Burberry Group PLC

LSE:BRBY

Earnings Call Transcript 2019-Q1

[Operator]

Ladies and gentlemen, welcome to the Burberry Q1 Trading Update Call. My name is Emma, and I will be the operator for your call this morning. [Operator Instructions] I would now hand you over to Julie Brown at Burberry to begin. Please go ahead.

[Julie Brown, CFO, COO & Director]

Good morning, and welcome to Burberry's Full Year 2019 First Quarter Trading Conference Call, which has accompanying slides, which are available on the IR section of our website. In today's presentation, I will briefly run through a review of our retail sales growth in Q1, and I will highlight some key operational progress we've made. And finally, we'll turn to the outlook for the remainder of the year. With me this morning is Charlotte Cowley, our Head of Investor Relations, and we'll be happy to take your questions at the end.So turning to the first slide and starting with the retail performance in the first quarter. Underlying retail revenue was up 3% at constant exchange rates. Comparable sales grew 3%, with strength in Asia Pac and Americas partially offset by EMEIA. Space was marginally negative during the period. We continued our strategic investments in key markets with 6 openings, including the relocation and expansion of our flagship store in Dubai. This, in part, offset the headwind from 7 store closures, including an additional 2 outlets. For the full year, we continue to expect space to impact retail sales by minus 1%. We also had an impact from the move to the retail calendar and the adoption of IFRS 15. In aggregate, the 2 equated to a 0.3% negative impact on retail growth.And finally, currency was negative in the quarter, as guided. With sales of GBP 479 million, were unchanged year-on-year at reported exchange rates. Now turning to comparable regional revenue performance on Slide 2. Asia Pacific grew by a mid-single-digit percentage, broadly consistent with the second half last year. Mainland China grew, but we saw a marked shift in Chinese spending towards other Asian countries as Chinese tourists took advantage of favorable exchange rates. This benefited Hong Kong, Korea and Japan, which all saw good growth across both domestic and tourist clients.EMEIA declined by a low single-digit percentage. And as mentioned, negative tourist spending weighed on the performance of both the U.K. and Continental Europe. The Middle East remained challenging as concerns around macro -- the macro environment continues. The Americas delivered high single-digit percentage growth. This ongoing improved momentum that we've started to see in the final quarter of last year is encouraging. Footfall has continued its positive trend, and we saw good growth from local customers. Turning to strategy on Slide 3. Now I wanted to share some progress that we have made across the business. As we continue through our transition phase, we are building a strong platform for reenergizing our brand, and the execution of our plans remains firmly on track. We've talked to you before about the evolving luxury customer base for the whole industry, and we continue to see evidence of this within our own business. Customers are demanding creativity and innovation across Product and Communication and expecting the highest level of customer service in stores and online. In response to this, in the quarter, we've excited plans with pop-up stores that celebrate the newest handbags around the globe across Beijing, Dubai, New York and Seoul. We've seen early success for our full look merchandising initiatives in our new collections, which have shown higher linked selling and outfitting rates than the total business.In our retail stores, we have rolled out a new digital customer service tool, [ Our World ], to help our sales associates enhance their engagement and connection with customers frequently and successfully. In the quarter, we saw the revenue driven by appointments up double digits year-on-year.Turning to Communication. We are encouraged by the early results. Under the creative direction of Riccardo Tisci, our recent collaboration with Beyoncé achieved the highest-ever Instagram story views with 1.1 million. We introduced new creative content across burberry.com and social media channels to support the heritage trench refresh program and new leather goods launches while also ensuring we produced more frequent content with clear, concise messaging. This has contributed to an improvement in our Instagram engagement rate, up 25% from Q4 to Q1. Our Digital business continued to excel in all regions, with growth led by Asia Pac. Mobile has now become the largest digital channel in our business. We continue to enhance our omnichannel proposition with the successful go live in the U.S. and Mainland China, supporting store-to-customer shipments in these markets. And EMEIA is scheduled to follow later this year. And our collaboration with Farfetch is performing ahead of our initial expectations. Under Operational Excellence, the acquisition of a business from one of our long-standing leather partners in Italy is proceeding as planned. In addition to skills and expertise, this acquisition will give us greater control over quality, cost, delivery and sustainability in this key strategic category.Under Inspired People, a key initiative this quarter, was our off-site, bringing together our top 250 global leaders. The event focused on immersing teams in our strategic vision and the critical role they will play in delivery. We believe our managers are now better equipped to motivate and engage their teams to execute successfully.Now turning to outlook on the next slide. As we look ahead to the remainder of the year, you will see us move further towards a fluid, flexible and creatively-led delivery cycle as we strive to continuously engage consumers with fresh and sometimes unexpected drops of product content and communication. Riccardo is working on a limited-edition capsule as part of his debut collection for Burberry, and this will be available in a series of instant drops from September. We've announced a collaboration with the legendary British designer, Vivienne Westwood, which will celebrate the iconic design elements from both houses and will launch in a select number of Burberry stores in December. Riccardo's runway collection in September will be in store from February 2019. And from May 2019, the first delivery of fall '19 designed by Riccardo will start to deliver to stores.In terms of the full year 2019 financial guidance, there is no change to our guidance for the broadly stable revenue and operating margin at constant exchange rates. In terms of modeling, in retail, we still expect a minus 1% impact from space as we evolve the store network. For wholesale, the low single-digit percentage full year decline is anticipated to be more pronounced in the second half. And we remain on track to deliver GBP 100 million of cumulative cost savings in full year 2019. As usual, we have updated our currency guidance, and the situation has improved due to the weakening of sterling. In terms of revenue, the top line impact is now expected to be marginally positive for the full year. In terms of operating profit, we now expect foreign exchange to be a GBP 25 million headwind in full year '19 compared with our previous indications of GBP 40 million at 30th of April spot rates and GBP 30 million to GBP 35 million at early-May rates. In terms of saving, the currency effect on profit is weighted towards the first half of the year, with a GBP 20 million headwind expected in half 1 and GBP 5 million headwind in half 2. This means, on a reported basis, we expect half 1 operating profit and margin to be lower than the prior year. And finally, we have now commenced a share buyback of GBP 150 million in line with our capital allocation framework. So in conclusion, whilst we're still early in our execution, we are pleased with the progress we have made in the quarter. We look forward to showing Riccardo's debut collection in September, a key milestone for our brand transformation. And while we know it will take time to achieve our long-term ambitions, we are delivering on all our strategic milestones and feel confident about the future. And with that, Charlotte and I are happy to take any questions.

[Operator]

[Operator Instructions] Your first question comes from the line of Edouard Aubin with Morgan Stanley.

[Edouard Aubin, Head of Luxury Goods]

One quick question on retail and one on wholesale. If you -- you are basically implicitly guiding for retail like-for-like of roughly 2% to 3% for the year. If we look at the sequencing, in Q2, you're facing your toughest comp of the year on a 2- and 3-year accumulated basis. So should we expect a more-or-less flattish like-for-like in Q2? If you can just give us a quick indication on the exit rate of Q1 and the beginning of Q2. And then on the wholesale, you reiterated actually your guidance for a low single-digit decline. Can you just provide us a quick update on the work in cleaning up the distribution channel in wholesale and particularly in the U.S., please?

[Julie Brown, CFO, COO & Director]

Yes, sure. So clearly, in terms of retail, we've provided all the elements of guidance that we can give. We don't obviously give guidance by quarter. But what we -- as you pointed out, the Q2 in the prior year was our strongest comp because we delivered 4% in the prior year Q1 and 5% in Q2. So we are up against strongest comp, but we wouldn't, obviously, give quarterly guidance on retail numbers. In terms of wholesale, we are progressing very well with the negotiations with wholesalers, both in the U.S. and in EMEIA. We've guided a low single-digit decline for the full year. However, it's definitely going to be more pronounced in the second part of the year just because of the phasing of the contracts and the buys through the May and November market. The discussions with them are going extremely well. We've had very good engagement with the wholesalers. As you know, our ambition is to ensure the brand is appropriately positioned in those department stores. And in some cases, we're not in the appropriate location at the moment because of the old brick heritage. So this will take some time to resolve completely, but the early signs are very, very positive. We've actually had improvement in luxury accounts, both in the U.S. and in EMEIA, which has been very positive.

[Operator]

Next question comes from the line of Helen Brand with UBS.

[Helen Michelle Brand, Executive Director and Equity Research Analyst]

A few questions from me. Firstly, can you just give a little bit more detail on the new strategy around more frequent product drop? So how often should we expect these? And do you plan to step up the number of collaborations through next year? Secondly, on the quarter specifically, can you give us the breakdown on ASP versus volume? And then finally, as a follow-up from this, could you just confirm any pricing actions you've taken since the start of the calendar year by region? And do you plan to follow the 5% price cut in China taken by some of your peers?

[Julie Brown, CFO, COO & Director]

Okay, sure. So if I take the first 2, and Charlotte can take the pricing one in terms of...

[Charlotte Cowley, Vice President of Investor Relations]

Yes.

[Julie Brown, CFO, COO & Director]

Changes of pricing actions. Yes, so in terms of product drops, we have now got a new model for engaging with customers. And as we reported yesterday, Riccardo is now working on a limited-edition capsule as part of his debut collection for Burberry, and this will be available in a series of instant drops in September. And as you've also seen, we also see collaborations as a way of working going forward. We've just recently announced what we see as a very exciting collaboration with an iconic British designer, Vivienne Westwood, and this will be in our stores from December. So the model now is to be more fluid and have it to be creatively-led, a delivery cycle that's creativity-led and is a new way, really, of conversing with customers across product, communication and the experience. So this will result now in Burberry delivering frequent drops of fresh product really to engage our consumers throughout the year and, to be honest, to surprise them also throughout the year. So what we'll be doing is we'll be announcing further details in advance of the Burberry show, which is obviously going to take place on the 17th of September. So it's just a new way of engaging with consumers. Taking your second question, Helen, about the quarter, ASP and volume, the quarter benefited from a combination of both. So we've had an improvement in volume. And again, we've had an improvement in traffic. And also, we've had a benefit coming -- a marginal benefit coming through AUR, which again is part of the strategy. The region which has probably shown this to the greatest degree is Americas, where we've seen a considerable uptick in performance in Americas, and that's seeing the benefit of traffic. It's also seeing the benefit of conversion and improvement in AUR. So we're very pleased with the early signs that we're seeing at this stage, but again, we'd emphasize that these things take time. Implementing the strategy will take some time. Charlotte, on prices?

[Charlotte Cowley, Vice President of Investor Relations]

Yes. So on pricing, we made a few small tweaks to pricing globally, but nothing significant, in terms of changing, big like-for-like price increases. It's more just to realign that global pricing architecture. In terms of in China in particular, we'll clearly watch and see how things develop. As a business with -- as a company with a big business in China, it's pleasing to see a policy that should benefit Chinese consumers, but nothing to update you on today, Helen.

[Operator]

The next question comes from the line of Louise Singlehurst with Goldman Sachs.

[Louise Susan Singlehurst, Equity Analyst]

Just in terms of Asia Pac, we're obviously all trying to follow all the news and see what's going on in that market. I know, to Edouard's point, you're not going to probably give us the exit rate, but can you just tell us anything that you spotted particularly Mainland China versus Hong Kong? I know you touched on it briefly in the commentary. Secondly, just following up on the collaborations. When we see these launches, are we going to expect a mix of more local as well as global? Or do you plan to launch small quantities but on a global basis and talk about the distribution there? And then just finally, if you could just confirm that you're happy with a consensus EBIT I see on your website, very helpfully, at GBP 441 million for this year.

[Julie Brown, CFO, COO & Director]

Okay, Louise. Thank you very much for the question. So in relation to the trend in the quarter, first of all, if we look at the Chinese, there was absolutely no change really in the Chinese as a nationality trend through the quarter. So some people have been flagging, "Did it change in the final month?" No. In the case of Burberry, there was no change in the trend. Probably important to say when we look at Mainland China that we did shorten our markdown period by approximately week -- a week, but it still had no impact on the overall trend. So I know the market is somewhat concerned about this as a general industry point, but we're picking up absolutely nothing in our numbers. We're aware of the macro environment, and we obviously look at that data, but our own numbers are not suggesting any change as we work our way through those months. In terms of the other countries within Asia, we definitely had an impact. When we look at Chinese and we look at Mainland China, we definitely had an impact through tourists or the Chinese moving out of Mainland China into other countries in Asia. We saw an uptick in Hong Kong, we saw an uptick in Korea, and we saw an uptick in Japan, so all of those 3 countries were benefited. Having said that, we also had domestic growth in all of those 3 countries as well as the traveling Chinese. Turning to your second question about collaborations, we've had -- it is part of our model going forward. Riccardo's really excited about the collaboration with Vivienne Westwood. It will be part of our model going forward to engage in collaborations, to engage the consumer. In terms of the distribution of those collaborations, it's going to vary considerably, I think. In the case of Vivienne, it will be select stores. But it's going to -- I mean, the idea of doing this is to be innovative, is to be creative, and therefore, it's not something -- like it's not a mathematical model at all; it's all about creativity. And we will disclose these as and when we're ready, but we want to surprise people as well.

[Charlotte Cowley, Vice President of Investor Relations]

And just in terms of the consensus, yes, you're right. So the adjusted EBIT was GBP 441 million this morning. And from what we can see, a lot of people had already updated, sort of almost run their own FX model, so the FX in that was at about the GBP 25 million that we've guided to today, so we're not expecting to see any real change in that number based on what we've said today.

[Operator]

[Operator Instructions] Next question comes from the line of Thomas Chauvet with Citi.

[Thomas Vincent Chauvet]

Julie and Charlotte, 3 question, please. The first one, on your upcoming Spring/Summer '19 collection and then the subsequent Autumn/Winter, how quickly do you think you'll be able to roll out the collection in all your points of sales and remove, at the same time, the old collection? And then 2 quick one on the limited-edition products and the collaboration. Firstly, are you, as a result of the strategy, expecting a gradual increase in ASP in seasonal product as opposed, perhaps, to carryover items, where you seem to suggest there'll be limited pricing from here, particularly on trench coats. And secondly, once these -- once the collections are in store, are you expecting a gradual change in the proportion of carryover versus seasonal items? And can you perhaps remind us on Christopher Bailey's last collection what was the share of seasonal versus evergreen products?

[Julie Brown, CFO, COO & Director]

Okay, sure, certainly. So in terms of the transition to Spring/Summer of '19, the main collection relating to that, we'd expect it to be starting to go into the store around the May period. But I think it's also just important to say that the model that we're adopting is changing to be -- have the greater frequency and more innovation rather than very large-scale deliveries at certain dates. So there is a change in the way that we're operating this. In terms of what we've commented on before, though, is we would expect Riccardo's collections and work to be really making a big impact on our stores from May next year; that's going to be the big sort of transition period. And during this time, even now actually, and as we talked about in the year-end results, we're obviously transitioning from one designer to another. And we look, in fact, weekly/monthly at the selling rate of all of those items so that we can judge any necessary provisions. And of course, you saw us take those provisions at the end of last year, so nothing to update you on that. It's something that we will work through. It's included in our guidance. And obviously, it's management managing the business. In terms of the limited capsules and the collaborations and the overall impact on ASP, as part of our strategy, as you know, we've looked at every single product category that we operate in. We've looked at how we compare with peers. And the important thing for us is to deliver perceptible value to our consumers. So in some cases, we will see improvements in ASP. We've mentioned a few of those in terms of the leather range because we're elevating the leather goods range. And also, we talked about, when we did the strategy, the polo shirts and that taking effect. So there will be some element of ASP improvement, and we're seeing signs of that already coming through in the quarter, but it obviously will become more pronounced as we go through the different seasons. I think just in terms of the final question was around the season in store versus others, we're obviously not going to comment really any more on the sort of fashion versus retail element because the whole strategy is to move more towards fashion. So what we would say, though, is the fashion component of our business is performing a lot more strongly than the old replen model. But going forward, we're not really thinking about it in this way anymore; it's all about moving towards fashion, innovation, creatively-led business.

[Operator]

Next question comes from the line of Rogerio Fujimori with RBC Capital Markets.

[Rogerio Fujimori, Analyst]

I think I have a question -- some questions on the handbags. I think you've flagged that the Belt Bag had a promising start. I was just wondering if you could talk about how the overall category perform and maybe also including how the -- some of the most important order lines are performing, how bags are performing versus the rest of accessories. And then finally, I think you articulated that AUR in bags is expected to increase over time with a greater penetration in the 1,000 to 2,000 U.S. segments. So how -- what was the progress on the AUR front in bags in the quarter?

[Julie Brown, CFO, COO & Director]

Okay, certainly. So if I take the bags generally in terms of how we're doing with specific ranges, and Charlotte can probably pick up on the AUR front. So in terms of bags, we're very encouraged by the new bags that we've launched. So in the period, the new ones that are coming in, Belt Bag, obviously, we launched in the previous quarter. And the D-Ring has been recently launched. Both of these are showing strong momentum. The Belt Bag is now the #4 bag in the quarter, so we've seen very strong performance in terms of that. And in the full-price category, it's even higher than that. And we've also had a very good launch in the D-Ring, although, obviously, it's early days. But the most important thing with regard to the bag range, it's all about building out the bag architecture, which will take a number of seasons for us to be able to do that. An encouraging start, but these things do take some degree of time. In terms of the -- you asked about the rest of the accessories. So accessories performed reasonably well this quarter. The reason you don't see the results coming through in the bag range overall so far is because we've also got some of the older styles starting to -- the growth rates starting to slow. So basically, good news with the new bags, but some of the older styles are starting to slow in the bag range. And it's all about building out the bag architecture.

[Charlotte Cowley, Vice President of Investor Relations]

And then just in terms of the pricing, I mean, those 3 bags that we've seen launched, the Belt, the Bucket and the D-Ring, they're all north of GBP 1,200 in terms of pricing. So the median Belt is at GBP 1,590, the Bucket's at GBP 1,350, and the D-Ring is at GBP 1,290. So while I haven't got an absolute sort of AUR of bags, you can see that those newer bags are at that higher price point.

[Rogerio Fujimori, Analyst]

And just a quick follow-up on trench coats. Have trench coats outperformed the other categories in the quarter?

[Julie Brown, CFO, COO & Director]

Yes, we've seen a good response. In particular, we've seen a very good response with tropical gabardine, which has been very popular in Asia. And obviously, linked to that, we've also had success in the Car Coat. The heritage trench relaunch that we embarked on at the beginning of this quarter, we've only launched it so far in 80 stores, but we've had a good -- good initial signs from that. And we're actually developing now new color ways in response to the response we've had in certain parts of the range, in particular, women's. And in particular, the honey color has been extremely popular. So we'll have a lot more to say about that, I think, when we come to the half year results when we will have rolled it out further.

[Operator]

Next question comes from the line of Melanie Flouquet with JPMorgan.

[Melanie Anne Flouquet, Head of European Luxury Goods and General Retail]

My first question is regarding the Chinese consumer base in total. Can you confirm what sort of growth rate it had compared to the mid-single digit of the previous quarters? And can you comment on what would have driven any changes? My second question is on the average selling price that you mentioned is up. If leather goods as a category in total isn't outperforming, nor the replenishment heritage trench coat, how is the average selling price going up? What is driving the average selling price up, please? Sorry, my third quick question is on the heritage trench coat. When would you expect this to have a -- to start to have a positive impact on your like-for-likes? What is the sort of ramp-up that we should expect on this? And my very last question is on the polo shirts. There were indications that you might want to somewhat reduce your exposure to polo shirts moving forward, and I expect that's part of the wholesale pressure. But can you help us understand how far you are and what sort of timing we should expect from this and the weight of that category?

[Julie Brown, CFO, COO & Director]

Okay, okay. So I think I'll share these with Charlotte. So I'll take the Chinese consumer one, and then maybe Charlotte can take ASP and heritage, and then I can come back on the polo, do it that way.

[Charlotte Cowley, Vice President of Investor Relations]

Okay, yes.

[Julie Brown, CFO, COO & Director]

So just in terms of the Chinese consumer, what we've seen with the Chinese consumer globally is that, in Q4 -- well, starting off actually in terms of the history. Q3, it was relatively flat last year. Q4, we had a mid-single-digit growth. Q1, we've had a low single-digit growth overall in the Chinese consumer. What we've found is that they have been shopping more in Asia. So in Mainland China, less so, it was a low single-digit positive, but there's being more shopping in Asia. In particular, we've had a benefit coming through in Hong Kong, Japan and Korea. When you compare us with competitors, we have lower penetration levels, as you know, Melanie, in both Japan and Korea. At this stage, Korea, just in terms of the distribution of domestic versus retail versus wholesale business is impacting this. So -- but generally speaking, no change to this overall trend that we've seen in the months in the quarter. January, February, March, it was a fairly consistent trend overall. So I think that addresses the Chinese consumer. If we move into the ASP increase and leather goods, et cetera.

[Charlotte Cowley, Vice President of Investor Relations]

Yes, so actually, when we look, we're seeing consumers generally trade up within categories, Melanie. So that's the biggest driver of why the AUR has been going up in fees rather than thinking about individual categories weighing up or down. It's actually within categories, consumers are trading up through the price points. And then on the trench, we're still quite -- we're still relatively early in the rollout in terms of phasing it through into that kind of [indiscernible] those stores are in at the moment. I'd encourage you not to really sort of overthink it. It is a refresh. As Julie said, one of the most popular styles is the very classic that I think is the Kensington honey for women's. So I wouldn't sort of overthink then to the modeling perspective of that. But clearly, we'll have a much better view when we're able to talk to you in November because we should be much further through this rollout by then.

[Julie Brown, CFO, COO & Director]

Yes, okay? So then, I'll take polo shirt?

[Charlotte Cowley, Vice President of Investor Relations]

You can take polo shirt, yes.

[Julie Brown, CFO, COO & Director]

Yes, okay. So we did do a relaunch of the core polo. Obviously, it's a higher-level material and product. The entry price is now at the 180 level versus the 145 that we talked about previously. So we've seen an improvement in that. In terms of the new polo shirt performance since the delivery, since we launched it in May, we've seen very good traction. The new Hartford core polo has been performing extremely well, with an improved rate of sales like-for-like options compared with the old Oxford version. So that's, I think, a good news. What I would draw your attention to, though, in terms of changing the product mix is really impacting the products in wholesale is a really important part of our strategy. So our wholesalers would tend to take certain parts of our range, and it wasn't representing our full range, the full Burberry offering, in wholesale in the same way as retail. So the important thing with regard to the range is to encourage the wholesalers to take the Burberry offering so that we're representing our product equally in both the retail and wholesale network.

[Melanie Anne Flouquet, Head of European Luxury Goods and General Retail]

Can I ask just a quick follow-up, sorry, on China -- on the Mainland Chinese? I understand that your geographic dynamics didn't help you very much for Korea and Japan where you don't have the big exposure to tourists, to Chinese stores. But that was already the case in the last quarter. So what changed? What created the deceleration? Or should we not -- was it just Chinese New Year helps the mid-single digits, and this is just a renormalization?

[Julie Brown, CFO, COO & Director]

Yes, I think it's -- I think it was all to do with currency, and it was all to do with the fact that in Mainland China, we reduced the sale period by a week. So this has had an impact in Mainland China, probably ourselves compared with some of the competitors.

[Operator]

Next question comes from the line of Warwick Okines with Deutsche Bank.

[Warwick Okines, Research Analyst]

Two quick questions, actually. Firstly, another one on Asia, I'm afraid. So in your commentary, Julie, you said that Q1 Asia Pac trends were broadly in line with the second half. Does that mean there was -- the growth rate was a little slower than in Q4? And secondly, on operating profits, in your comments for the first half, could you give some comment on the first half gross margins? I know you don't like to comment too much about them. I'm just wondering whether, because of the currency impact at the cost of goods line, maybe the gross margin impact will be bigger than the operating margin impact. Perhaps you could help there.

[Julie Brown, CFO, COO & Director]

Right, okay. Okay, so -- and your question on the Asian trends, Warwick, just to clarify, was it Asia or was it Chinese?

[Warwick Okines, Research Analyst]

Yes, Asia Pac region, whether the...

[Julie Brown, CFO, COO & Director]

Asia Pac region.

[Warwick Okines, Research Analyst]

Growth in Q1 was a little slower than Q4?

[Julie Brown, CFO, COO & Director]

Yes, okay. So in terms of Asia, Asia as a region overall, there was actually very little difference. It was practically the same number. So in both Q4 and Q1 2019, we basically had the same growth rate; very, very similar. In terms of the gross margin, as you know, currency is a headwind, and we will have impacts on the gross margin and the operating margin in terms of currency. As I think we've mentioned, the impact on the margin in the first half is going to be more pronounced, but we're obviously not giving absolute pinpoint guidance on the overall impact, but it's going to be more negative in the first half, both growth and operating.

[Warwick Okines, Research Analyst]

Okay, but you can't say whether you think the gross impact will be bigger than the operating margin impact in H1?

[Julie Brown, CFO, COO & Director]

Just take a look at that. Yes, yes, it's not going to be materially different, but we don't want to give sort of pinpoint accurate numbers on it.

[Operator]

Next question comes from the line of Charmaine Yap with Redburn.

[Charmaine Yap, Analyst]

I have 2 questions, please. The first one will be on Farfetch. Can you please give a little bit of a comment in terms of what has surprised you given it is outperforming your expectations? And the second one, just on SKUs, did you need to do any reduction in this quarter? Or do you plan to do anymore? Or is that part of the exercise now broadly done?

[Julie Brown, CFO, COO & Director]

Yes, okay. So in terms of Farfetch, it is still a small part of our business, but we are delighted with the early uptick in Farfetch. It's been really encouraging. We've now got exposure to 150 countries, whereas Burberry previously was exposed, through burberry.com, to about 44. So -- and the early signs versus our own plan which, obviously, we wouldn't be able to disclose, very, very positive. And Farfetch also collect data in terms of the partners they work for, and that's also come out very, very well for Burberry. In terms of the SKUs, we've had a major change in the SKUs since we moved to 3 -- from 3 labels to 1. So just to give you a little bit of data on that, we've actually had a 35% reduction in SKUs since we've moved from the 3 labels. And this has obviously been over the course of number -- a number of years. We're continuing to put pressure on options. The idea is that we're able -- by having actually fewer options and, I guess, less complexity, the innovation in our stores shows more clearly. And that's been the major drive that we've had to be able to show the innovation more clearly in our stores.

[Operator]

This concludes our question-and-answer session. I would like to turn the conference back over to Julie Brown for any closing remarks.

[Julie Brown, CFO, COO & Director]

Okay. So thank you very much for joining us today. We look forward to updating you at the interim results on the 8th of November, and I wish you all a marvelous and well-deserved summer. Thank you very much.

[Operator]

Ladies and gentlemen, this concludes today's conference. Thanks for joining. You may now disconnect. Goodbye.