year of Burberry Forward. And I'm really excited about what's coming next.

And then Maria.

Maria Meita from Bernstein. I have few questions. One is sort of a follow-up to the previous one. And regarding new customers. So once these new customers come in to buy the car for the Hunza G swimwear, how do you work with them to sort of retain them and to elevate them? Are these specific actions are working very well or something that you've seen that you'd like to sort of do more of? And are there differences across regions?

And then my second question is regarding evergreen items versus newness.

I'm sorry, I didn't hear the -- we're going what?

Evergreen carryover items versus newness. What is the level now? Are you comfortable with it? Or do you think you're sort of relying a bit too much on the evergreen items and you'd like to bring more newness into the fold?

Okay. So in terms of the customer journey, that is -- it's a great question. We have an incredible team of client advisers. And historically, they have been working in more of an ad hoc basis in terms of their approach to clienteling. But this pilot that we talked about that we launched in Q4 is marrying the magic of our client advisers and the type of people that we hire and their ability to wardrobe their customers and build relationships with their customers. But marrying that magic that they have with logic and technology. And so what we've been able to do is we've been able to go deeper into the client books and have targeted prompts for the client advisers to send out and to do that at scale. And so we're on 1 platform in the West, and we're on WeCom in the East.

And frankly, this was an investment that was planned 2 years ago. And given where we were financially, we deferred that investment, and we started the work this year. But the real tail off is going to come in fiscal '27 as we bring these client journeys to life. And we have different programs depending on where you enter the brand. So the journey for a Gen Z swimwear customer who -- where that's their first purchase is going to be different than the journey for somebody who comes in and buys a cashmere trench on day 1. And it's marrying art and science. And again, this is another reason why I am confident in the year ahead.

In terms of your question about newness and replenishment or carryover we were in a part of the cycle 2 years ago. I joined almost 2 years ago. And we were at the part of the cycle where we had introduced newness that hadn't really resonated, and so we were carrying over a lot of older products. And at this point, we have exited a lot of that older product as we have confidence in the options that are coming through in the newness. So some of the newness of the last 18 months is now being filtered into carryover and replenishment in a usual cadence. And so we're at the place where we have the right balance in our stores. And when you go into the stores, it doesn't look like, oh, that was from a different generation. And I think you're seeing that it looks more cohesive and all with 1 signature, but that is meeting clients' different needs.

Super. Well, thank you, Josh. Thank you, Kate. Thanks for the questions. That concludes our Q&A. I'll hand it back to Josh for closing remarks.

Thank you, everyone, for your questions. It's always good to get together with you at these events. I also want to take the opportunity to also acknowledge our announcement this morning that Gerry Murphy, who is seated a front-end center has decided to retire as Chair from the date of our interim results in November.

During his nearly 9-year tenure, Jerry has made many valuable contributions to Burberry. And specifically, I am appreciative of the important role that he has had in supporting me and our leadership team throughout my time as CEO. We will have plenty of time and occasions to thank Gerry for his contributions in the months ahead.

Also, we announced that Gerry will be succeeded by William Jackson, who will join Burberry as a Non-Executive Director on July 1, 2026. I am very pleased to welcome William to the Board, and I work -- I look forward to working very closely with William as all of us on the leadership team continue to drive Burberry Forward.

Most importantly, I would like to thank all of our colleagues around the world who are responsible for the progress we are making on our strategy. Our strategy is working and it's because of our incredible people around the world.

And finally, I'd like to thank -- take the opportunity to thank our investors, analysts and partners who continue to support us on this journey. Thank you.

Good morning. I'm Kate Ferry, CFO of Burberry. And with me today is Josh Schulman, our CEO; and Lauren Wu Leng, Head of Investor Relations. There are slides to accompany this call on our corporate website, and a transcript will also be available later today.

In terms of running order, I'll go through our performance in the third quarter, and then Josh and I will be happy to take your questions. Since our last update just a couple of months ago, we have continued to see positive signals across the business, which provide further proof points that the Burberry Forward strategy is working. For the third quarter, comparable retail sales grew 3% versus last year, a sequential improvement on Q2.

As planned, we delivered a higher quality of sales across all channels and regions as we return to a shorter, shallower and more discrete markdown period versus last year. We saw continued brand momentum with the outerwear and festive campaigns, and these were further amplified with activations around the world. We delivered a double-digit improvement in Gen Z customer growth in Greater China and Asia Pacific with growth in younger consumers across all regions.

Our hero categories continue to outperform with scarfs and outerwear both up double digits. And this momentum is now extending into handbags and ready-to-wear. We've also seen a significant improvement in sell-through driven by a strong customer response to our spring '26 collection. In stores, we improved retail productivity and continued the rollout of our scarf bars, reaching 190 to date with 200 on track by year-end.

Moving on to the quarter's retail performance on Slide 3. Comparable store sales grew 3% in the quarter. The impact from space was flat, leading to 3% retail sales growth at constant exchange rates. Currency was a 2% headwind in the quarter with retail revenue landing at GBP 665 million, up 1% at reported exchange rates. We saw full price sales accelerate this quarter, offsetting reduced markdown activity as we return to a private sale format in stores and online.

The shorter, shallower and more discrete markdown period resulted in a margin improvement overall as anticipated. All 4 regions delivered flat or positive comparable sales for the second consecutive quarter. Traffic continues to be challenging, but conversion and AUR were up in the quarter, reflecting a strong consumer response to our refreshed ranges.

Asia Pacific led with the greatest sequential improvement, up 5% from flat in Q2, driven by a strong performance in South Korea. South Korea returned to growth at 13%, supported by both local customers and increased tourist spend, particularly from Chinese visitors. Japan grew 2%, in line with Q2, though reduced tourist activity continued to be a headwind.

Greater China grew 6%, improving from 3% in Q2, fueled by local spend. Similar to Q2, Chinese customers outside the region slowed, but local demand offset the decline with the overall cluster turning positive. EMEA was flat year-on-year, continuing to be impacted by reduced tourist activity. The Middle East, while a smaller part of the business, showed notable strength both locally and across the region.

Americas grew 2%, supported by local spend during the festive period and continued growth in new customers. This was slightly below Q2 due to the higher penetration of markdown activity in Q3 last year. We began Q3 with the latest installment of its always Burberry weather postcards from London and followed this with our festive campaign, which drove strong engagement across our channels.

Average Instagram reach was up double digits, complemented by a strong performance across digital and social platforms in China. Branded search, i.e., customers looking for Burberry on Google, was up double digits globally. This year, we're excited to celebrate our 170th anniversary with a series of innovative campaigns and activations, starting with the launch of our Gabardine capsule earlier this month.

In terms of product, our customers are responding to our timeless British luxury expression and synchronicity between our runway looks and commercial core, enabling us to reach a broad luxury audience. Building on our strength in outerwear, our stronger assortment of knitwear, trousers, skirts and dresses has given customers more ways to wear Burberry head to toe, driving momentum in ready-to-wear.

We strengthened our foundation in accessories, sequentially improving quarter-on-quarter led by scarfs and bags. Half of scarf purchases were personalized, highlighting our customers' desire for unique pieces anchored in Burberry's brand codes this festive season. In distribution, we continued our focus on enhancing the in-store experience through richer displays and cross-category merchandising.

We also delivered a series of high-impact festive activations to engage customers globally from the spectacular Bloomingdale's takeover in New York City to an ice skating rink in Beijing and finally, back home in London with a retail pop-up at the iconic Claridges hotel. In addition, our scarf bars continue to outperform and are helping to drive store productivity.

Building on this momentum, we're launching more category destinations in the year ahead, including for trench coats and polo shirts. Turning now to the outlook. As we move into the final quarter of the year, the impact of our initiatives continue to build, giving us increased confidence in the direction of the business. We expect adjusted operating profit to be in line with consensus for full year '26.

We are confident that we can build on the progress we've made in quality of earnings, continuing to improve performance and driving sustainable long-term value. And with that, we will now be happy to take your questions.

[Operator Instructions] Our first question is from Antoine Belge from BNP Paribas.

It's Antoine Belge, BNP Paribas. So 2 questions, if I may. The first one is about the very good performance of Greater China. So could you maybe comment a bit into more detail about the Mainland and the Hong Kong, et cetera? And so what is -- why is it accelerating? Which products are resonating a bit better with that particular customer group?

And my second question is about the retail productivity. I don't know if you could mention figures or at least some flavor around how it's evolving, especially compared to the more recent period.

Perhaps I'll hand over to Josh to chat through some of the products and so on, that we're seeing really resonating in China. I mean I think just on the productivity point, we're not giving any specific targets. But clearly, you can see sales up 3%, flat space, retail productivity is certainly improving, and that really is being driven by all of the initiatives that we highlighted today, whether that's product resonating well, brand.

And obviously, we highlight specifically initiatives like scarf bar and some of the things that you've been seeing happening within the store, but we're not putting a specific number on it. Josh, do you want to tackle the China and...

Sure. So overall, we're very pleased with the Greater China performance, which accelerated in the quarter. And it was really throughout Greater China, but led by the Mainland and the most important flagship cities were really in the lead. So strong growth and exactly where we would want it to be. And it reflects the strong engagement of Gen Z in that market and which is leading us globally. The Gen Z are up double digit.

And it was really led on the retail equation in terms of conversion and AUR. And I can just say having visited the region recently and comparing store after store to my visits last year at the same time, you can just see the difference in the offer, in the physical store anchored by a scarf bar, in the more robust visual merchandising, highlighting a product range that was really designed for broad universal luxury appeal.

So you can see the diversity of customers in the stores attracted to a wider array of products. And so we were selling we were led by outerwear and scarves. But now we're seeing the product momentum extend. And in China, the ready-to-wear category led by knitwear, frankly, anything cashmere that we had in the better and best parts of our pyramid, we're selling.

So cashmere coats, cashmere knitwear with the EKD, the Equestrian Night design logo, all of those were leading and starting to see really positive sell-throughs on our flagship vintage check handbags, which we had a collection that was trimmed in Ruby Red, which really resonated with our Chinese customers.

And so all the work that the team has been doing there in terms of localizing the marketing with more brand ambassadors. This year, we have 4 brand ambassadors versus 1 last year in terms of disruptive activations like taking over the iconic ice skating rink at Wangfujing in Beijing. All of those are really working, frankly, to drive engagement of our Chinese customers.

If I can sneak in just a follow-up. So in China, has there been any store network changes, other openings or closure in the quarter?

Nothing significant, just the normal pace, but nothing significant to announce.

Our next question is from Grace Moley with Morgan Stanley. Sorry, Grace, we can't hear you. If you could just check -- so we're going to just move on to the next question for the time being. Next question is from Thomas Chauvet from Citigroup.

I have 2 questions, please. The first one on Korea, you indicated it was a bright spot. Obviously, it's an important market for you. I think the second largest after China in Asia. What is Burberry specific versus the broader market? And what are the successful actions you've had there even in China that you can incorporate into other Asian markets, which have been a bit softer in the period, whether Japan or Southeast Asia? That's my first question.

And secondly, on wholesale, you've turned your wholesale business in just over 12 months with renewed trust from your key partners and a solid revenue guidance for the second half. Can you update us on 2 regions? One, Europe, is the closure of smaller European accounts largely over? And with regards to the U.S. department stores, any material exposure to the Saks Global situation? And more generally, how do you assess the health of your top 4, 5 U.S. partner at the time. They seem to be increasingly excited to order merchandise from Burberry, but some of them, as we know, are in a relatively fragile financial situation.

Yes. Thomas, I will take both of your questions, which are both really good questions. So starting in Korea, we couldn't be more delighted with the traction there. Korea is an extremely important market for Burberry. We were one of the first to make Korea a real focus for the local customer there. 20 years ago, Korea was thought of as more of a duty-free market. And I think several of my predecessors a long time ago, really focused on that region for the locals. And what we see there today is that the overall market is improving. But based on our brand position in Korea, we are outperforming a stronger market there. And what we hear is that we are among the top players in the market. And we've really worked in enhancing that relationship between our merchants in the center here in London and in our local markets.

And I think the work that's been done in Korea is a great example of that in terms of how to phase their outerwear cycle and to be seasonally appropriate for the different times of year. And so we're really seeing the strength led by outerwear and scarves there. But like other parts in the world -- parts of the world, we're now also seeing that strength extend to other products as well.

Of course, in terms of Korea tourism this quarter, we benefited from double-digit growth, but that was both on the tourist side and on the locals, which are the vast majority of the customers there. You mentioned the other areas in Asia, you'll remember earlier this year, I guess it's last year at this point, we reorganized our Asia regions around a Greater China region and an Asia Pacific region. So now we have a President who sits in Seoul, but she has a team in Seoul, in Tokyo and in Southeast Asia and Oceania.

And so you're seeing a lot of the best practices from Korea starting to be implemented across the region. And it's really a terrific team with a mix of local expertise and central guidance. So we have great people in Singapore and in Japan as well. Moving to your question about wholesale. So I think it's always important that we frame wholesale as a relatively small part of our business. It's about 12% of the business.

And for us, particularly a brand that is in a transformation, I find being present with the top-of-line wholesale partners in the world to be really important because that's a place where customers can discover the brand. And frankly, it's a place where we benchmark ourselves against the competition too. And -- and so obviously, it's a dynamic time in the channel. So Saks Global is a long-term partner of ours.

I'm not going to comment specifically on our exposure as part of their restructuring. But I would say it is early days with the new leadership team, but we are confident -- we're confident in the leadership. We're confident in Geoffroy and his team that they will be able to restore Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman to their rightful place in the luxury landscape.

I would also highlight that Saks Global is a very important customer of ours, but we also have other important customers in the market. And during this quarter, we were really proud to have our takeover of Bloomingdale's 59th Street in New York City with the spectacular activation. I don't know if you made it out to New York to see it, Thomas. But if not, you really missed something because we wrapped the facade in 126,000 twinkling lights in the shape of a Burberry scarf, and we had pop-up shots on nearly every floor in the building, and it was truly spectacular.

And that's the types of activations and the types of reach that you can achieve when you partner with the best wholesale customers in the world. Your last point about Europe, I think that is an ongoing effort, and that's dynamic because the small multi-brands evolve, and we want to be alongside our luxury peers. And if those accounts no longer have the luxury peers, then we tend to exit them.

Our next question is from Chiara Battistini from JPMorgan.

I have a couple of questions, please. The first one on the like-for-like, the 3%, if you could provide us with any color in terms of the split between pricing, volume and possibly also maybe the mix effect from shifting from discount to full price sales?

And the second question, more on the ready-to-wear and on the handbags and accessories in terms of how to think about the evolution of the product assortment from here in terms of newness versus more activation? Any color you can give us on the upcoming initiatives on this category specifically, please?

Chiara, perhaps I'll take the first one on the retail equation, and then I'll hand over to Josh. room-to-wear and bags. So yes, the way to look at the 3% Chiara is that traffic, much as you're hearing from others, is still quite challenging everywhere, but we are really, really encouraged by what we're seeing in terms of conversion. So strong conversion everywhere, customers coming in, certainly liking what they're seeing.

On pricing, so Q3, you're probably not surprised to hear that the AUR was up because, of course, we reverted to the private sale this year versus the very public sale last year. And I think on pricing more broadly, we've talked to you a lot about our pricing strategy with the good, better, best tiering. And I think I would say that we are seeing that our pricing strategy is really, really working.

So we're seeing good traction, both at the top end -- we've talked before as scarfs, for example, as a good category to showcase this where we're doing extremely well in some of these high-end cashmere capes as well as the kind of silk scarfs at the lower end. Likewise, in outerwear, obviously, heritage is a core category. But within that, for example, the Kensington coat and cashmere selling really well. So I think we're very pleased with how pricing is playing out. Josh, do you want to take on?

On the product piece. Yes, I think you actually touched on it somewhat in your answer. As we look at the quarter, the products are really having a broad universal appeal. And we are very pleased with the traction that we're starting to get beyond the core outerwear and scarf categories. So in handbags, for instance, we have the good, better, best strategy, and we were really seeing traction at all levels.

So we talked last time about the introduction of the Horseshoe bag, which is an opening price bag. Also, we've had our core vintage check line, which up until this season, it had been a long time since we had provided newness there. And we did the core shapes with a Ruby trim and introduced a few new small shapes. -- and that had a very strong response globally. And then in the best category, our [indiscernible] bags, our beautiful suede or leather cotswolds totes with the iconic hardware, those have also been resonating with customers.

Kate touched on our traction in cashmere Kensington trench coats. And now we're seeing that cashmere authority that we have in trench coats and scarves also translate into knitwear. -- which was a big part of our campaign. You saw in the Night -- before festive campaign, you saw many people of different generations and different walks of life wearing a cashmere Burberry sweater with bold branding of the Equestrian night design and the Burberry wordmark, and that was the best seller across regions.

Our next question is from Carole Madjo from Barclays.

Just a quick question from me, please. Can you share any color on the exit rate and on current trading? Are you seeing the sort of Q4 being broadly in line with Q3 or anything to call out here?

Carole, I think that we don't typically comment on how we've traded month by month in the quarter, but I think fair to say we were really pleased with how we ended the quarter. And again, look, on Q4, we've been really pleased with Q3. I think the shape of Q4, as you know, is going to be very different because, of course, Lunar New Year is a couple of weeks later than it was this time last year.

So I'm not going to comment on current trading. But kind of even if I could, it really is too soon to make a call on it. But as I say, we're really pleased with how Q3 played out. And I think we've got a fantastic Lunar New Year capsule. We've got some really good campaigns around it as well. And yes, we look forward to updating you in May.

Our next question is from Grace Smalley with Morgan Stanley.

Sorry, I was disconnected. I'll just give it to one question as I know we're coming up on time. I just wanted to ask a follow-up on China, please. Thank you for the color earlier in the call. Based on what you said, it sounds like as if you attribute the improvement both within Greater China, but also the Chinese consumer cluster largely to your company-specific initiatives. Is that fair?

Or what are you also seeing from the Chinese consumer more broadly in terms of macro and market stabilization? And anything you can share in terms of how different price points are doing within China and whether the aspirational consumer or there's any trading down from higher price points to more aspirational price points?

Grace, I mean I think just to clarify on the cluster because I know people are always interested in that. I mean, we did actually -- the cluster did turn positive. You'll probably remember it was flat last quarter. The Chinese cluster turned positive. So we are seeing sequential improvement quarter-on-quarter there. You'd expect it was slightly behind the region because, of course, you are seeing this slowdown in outbound tourist spend. But as we said before, we're really encouraged by local spend there. In terms of versus the competition?

I think traffic remains challenging, but our conversion was really spectacular in China. And I think that speaks to the -- in China and more broadly, conversion was strong. And I think that speaks to the product offer and that the customers are finding more about more of what they love about Burberry in the stores, and it is easier for our client advisers to fully wardrobe their customers.

And our next question is from Piral Dadhania from RBC.

So I just have one. I guess as we approach the end of the autumn/winter season, this is the first in which you guys have had full control over the way in which you've operated as well as the product range. Could you perhaps, Joshua give us some insights into the learnings that you've had? I think you touched on certain product categories like cashmere working better than perhaps you were expecting.

How are you planning and setting the business up for autumn/winter '26? And are you planning to be more aggressive in terms of the open to buy and the purchase order commitments as you gain confidence in the strategy delivering to plan?

That is a terrific question. because you rightly noted that this was the first festive season that was fully impacted by the Burberry Forward strategy. Last year, we were pulling together the campaign with a product mix that hadn't necessarily been conceived with the Burberry Forward strategy.

So the biggest learning is that the strategy is working, that timeless British luxury is the right brand expression, that aligning our pricing authority -- aligning our pricing to category authority is working for us, that we have broad universal appeal and need to have good, better, best in each of our categories and that we also need to lean into our strengths of leading with outerwear and using scarves as a differentiator, but then fully wardrobing the customer.

So as a merchant, we're always looking at what we can do better and what we didn't get right. And so one of my favorite meetings of the year is always our fest of hindsight. And we try to do that as quickly as possible after the first of the year to get together, well, it's all fresh in our minds. And one of the reflections is we were low on stock in some key classifications. So Kate mentioned Kensington cashmere trenches. -- hard to find in our stores today because we did not anticipate the demand.

And so generally, you want to keep stock in those in January and February, and we're very broken in sizes. A category like knitwear, it's not something we're famous for. We heroed it in our campaigns, but we haven't invested in the cashmere knitwear in the way that we might have knowing how successful it would be. And of course, now having this year under our belt, you never want to always look backward, you always want to look forward about what they're going to be wearing next year.

We talk about our triangle of design, merchandising and product development. And they're hard at work now taking these learnings and incorporating them into our plans. And our merchant teams have been traveling around the world, and our design team is upstairs working on the fashion show. So lots of work here and lots of learnings to build on the momentum from this quarter.

Our next question is from Zuzanna Pusz from UBS.

I just had one. Sorry, maybe it's a little tricky one because I know it's a revenue call. But I mean, hearing everything and you clearly seem to be enjoying a very strong momentum, especially on the full price front. I'm just wondering because your gross margin outlook for the year seems very conservative. It implies that basically the H2 gross margin would be much lower than H1.

So I'm just -- I guess my question is, has the -- is there anything that has changed in the business structurally because if I look back, let's say, pre-COVID when life was a little bit more normal, I believe that your H2 gross margin was usually actually a little bit higher than H1 or at least at par with H1. So yes, I guess, especially having such a strong Q3 early in the pocket, I'm just wondering if you could tell us what exactly is behind your thinking on being so conservative on the gross margin for H2?

Yes. Zuzanna, I'll take that one. I mean I think looking across the piece and what I take from today, as we've said, clearly, really pleased with our revenue performance. On the margin, it is definitely playing out as good as we could have hoped. So certainly, we've talked a lot about margin improvement. We really are seeing that coming through as planned.

You're absolutely right that in the past, yes, typically, H2 would have been higher than H1. I'm sure in time, we will return to that more normalized phasing. But as I talked about a lot back in November, the shape this year is still going to be a lower margin in the second half, albeit it will be -- you're going to see this significant improvement year-on-year, and we're feeling increasingly confident that we will deliver the margin uplift, at least as good as guided for the full year.

So I think, look, wrapping all that up into our outlook, as I say, pleased with the top line margin improvement coming through as planned. We are, however, given the momentum that we're seeing in the business, we're investing more year-on-year. And you've seen that in our marketing campaigns and therefore, reiterating consensus today. But what I would say and just to reiterate some of Josh's comments, all the signals are certainly looking very positive for our longer-term success.

But sorry, just to clarify, but what exactly? Is it tariffs? Or what is it exactly that sort of is impacting H2 gross margin so much?

Well, you remember, we had -- H1 was more around the kind of unwind of -- we did some significant provisioning in the first half in the prior year. And then, of course, this time last year, I mean we're absolutely comping against that quarter where we were exiting really problematic stock -- so we had the kind of one-off very public markdown, which we're not repeating again.

This year, we have reverted to a much more normalized sale period, private sales shorter, shallower, more discrete, and therefore, you are going to see that coming through in the margin. So very simply, it's exactly the same as what we took you through back in November.

So this now concludes our Q&A session for today. I will hand back over to Kate Ferry for any closing remarks.

Thank you. Well, we'd like to thank you all for joining us this morning, and we look forward to updating you again in May on our progress.

Good morning. We actually have some seats here in the front row. This is like the first day at school. No one wants to be -- it's not like a fashion show because at the fashion show, they really want to be seated in the front row. It's all about your seat.

In any case, good morning, and welcome to our interim results and our update on the Burberry Forward strategy. I'm Josh Schulman, CEO of Burberry. And with me is Kate Ferry, our Chief Financial Officer. One year into Burberry Forward, my belief in this extraordinary British luxury house is stronger than ever. Since we met last November, we have moved from stabilizing the business to returning to growth. I am encouraged by the signals I'm seeing throughout the business, which provide initial proof points that our Burberry Forward strategy is working.

With our timeless British luxury brand expression and an improved product offer, our brand has become more desirable. We're attracting new customers to the brand while welcoming back existing customers, resulting in sequential improvement in customer growth. And these customers are responding strongly to our autumn and winter collections with a significant increase in sell-through rate compared to last year. We're accelerating our momentum in our iconic categories, outerwear and scarves, and now this growth is extending into additional categories.

In Q2, we returned our retail business to comp sales growth for the first time in 2 years. And now our most important wholesale partners are seeing the momentum as well. We recently completed our Summer 2026 wholesale market, and the reaction has been very positive with a significant increase in orders from key opinion leading partners in the U.S. and Europe, an incredible vote of confidence in our product and Burberry's relevance.

While I am pleased with what we've achieved in our first year of Burberry Forward, these are just the first steps to reigniting desire. There is a lot more to do, and I am looking forward to building on these foundations in the year ahead.

I will now turn it over to Kate to take you through our first half financial results, and I will then update you on our strategy, our progress and our priorities as we look to year 2 of Burberry Forward.

Thank you, Josh, and good morning, everyone. For the first half, comparable retail sales were flat with sequential improvement between quarters. In the second quarter, we delivered growth of 2%, our first positive comp growth in 2 years. Total revenue was GBP 1.03 billion in the first half with adjusted operating profit of GBP 19 million. Free cash outflow was GBP 50 million, an improvement from this time last year and in line with our expectations for the half.

When we launched Burberry Forward a year ago, we talked about actions to drive sustainable performance. We've returned to adjusted operating profit in the first half. Our gross margin is recovering, up 410 basis points at constant exchange rates versus last year to 67.9%, driven mainly by a healthier inventory position. We continue to bring scarcity back to our inventory model. We have tightly managed buys throughout the half with net inventory down 24% versus last year. Following the expanded restructuring program announced in May, we're on track to deliver GBP 80 million annualized savings by the end of the year. And finally, we continue to invest our capital where we know we can get the highest returns with continued focus on cash generation.

I'll now take you through a more detailed review of performance, starting with revenue by channel. I'll refer to changes at constant exchange rates. Retail revenue declined by 1% during the half. Space reduced by 1%, while comparable retail sales remained flat year-on-year. Wholesale revenue decreased by 11%, slightly better than our guidance of a mid-teens decline, reflecting phasing and some uplift in in-season orders from our key strategic partners following improved sellout of Autumn '25.

Licensing revenue was down 8% versus last year with ongoing strength in our Fragrance and Beauty businesses, including the Goddess and Her franchises, offset by the planned destocking of older fragrance lines. As a result, total revenue for the first half declined 3% at constant exchange rates or 5% on a reported basis.

Turning now to regional performance. Comparable retail store sales were flat or positive in all 4 regions in the second quarter. Traffic at our stores remained challenging throughout the first half of the year, but we're pleased with the improvement in conversion we've seen. Greater China led with the strongest improvement as compared with Q1 with 3% comparable retail sales growth in the second quarter. This was supported by a strong Chinese Valentine's Day.

Globally, the Chinese customer group slightly lagged the regional performance with growth in locals offsetting the decline in outbound tourist flows. Asia Pacific also improved to flat in the second quarter with the first half down 2%. Japan returned to growth in the second quarter, up 2%, offsetting decline in South Korea. Americas saw 3% growth in the second quarter and the first half. The region is continuing to benefit from new customers, offsetting lower tourist spend in the United States during the summer months. EMEA remained in line with the first quarter despite reduced tourism activity, growing 1% in Q2 and the half, supported by growth in local and returning customers.

Moving on to the income statement and staying with changes at constant exchange rates. Gross margin was 67.9%, a 410 basis point improvement year-on-year. I'll give more detail on this in just a moment. Adjusted operating expenses were down 5% year-on-year at constant exchange rates following the delivery of our expanded cost savings program as well as nonrecurring store impairment headwinds in the prior year. We remain on track with our cost program, expecting to deliver GBP 80 million in annualized savings by the end of the year.

As mentioned the last time we spoke, we're investing behind our journey to reignite desire, restore growth and continue on our path of sustainable value creation. We've prioritized investment in the first half using some of these savings to invest in consumer-facing areas such as marketing. This year, we continue to invest a high single-digit percentage of sales in our brand with a focus on maximizing our return on investment. We delivered an adjusted operating profit of GBP 19 million with an operating margin of 1.9%.

Adjusting items amounted to GBP 37 million. This primarily related to restructuring costs resulting from the transformation program announced in May. The business has demonstrated resilience during this period, allowing us to progress swiftly through the program over the summer. Our full year guidance remains unchanged with restructuring costs expected to be around GBP 50 million. As a result, we've reported an operating loss of GBP 18 million for the first half. The net finance charge was GBP 30 million, of which GBP 23 million was interest charge on lease liabilities and GBP 7 million was other financing interest.

Gross margin benefited mainly from the non-repeat of inventory actions taken last year. As a reminder, these inventory actions were a combination of provisioning and discounting. This year, we have significantly less inventory, down 24% at the end of the first half. We're also seeing the benefits of our transformation program in gross margin. We experienced a free cash outflow of GBP 50 million in the first half, an improvement versus this time last year. Working capital was GBP 43 million outflow given the seasonal inventory buildup ahead of the festive period, albeit still reflecting tighter inventory management than this time last year.

Capital expenditure for the period was GBP 38 million, with investment targeted to those projects with the highest return on investment. In our retail network, we're focused on amplifying our most iconic categories. We've launched over 100 scarf bars to date and are on track to deliver 200 by the end of the year. We also opened a new showroom at our headquarters here in London, which is already driving cost efficiencies and enabling closer collaboration across our global retail teams.

Borrowings reduced by GBP 221 million following the repayment of our September 2020 bond, and we closed the period with net debt of GBP 93 million or GBP 1.1 billion, including lease liabilities. At the end of the period, net debt to adjusted EBITDA was 2.2x. We remain comfortable with our liquidity and headroom and are focused on continuing to reduce our leverage through the actions we are taking to rebuild profitability.

Turning now to the outlook for full year '26. While we remain in the early stages of our turnaround, we're encouraged by the progress made so far and expect to see the impact of our initiatives build into the second half and beyond. The macroeconomic environment remains uncertain, but our focus this year is to build on the momentum in reigniting brand desire as a key requisite to growing the top line. We will deliver continued margin improvement with a focus on simplification, productivity and cash flow.

To help you with modeling, in full year '26, we expect no changes to our guidance of retail space remaining broadly flat and annualized savings of around GBP 80 million alongside a GBP 50 million restructuring charge. Within wholesale, we expect a mid-single-digit percentage revenue decline for the full year, slightly ahead of our original expectations and returning to growth in the second half. This reflects our key wholesale partners' confidence in our new direction. We expect capital expenditure of around GBP 120 million, slightly lower than initial guidance as we've been very intentional in our investment approach, focusing on the highest return on investment projects during this year of transformation.

And finally, we expect currency to be a headwind of around GBP 50 million on revenue and around GBP 5 million on operating profit, all based on the 24th of October spot rates. Further detail can be found in the appendix of this morning's statement.

As we move into our second full year of Burberry Forward, we are confident that we can build on the progress we've made in quality of earnings, continuing to improve performance and driving sustainable long-term value.

I will now hand back to Josh.

Thank you, Kate. As we move into the second year of Burberry Forward, we are increasingly confident that we're on the right path to build brand relevance and value creation. If the strategy for the next year of Burberry Forward looks very similar to what we presented last year, this is intentional because we are now focused on accelerating and delivering on our 4 pillars with consistency, placing the summer -- I'm sorry, placing the customer at the center of everything we do, we will continue to anchor Burberry Forward in timeless British luxury as we enhance our product, marketing and customer experience to engage a broad luxury audience. This will be underpinned by an organization that is fit for purpose and executing at pace.

Starting with our brand. Our traffic and sales inflected in August as we launched our Chinese Valentine's Day campaign, followed by the Back to the city campaign focused on a more polished expression of city dressing against a backdrop of iconic London landmarks appealing to our investor customer. Next, the elegance of our Winter Runway campaign set in a quintessentially English country house attracted our opinionated customer, while the winter wardrobing campaign showcased looks that could be worn every day, appealing to all of our customer archetypes. Collectively, these campaigns have driven an improvement in brand engagement in September.

In addition to these fashion campaigns, we have continued our institutional outerwear campaigns with the latest installment of its always Burberry weather Postcards from London, which launched in October across all of our channels.

[Presentation]

Looking forward, we will continue to fully embed our timeless British luxury brand expression across all touch points, creating universally recognizable stories and imagery balancing town and country. And our marketing initiatives will celebrate our customers' cultural occasions around the world with a dose of British warmth and wit. We are looking forward to celebrating our 170th anniversary next year with a series of campaigns and activations to celebrate our iconic trench. This will include disruptive amplifications across product and marketing initiatives to drive broad global appeal.

Even global icons are leaning into our most beloved Burberry codes and showing that when we have -- where we have the most opportunity, where we have the most authenticity. When influential personalities of the world come to Burberry, they are selecting to wear our most beloved brand codes. From Olivia Dean wearing a modern interpretation of our iconic check to Tommy Paul and Jack Draper dressed in our ready-to-wear and Dua Lippo wearing a full check dress, it's clear that Burberry continues to resonate in popular culture.

Just last week, we launched our festive campaign, bringing a warm and joyous rendition of the British holidays to our customers around the world. Amid the charm and commotion of party preparations, Jennifer Saunders is joined by an all-star cast, including Naomi Campbell, Rosie Huntington Whiteley and Song Hun Min, who each share beautiful Burberry gifts with their friends and family.

[Presentation]

We are so excited about the early reaction to Twas the Night Before, our festive campaign. And we look forward to bringing other extraordinary experiences, including at Clariges, where Daniel is designing a special tree decorated with Burberry textiles alongside a pop-up shop featuring iconic Burberry gifts.

Building on our momentum in China, we are looking forward to celebrating Lunar New Year, the year of the horse. We will be increasing our investment in product and marketing with a more complete product capsule and an immersive campaign, including 4 well-known ambassadors.

Moving to product. Our customers are clearly responding to the timeless British luxury brand expression and the synchronicity between our runway looks and the commercial core that is allowing us to reach a broad luxury audience. Here, you can see how the spirit of our runway shows has been interpreted to appeal to a broad luxury audience. On the left is an extraordinary fringed runway trench from Daniel's Winter '25 show. The item retails for almost GBP 10,000, and we had preorders from our most elite clients from the moment this walked down the runway. And now Daniel, together with our merchandising team has reworked this inspiration into different silhouettes appealing to a wider audience. These looks are among our best sellers for the season, retailing at around GBP 2,500.

Building on our success with Winter '25, on the right, you can see we are taking the same approach to our Summer Runway collection. Summer '26 captured the intersection between fashion and music and was yet another uniquely British story that only Burberry could tell. You can see the beautiful leather fringe trench that walked the runway and how this inspiration has been reinterpreted into classic gabergen with leather detailing to reach a broader audience. The product mix and strategy is capturing the attention of new customers and attracting existing customers to return with sequential improvement in customer growth over the course of H1.

In particular, we're seeing new customer growth among Gen Z. I was just in China a few weeks ago and walking stores with our teams there, and they were sharing how the evolution in our collection architecture is attracting different customer profiles to the brand. These customer profiles are now fully embedded in our product development cycle. Looking forward, we will be integrating even deeper consumer insights to ensure we're meeting all of our customers' wardrobing needs.

As we enter the second year of Burberry Forward, we now have significantly greater knowledge of our customers, which is informing our product strategy. One of our priorities is to refresh our heritage rainwear assortment in the new year. We will be introducing lighter tropical gabardine and strengthening the trans seasonal appeal of our iconic trench. This will enhance customer centricity, allowing our trench to be worn in global markets year-round.

Another observation is that we are only scratching the surface with wardrobing. Building on our foundational strength in outerwear, we are now completing the look with a stronger assortment of knitwear, trousers, skirts and dresses. Across the assortment, we are developing with customers' needs in mind, including the right fabric, the right fit and the right silhouettes for men, women and children. And in accessories, we've made progress on our foundation with the amplification of scarves and resetting the base in handbags. Looking forward, we are strengthening our assortment of leather goods and shoes with a focus on both subtle and overt branding, driving commercial shapes with clear brand signifiers. Across categories, we now feel more confident to place bigger bets on selected families of newness to fuel our growth and improve our productivity.

Moving to distribution. In our stores, we are creating more warmth and desire by increasing product density, enhancing our displays and encouraging cross-category selling. We are so excited to have the majority of our scarf bars open for the festive season. These stores are already outperforming, positioning us strongly for the season ahead. Our stores now offer a richer experience, one I hope that you will all enjoy during the festive season.

Our e-commerce channel was the first to turn positive and continues to outperform. We've elevated our product storytelling, seamlessly integrating shopping journeys with rich editorial imagery and improved our styling across the offer. Building on the success of our monogramming and scarf personalization services, we're expanding our personalization offer to knitwear and capes launching in the weeks ahead, just in time for festive. Looking ahead, our focus is on driving productivity. Building on our momentum with scarf bars, we're launching more category destinations in the year ahead, including for trench coats and polo shirts.

We are also investing in clienteling capabilities, deploying new AI-enabled tools to support our client advisers and serve our customers with a warm and personal approach informed by data.

And while wholesale only accounts for around 13% of our business, it serves several very important purposes. Our opinion leading digital wholesale customers are the ideal place for customers to discover the evolution of Burberry alongside our luxury peers. As I mentioned, we've seen growth in our wholesale order book from these opinion-leading wholesale customers globally who are enthusiastic about the new direction of Burberry.

Being present on luxury platforms allows us to share our refreshed brand expression with a broader array of consumers than visit our own sites. And our omnichannel department store partners provide visibility in key locations. I am so excited to get on a plane next week and go to New York. We are literally lighting up the facade of Bloomingdale's, an iconic flagship with an enormous sparkling Burberry Check scarf. And this activation is going to -- is anchoring dedicated Burberry windows and pop-up shops throughout the store in the flagship and in key branch stores, which tell our brand story.

One of the things I am most proud of this year is reigniting our culture. I continue to be encouraged by our incredible team around the world, whether it's the product triangle of design, merchandising and marketing coming together, the regions working with the center, or our teams across stores, manufacturing sites and warehouses, delivering exceptional service for our customers. We are rekindling the creative and commercial alchemy that is unique to Burberry. We continue to uphold our commitments to social and environmental responsibility. This remains an integral part of who we are and is important to our colleagues and customers around the world.

As we move into our 170th year, we are embedding the spirit of Burberry Forward into our purpose.

[Presentation]

In the first year of Burberry Forward, we moved at pace to execute our strategy and stabilize our business. With the consistency of our timeless British luxury brand expression and an improved product offer, we now have begun to capture the attention of new customers while seeing existing customers return to the brand they love. This has resulted in comparable store sales growth for the first time in 2 years.

As we look ahead, our ambition is to deliver sustainable performance, growing the top line while expanding our profit margin and delivering strong free cash flow. As I mentioned earlier, my belief in this extraordinary British luxury brand is stronger than ever. We now have proof points that illustrate that Burberry is at its best when it forges its own path, grounded in timeless British luxury and guided by authenticity. Although it is still early days and there is a lot more to do, as we approach our 170th anniversary, we are confident that Burberry Forward is the right strategy to build brand relevance and value creation.

I will now hand it over to Lauren for Q&A, and Kate and I will take your questions. Thank you.

[Operator Instructions] I can see Carol right in front of me and then we will move over to -- and then to Luca and then I think -- as well -- Thomas...

Carol Mathis from Barclays. So two questions then. The first one, I think you mentioned that you went to China or Asia just recently. So can you come back on what you're seeing there in terms of trends, mostly on the macro environment? Any sign of stabilization that you saw on the ground on top of, I guess, you've been doing some more work to see improvement of your China performance down there? That's the first question.

Second one is about the improvement of, I guess, increasing new consumers at the brand. When you think of the chart you talk about the consumer being investor, conservative, honest, what kind of new consumers were you able to attract more if there is a way to put them in those categories?

Yes. Two great questions. So I'll start with China. It was a really wonderful trip that I took with several of my colleagues to China. And ironically, it was 1 year to the date that I took my first trip to China last year as part of Burberry. And so literally, we could see the difference in the market year-on-year, but we could also see the difference in the expression of Burberry year-on-year and hear from our field teams, the people who interact with customers every day.

In terms of the market, clearly, I do think there is a little bit of stabilization happening in the market. I do think that our inflection in China this quarter was probably driven more by our internal changes that we've made. It was really wonderful to walk through our store estate and to hear about customers literally returning, people who they had been trying to get in for the last couple of years who didn't see themselves in the product that we were offering. And now they were coming in and they were -- and their conversion was way up.

We really saw customer engagement globally improved as we went through the quarter, but particularly in China. Our earned reach was up 129% in China, which translated into new customer growth of 10% in China. And so they really led. And on a global basis, we had 18% customer growth in Gen Z with substantially higher growth in Gen Z in China. So this -- I think -- in the past, there may have been an idea that in order to attract younger customers in China, you need to be super edgy and kind of do what other brands are doing. But actually, what's working in China now is this authenticity, the timeless British luxury, the authenticity, and we're seeing that across all of our customer archetypes.

We're seeing that against younger, cooler customers. We're seeing that against more mature, sophisticated customers. And the breadth of our customers coming back to the brand in China and globally and starting to attract new customers, especially in China and in the Americas, has been one of the most gratifying things that we've seen in the last couple of months. I would also say that if you double-click on some of these metrics, you really see the quality of the business changing year-on-year in terms of the types of products we're selling, in terms of the channel mix, in terms of the breadth of customers that we're touching. So it just gives us a lot of encouragement for what lies ahead.

Luca Solca from Bernstein. I have a question on these metrics and the double clicking in particular, what you're seeing in terms of full price sell-through. One of the pushbacks we're getting is that Burberry has been discounting a lot and is discounting a lot. But I think -- and I assume that, that is connected with the phasing out of the old Burberry. And if you could give us a couple of data points on how you see that has been evolving and how that is impacting, for example, your used dependence on off-price and factory outlets and discounts?

Maybe a second question, again, going back to the point about China. I see that there's a lot that you're doing yourselves in terms of improving your predicament there. Do you have a view based on what you see from the landlords and the shopping malls where you operate, how the broader Chinese consumer nationality is doing?

Okay. So I really appreciate both questions. But on the first, let me walk you through how we're thinking about this and why I'm so encouraged about what I call the quality of sales. Normally, we don't talk about what's happening in the full-price channel versus the outlet channel. But I think it's important in this case because what we saw in the quarter was that the strength in the newness that we were delivering in our full-price channel fully offset the declines that we were having in the outlet channel, the declines in traffic that we were having in the outlet channel. And traffic has been challenging in that channel in general. But also we just have less inventory going through that channel now, and we are discounting less. And so all of that is really good for brand health and for brand heat. And you'll see that really across the business.

In our full-price stores, last year, we did an exceptional public clearance, and we did that online and in stores, and that contributed about 3 points to our comp in the festive quarter. This year, we're not doing that. We're reverting to our normal end-of-season activities, which are substantially smaller, more discrete, shallower and less. And all of these are contributing to what I call the quality of earnings.

Finally, in our wholesale channel, where we're seeing the growth is from our strategic partners. These are the luxury pure-play digital partners, they're the U.S. department stores, they are even travel retail. And they're coming back because they're seeing their sellout of Burberry in the autumn and winter collections. Their sellout is going up. They're coming to our showroom, enthusiastic about finding opportunity, and they loved what they saw from the summer collection, and they believe that their customers will likewise love it.

And so that builds a virtuous cycle with the strategic wholesale partners, and that is helping us to offset the planned decline in nonstrategic partners. So overall, I would say this print is, as you said, no drama. But under -- if you double-click under the covers, there's a lot going on that we feel very positive about and that sets us up in a good way looking forward. In terms of China, what I would say is there does feel to be a little bit of a market stabilization that is happening. But what we understand is that it's very bifurcated and very specific in terms of how a brand is performing there, probably more polarized than the rest of the world.

Erwan Rambourg from HSBC. Congrats on the consistency of messaging and execution quarter after quarter. So I'll stick to two, even though I have probably 15. So you historically talked about good, better, best coming back with maybe more palatable price points after being disconnected for a while. You just flipped positive in terms of like-for-like. Can you maybe just talk about the role of volume as part of that equation? I suspect mix is negative. I suspect pricing is limited. But yes, maybe can you talk about how that like-for-like is built up and what we can expect for the longer term?

And then you just mentioned that the disposition channel, the cleanup of obsolete inventories last year meant a 3% headwind on comp for H2. How should we feel about like-for-like for H2 in that context? And I think historically, Kate, you mentioned whether you were comfortable or not with consensus. So I'm going to be the one to ask the question. What do you think about consensus in terms of sales and EBIT? Are we at a reasonable level today?

So Kate, why don't I let you start on the headwind and the -- our view on consensus, and then I'll come back on the other piece.

Yes, sure. So yes, I think it's the usual veiled ask about current trading. So I think as usual, I'll say we're not going to comment too much on current trading at this stage. But I will say that Q3 has started well in line with the previous quarter. But Josh has already helpfully highlighted the very public markdown that we had last year. As Josh said a moment ago, that was 3 points on last year's comps. So we're not repeating those activities. So I will just highlight that again. And of course, although we're pleased with performance so far in the quarter, we're mid-November. We've got Thanksgiving, Christmas, Lunar New Year, everything to come. So it would be premature to call it. But in terms of, I guess, half 1, half 2, we would anticipate sequential improvement there.

I think on the consensus point, probably similar answer in that, look, we're broadly happy with consensus. Again, really, really important trading period ahead of us. So I think it would be premature to change guidance at this point. But I would just add that we also want to leave ourselves some firepower to invest. So depending on where we get to, you've heard it in the presentation there, we are spending more year-on-year on the kind of consumer-facing areas, specifically marketing. You heard there we are investing more in Lunar New Year, for example. So I think leaving consensus where it is today feels the right thing to do for the business.

So then I'll pick up on the retail equation and what we're seeing in terms of pricing. So we start -- our inventory is down 24%. And then when we look at our traffic in the stores, traffic remains challenging across the board and continues to remain challenging. However, our conversion is up in the low teens. And our AUR is down slightly, which was planned because we did the realignment of pricing along good, better, best and with certain key categories like scarves outperforming. So all what we would want to see at this point in the turnaround.

[indiscernible]

Not so much. We took some surgical increases in the U.S. specifically earlier this year. But pricing is relatively in line globally. And any pricing that we took on individual items was somewhat offset by the difference in mix.

Grace Smalley from Morgan Stanley. My first question would just be on marketing. You mentioned a few times there that you've increased the marketing spend. You seem very happy with the results you've seen from the marketing campaigns. So just how are you thinking about the return on marketing spend? And whether you're still tied to that marketing as high single digit as a percentage of sales or if there's actually room to further increase that and take kind of, I guess, capitalizing on this moment in time and chatting about what you're doing in terms of the brand?

Yes. Well, I mean, I think this also relates to what Kate was saying about consensus. We want to leave ourselves more firepower to invest in marketing. And my Chief Marketing Officer is in the front row over there. So he's listening very carefully to this. But we're very focused on having an ROI. And we're pleased that the initiatives we've had have resonated. We are seeing a direct impact from the marketing into the sales. So a year ago, we didn't have that luxury to even consider given where the P&L was. And now we want to be very mindful of those opportunities and not let a moment pass without investing appropriately. I don't know if you have anything to add, Kate?

No. And I think the key is, yes, for now, maintaining the high single-digit percentage of marketing, but let's see where we get to.

Very clear. And then my second one would just be on gross margin. Thank you for the helpful bridge slide. As you think about gross margin in the second half, could you just perhaps talk through those dynamics in terms of the inventory benefits, transformation benefits? And then also given the Josh's comments on the improved full price sell-through, how we should think about that impacting gross margin in the second half as well?

Yes. So I mean, recap, obviously, H1, you can see that there's that -- it's 330 basis points, which essentially is the tailwind from this time last year, all of that inventory actions. I then did flag that we had, which was probably the bit over and above what you might have expected was what we have badged as transformation benefits. And I think the message there is that although most of the transformation benefits have been in OpEx, we've been looking at cost across the business, and we have actually seen some benefit in gross margin. In terms of then what to expect for the full year, which will help you with the second half, I think guidance there remains the same. We talked about a 300 basis point tailwind for the full year, and that remains the same. You'll remember that, of course, in the second half, in terms of phasing, the trend of the last 2 years has been for H2 to be lower than H1. You'll see that again. But in terms of absolute H2 to H2 margin improvement, yes, you'll see that because you'll remember, it really was this time last year where we did a lot of nonrepeatable heavy discounting. So I think you'll certainly see that come back. So remaining the same on full year gross margin guidance.

Thomas Chauvet from Citi. Two questions. The first one on product newness and categories. If we look at your H1 performance, retail wholesale by category, I know it's a bit diluted by the wholesale performance, but womenswear was already positive in the half, which is quite an achievement. Menswear accessories down 3%, 4%. Has menswear and accessories improved sequentially in Q2? And then when you look at your upcoming spring/summer product, is there anything that excites you in terms of menswear accessories offering to drive a bit of a catch-up and bring these categories back to growth where they should be?

So we are very pleased that the initial improvement in the strength of outerwear and scarves is now spreading. And we're obviously seeing that first and most importantly, across women's, which historically has been challenging for Burberry. And yes, both men's and accessories improved sequentially during the quarter. As we moved into, I'd say, mid-August, September and that winter wardrobing came into the stores, that has really ignited those categories. Specifically on leather goods and shoes.

So again, if you double-click here, we reduced our inventory the most in leather goods. So this is really where we really took out a giant amount of inventory, and we said that we would test and learn this year. And we have been doing that, and we have some areas where we have green shoots where now we're going back and building those back. So I think we talked about the B Clip bag. Last time, that family has been strong. We've recently refreshed -- done the first stage of a refresh of our iconic vintage check. We introduced a vanity case, which has been very strong. We currently have a novelty color in Ruby, which is performing well. And we -- and this is all in advance of a bigger relaunch of vintage check in the coming seasons.

And so we've been very deliberate in how we've approached that category. But it's interesting because there's -- we're seeing success in the good, better, best strategy across the estate, even in a category that we don't talk about a lot like shoes. And on the runway, there were these beautiful riding boots. And we took a big bet on those beautiful riding boots, even though we had no history of selling very elevated product with minimal branding, frankly. It's GBP 1,500 pounds and up for the cavalier boots. And they have become among our best shoes and are meaningfully contributing to the growth of this small category. And that was such an important lesson for me because it's such a quintessentially Burberry item. It's something that in your mind, you would think that you could go to Burberry and find a beautiful English riding boot. And when we put it there, in the context of that beautiful fashion show collection, the customer responded and actually it was one of the items leading to customer acquisition. So I know I sound like a broken record with our team talking about the timeless British luxury brand expression and the good, better, best pricing architecture, but it really is resonating with our customers.

My second question on licensing. Could you give a bit of an update on your relationship, personal eyewear with Luxottica and of course, Beauty, I think Coty's CEO, Sunabi, gave interesting numbers recently, implying Burberry has been growing at about mid-teens percentage since 2019. So curious to hear your view here. And just on the cleanup of the older fragrance line that impacted your licensing revenue down high single digit in H1. I understand it will be the case also in H2. That shortfall of licensing revenue, if you gross that up to wholesale, i.e., Coty sales, there's quite a big number of bottles. So I was just curious what's happening to these models? Are they heavily discounted by Coty? Are they being destroyed, gifted? What is Coty doing to drive such a big decline in revenue given Goddess and Her, your top fragrance line are actually doing very well? And as I said, mentioned mid-teens sales for Burberry Beauty in the last 6 years.

Yes. So broadly speaking, we think we have 2 best-in-class licensing partners in Luxottica and Coty, and we are pleased with the trajectory. Within beauty and fragrance specifically, the fragrances that you mentioned, her and Goddess have been very strong. And similar to what we're doing in the core brand of focusing on the quality of sales, they're doing the same. They are -- because Goddess and Her are in a position of strength, they're able to destock on some of these lines that are older and less relevant. And so that is why you see this significant decrease this quarter. in the channel. Kate, I don't know if you have anything to add.

Yes. I mean I think the key being that we're still seeing good steady growth in those core lines. And in terms of the look forward, obviously, it's not something that's just done in the quarter. So we would actually expect the destocking to continue into the second half.

And be over by the end of fiscal '26.

Yes.

It's Daria from Bank of America. And congratulations on your results. I have 2 questions. The first one, could you please talk about what you're seeing in the U.S. market? You saw flattish no acceleration in trends in this geography. So I was just wondering, could you please help us understand how it's shaping up into the holiday season? And if I can just ask my second question straight away. Outside of some marketing reinvestment that you already mentioned, are there any other initiatives that we should be aware of for the cost savings for the second half, like bonuses, remuneration, anything that we should be modeling?

Kate, do you want to take the cost savings and then I'll talk about the U.S.

Sure. So yes, I mean, I guess there are a number of moving parts within cost. We've been very open about the incremental investment in marketing. Of course, the other piece is to consider, as always, there's inflation in our cost base. We've got a very high fixed cost base, 80% of fixed costs, that will be inflating at around 2%, 3%. You talk about people costs. Yes, there's the usual merit in there, and there will be potentially incremental performance-related pay, reflecting the performance being below what we would have expected for the last couple of years. And I guess those are probably the key moving parts. It will be people inflation and marketing.

And then in the U.S., the U.S. was the first region to return to growth for us. And what we've seen is that the brand expression and the way that we're showing up at retail in exciting ways is really resonating with the customer there. Our team in the U.S. has been very creative in terms of how in a market where retail traffic is so, so. How they're really going to the customer. They hosted over the summer. They hosted an exciting VIC event in the Hamptons, inviting customers from across the country to stay with the Burberry team and have a one-of-a-kind experience in the Hamptons.

They're planning something similar for the VICs for Aspen. And that's really for our top of the pyramid customers. And then we also have an opportunity there to really build on the broad universal appeal of the Burberry brand. And that's why this Bloomingdale's takeover -- facade takeover and activation is so powerful for us. Because it gives us an enormous stage to share with people the Burberry story and who may or may not come into our network of stores. And so it's that mix of how we do really high-end elite events and then customer-centric events with broad universal appeal for customer acquisition. And so we're really excited about the trajectory there.

I would just kind of step back from the U.S. specifically and just reiterate as we're at the end of the -- I think we're at the end of the Q&A. I would reiterate that after our first year of implementing Burberry Forward that we are more confident, I am more confident than I was 12 months ago. 12 months ago, this was really a thesis. It was a thesis that we were too niche. We were trying to be kind of a me-too of other brand strategies and that we weren't true to our own unique DNA.

And as we've leaned into that at all levels from the runway to the marketing campaigns to the type of visual merchandising you see in stores to our sites, that's resonating with customers. It's resonating with the customers we want to have. And long term, I see this as a bigger opportunity than I envisioned a year ago. We're going to do the right thing with the brand and do it in a steady, slow way, and we're not going to chase sales for the sake of it. But we're feeling confident in the Burberry Forward framework that this is the right path for value creation and for the brand relevance.

Thank you, Josh. I'll hand over to you for closing remarks.

[indiscernible] closing remarks, but I'll come up here. So really, as we approach 170 years, I want to thank all of my colleagues around the world who have been working so hard to drive Burberry Forward. You only see Kate and I up here, but this is literally the work of thousands of people around the world. And I'd also like to thank all of you, our investors, analysts and partners who have supported us on this journey. So thank you.

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.