Earnings Transcript for BRBY.L - Q1 Fiscal Year 2020

Julie Brown: Good morning, and welcome to Burberry’s First Quarter Conference Call. Slides are available to accompany this presentation on the IR section of our website. In today’s presentation, I will spend first three minutes running through our retail performance in the quarter sharing the progress we have made against our strategy and then close with guidance. With me this morning is Annabel Gleeson, our Head of Investor Relations and we will be very happy to take questions at the end. Turning to Slide 1, this quarter Riccardo-designed products became meaningful proportion of our offer building from 10% 15% of the assortment at Q4 to around 50% by the period end. The customer response to the new product has been very positive. We saw strong double-digit percentage growth across runway, summer and autumn 19 collections, compared to the equivalent collections in the prior year. Sales in the new product were ahead of the prior year in all regions with Chinese and Japanese customers delivering the stronger trends. Consumer reacted positively to the new aesthetic and the new Burberry house codes. Men's and women's benefited from the outfitting initiative with strong growth in tops and bottoms. And in accessories, we continue to build out our product architecture and increase emphasis on solid leather bag collection. Whilst the new product is performing well, lines of previous collections continue to weigh on the overall performance of the business, resulting in comparable store sales growth of 4%. Turning to the second slide, by region, Asia-Pacific led the growth delivering a high single-digit improvement year-on-year. Mainland China grew mid teens, as customers responded positively to the new product line and the country benefited from some repatriation of spend towards Mainland China. By nationality, Chinese spending globally was up high single-digit and marked sequential improvement on the low single-digit trends in the prior year. In Japan, we continue to expand our retail footprint gaining concessions in Hankyu and Isetan. On a comp basis, Japanese sales were up mid single-digit with increasing the benefit in this space, Japan grew mid teens as our new product resonated well with fashion forward consumers. Elsewhere in Asia, Korea grew low single digits while Hong Kong was lower year-over-year impacted by the protest. EMEA grew low single digits with the mixed performance across countries. The UK and Italy both delivered good growth while France was softer year-on-year. And the Middle East remained challenging impacted by the macros situation. And finally, the Americas was flat year-on-year. The U.S. grew low single digits but was offset by Canada which was impacted by later markdown period. Turning to Slide 3, this slide shows the major components of retail sales, and again, you can see the 4% growth in comparable store sales. Space was minus 2 in this quarter and we still anticipate space being flat for the full year. During Q1, we continue to invest in our store network, opening 9 stores, increasing 3 large news stores in China, IFC and IAPM in Shanghai, and China World in Beijing and two additional concessions in Japan. Offsetting these openings were 12 closures including four from the previously announced rationalization program. We also continued our store refurbishment program, which included completing store refreshes Canton Road and the Ocean Centre in Hong Kong. In aggregate, 23 of our stores are now aligned to the new creative vision and we remain on track to 80 stores to be complete by the end of the year. In total, our retail revenue was up 2% to constant exchange rate and finally currency had a 3% benefit this quarter resulted in reporting sales of £498 million, up 4% year-on-year. Now before I turn to guidance, I wanted to talk you through some of the brands highlight in the quarter on Slide 4. We engaged recently with consumers through our monthly B Series drop and the newly launched monogram capsule, which continued our investments in the Thomas Burberry Print to the new house codes. The monogram collection resonated strongly with consumers particularly with Chinese millennials. We supported its launch with high impact activation including pop-up stores, department store window takeovers. This was highly successful and driving brand heat reaching 120 million consumers globally and social post of the monogram product to grow higher than average engagement rate. More widely, our traction across the Instagram and WeChat continue to progress positively. We saw growth in the number of followers and double-digit gains in engagement rate per post compared to the previous quarter. And we continue to innovate on new platform like Tik Tok and Doujin in China and, for example on Doujin user generated content, which drove over 1 billion views by taking up our monogram challenge. In addition, key influences continue to organically endorse Burberry product and our editorial return on investment with higher than an already strong Q4. Turning to Slide 5, I want to talk about the top line dynamics for the remaining quarter this year. Over the coming months, the new product will build from around 50% now to around three quarters of our offer by the end of the financial year. In terms of comparable sales growth, mainline is expected to accelerate as the new product builds through the year. However, we anticipate this will be partially offset in the second half by reduced markdown inventory compared with prior year. Now turning to the outlook on Slide 6. With this top line dynamic in mind, we maintained our guidance for broadly stable revenues and adjusted operating margins at CER in full year 2020. As previously announced, we anticipate a more pronounced weighting of adjusted operating profits in half two relative to half one than the prior year. Cumulative cost savings of 120 million will be delivered by the end of the year and our CapEx program is on track. And finally turning to the currency, we now expect a 15 million benefit to adjusted operating profit and a 45 million benefit to revenue as a result to the further weakening of sterling against major currencies. And this compares with prior guidance of the headwind of 7 million as operating profit. Turning to the final slide. In summary, this was a good quarter in our multiyear journey to transform Burberry. We continue to build out the proportion of Riccardo's products in store. We continued on journey of aligning distribution to a luxury positioning and our new creative division. And we launch some monogram capsule and improved brand heat and consumer engagement sequentially. The implementation of our strategy is on track and we maintain our full year financial guidance. And with that, we're happy to take any questions.

Operator: [Operator instructions] The first question is from the line of Elena Mariani with Morgan Stanley. Please go ahead.

Elena Mariani: Hi good morning, Annabel and Julie. A few questions from me please. The first one is on the underlying moving parts of your like-for-like in the quarter. So I guess 50% of your retail sales are now growing strong double-digit and what about the rest? So how much is older collections and carryovers? And how much is remaining 50% was discounting and perhaps going to outlet? So, I’m trying to better assess whether part of your comp was driven by higher discounting activity or whether the level of discounting was exactly in line versus last year? And then the second question. You think to manage your expectations on the like-for-like in the upcoming quarters, suggesting it might not be progressing in a linear way. Could you help us understand why this might be the case, if the near collection is growing high double digits and then it's going to represent 60% to 70% of sales by the end of the next quarter, in theory you should see like-for-like progressing positively given also that the overall like-for-like comp days gets easier in the second half? And then perhaps one final question on the gross margin guidance, you haven't changed it and you still talking about how your profits in the second half of the year versus the first half, but how should we tie in your gross margin guidance versus what you are expecting in your top line? Should we see the, how your gross margin decline in the first half, the reflection of higher discounting and then in the second half there should be less gross margin down side because you're going to discount less? So if you could help us understand this better, it will be really great.

Julie Brown: Okay, thanks, Elena, just went through the questions. So, the first one relating to the underlying like-for-like in the first quarter, the strength has really come from Riccardo's collections in the first quarter. And as we mentioned, summer '19 the pre-collection for autumn and the runway have performed very strongly, so we delivered a strong double-digit performance. It's not been driven by the discounting. Obviously, outlets were always a proportion of our sales. We don't disclose the amounts. But the success this quarter has been driven really by the strong response to the new product. And within the number, as we mentioned the older line previous collections, and the replenishment business is going to a softer period and facing declines. What we're doing now in this next phase is will be rebuilding some of the main Burberry icons and to support that replenishment business getting forward. But the focus today has been on establishing the new collections and establishing Riccardo as the great designer of this year. In terms of the like-for-like progression, so Riccardo's product as a percentage of our sales at the end of this quarter was 50% as we mentioned, we expect it to be around 60% to 65% by September and 75% by the end of the year. So, in terms of overall what was lagging and in terms of forecasting through the quarter is the main sale period for Burberry and major luxury, the post main season. So, we have the sell periods in Q1 and also in Q3 with Q3 in the most significant. And what was lagging is that this year we will have reduced inventory going in markdown in Q3, and so basically for the for the purpose of modeling, we're guiding towards the constant Q3 in aggregate across all channels and all likelihood being lower than Q1, due to this factor. And in terms of the gross margin guidance, the major thing that we highlighted is the investment that we're making in products. So, it started last year with the investments in design and the new product and so the gross margin was under pressure in the second half of last year already from this feature, and we anticipate greater degree of pressure in the first half of this year for the same reason. When it comes to the second half of this year, that impact will be more muted because the last thing already investment period and half through as the prior year, so absolutely no change to the guidance on gross margin. We are anticipating headwind of around 100 basis points, largely due to product investment and we expect a more pronounced effect of this in the first half, basically as we guided.

Elena Mariani: And two very small follow-ups, the first one is that, if I understood correctly then we should expect like-for-like to sequential improve Q2 versus Q1 given that we're going to have more products from Riccardo in stores and then we might see a bit of acceleration in Q3 and then a re-acceleration in fourth quarter. This is sort of trend we should expect?

Julie Brown: Yes.

Elena Mariani: And then last point, on the gross margin, so by next fiscal year then we should start to see an improvement instead because you're done with your investments in new products and so you would expect to see positive effect on the gross margin coming from perhaps the growth of leather goods kind of new products in general. Should we model it this way?

Julie Brown: I think we'll give further guidance in May when we come to the gross margins, specifically, heavily depends on the product mix.

Elena Mariani: Yes.

Julie Brown: And in the first few years, we are investing in the leather franchise, we are elevating the leather that we're using and the designs that we using. But because we want the value to perceptible and that's our number one objective, we are not putting the prices up commensurately and in the end we say we're implementing the strategy. So, I would see a recovery in gross margin as we gain scale in this area, but it won't happen immediately. So, we'd encourage you to model that gross margin headwind for period of time until we guide it away.

Operator: The next question is from the line of Thomas Chauvet of Citigroup. Please go ahead.

Thomas Chauvet: Good morning, Julie, and I have two questions please. The first one on the Riccardo's strong double-digit LFL, would you be able to single out some categories collections or price points that did particularly well? As you've mentioned Julie, the replenishing business is still weak. I understand Tisci hasn't refreshed the heritage trench coat, that's a significant part of your selling profit, why is that? And when can we expect him to modernize perhaps this important category? And secondly on Greater China, you've mentioned the benefit from repatriation of demand into the mainland driving that mid-teens fell. With regards to Hong Kong, what are your teams saying on the ground? Are they concerned about the situation, about the future traffic? Do you have already a contingency plan in place on this profitable market in terms of I don’t know staffing levels, store closures, rents for negotiation, I think you've took some action in 2015 after the student protest of the autumn 2014 in Hong Kong? Thank you.

Julie Brown: Okay, thank you. So, Riccardo's products as we've mentioned is growing strong double digits across the two collections and the runway that is launched. We've actually seen positive trends in all regions and we continue to build out the solid leather bag architecture, and we’ve seen the new product resonate very strongly in particular with the Asian populations and very strongly with the Chinese. And wholesaler also seeing significantly higher sell-through than previous collections and the sell-in as the main market recently with wholesale is very encouraging. In terms of specifically product categories, the apparel range is going very well so women’s and men’s apparel are seeing double-digit growth. And what we see across, Riccardo had the persona of the man and the boys, the women and the girl. And we've seen a success across the all of the categories including the younger generation, which has been very positive. And just moving onto the second part of your question related to the heritage trench, Riccardo oversaw that the time we were launching it, but it only had a modest impact. He will be turning his attention to some of the iconic Burberry styles as we approach this next year. But his first focus, as we sure everybody understands as being on the main collections and on the runway. China, you’re absolutely right, we've seen a mid-teen growth in Mainland China, a very positive response from this Chinese consumer. And what we’re also seen because of I think of a lot of support local consumption, we’ve seen a repatriation of spend away from some of the other Asian countries towards China, which overall, I mean the key metric we look at is the Chinese as a nationality. And here again, we’re very pleased with the trend because we were on a low single digit growth last year, and we've just delivered a high single-digit growth in China or the Chinese globally. So, we're happy with that. Coming onto Hong Kong, clearly, we keep the situation under very close review. And we did see an impact due to the protest. We saw an impact on the Alexandra House on Pacific Place and we closed -- we've monitored the situation and we decided to make closures to the stores to protect our employees. So, they were closed in total for about five days. So, it does have an impact on Hong Kong performance in the quarter, not that material at the group level, but we have to keep the situation under close review. No change really to the rents. It happened a few years ago because of the downsized with the business with the economic cycle, but no really major change to the rents to-date.

Operator: The next question is from the line of John Guy with Mainfirst. Please go ahead.

John Guy: Thanks so much, good morning, Julian and Annabel. Just following on from Thomas's point there, I'm looking at the performance of the non-Tisci products and during the first quarter and you've mentioned that replenishment and older collections were in decline. Could you maybe sort of flesh out a little bit in terms of looking at the replenishment versus the older collections and maybe quantify that? And the second point is, I think, the average penetration of Riccardo's is product and over the quarter was around 35% appreciated, you ended at 50. Can you give the scale of the performance of Riccardo Tisci's and sales within the accessories category during the quarter? And can you make also some sort of, I guess, some a little bit more detail comment around the performance of the refurbished stores against the non-refurbished stores? Thanks very much.

Julie Brown: So, in regard to non-Riccardo product, we've got a number of categories within there. We've got the re-plan lines we've got the older collections. It's quite normal to expect to see a decline in older collections as fashions change. We plan as I mentioned on the call, we're in the process of rebuilding the Burberry re-plan icon and that would be the next phase of our transition that Riccardo will turn his attention to. So, at this stage in our transition, we completely expect it is to be the level of performance. In terms of the average penetration of 35%, yes, that’s about right. We do see variability in that percentage across the store network. We put prioritization on the flagship stores and stores in the major cities so they can drop rates on a higher percentage. But basically, yes, it was 35 percentage and by the end and we anticipate that moving to around 65 by Septemberm, and absolutely in line with guidance 75% by the end of the year, and not what draw the success in the quarter. Just in terms of the categories and the sale of Riccardo's product, and as we've mentioned, the leather franchise and accessories or leather bags within that franchise, we anticipate this being a longer journey, and partly because we are elevating the products in this category, investing in solid leather shapes, investing in high quality leather, investing in new designs and fabrications. And therefore, we anticipated this category being under some pressure in these initial phases and we've guided to those within our guidance. We didn’t guide specifically by category on what's Riccardo's and what isn't, but it's not dissimilar to the overall shapes that we've got. And then in terms of store refurbishments, we are really pleased with how this is progressing. As you know, we've got an ambitious plan and still refurbishment we plan to reach 80 by the end of the March 2020. And the reason we're focused on this is because what we see is, when we have three ingredients together, we see an inflection in the performance. And one is refurbished store, two is a larger proportion of Riccardo's product in the store, and three is a retail excellence program having run through and raising the capability level of our team. And when we see three together, we see an improvement, we track it rigorously as part of our KPI dashboard internally, but we don’t disclose the performance of the store externally, but we do see a good return on our investments.

John Guy: Thanks Julie, just maybe following up on that. I mean over the course of the quarter and for the entire quarter looking at the sales densities, they seem to have gone out by about a mid single-digit rate over the quarter and that I would expect to be probably running at a double-digit pace for those refurbished stores. Would you be able to sort of confirm that’s the kind of sense that you see based on those three magic ingredients you've just mentioned?

Julie Brown: We do overall an improvement in the productivity of those stores when we've got the three factors in play, but we don't disclose sales densities as you know, John.

Operator: The next question is from Anne-Laure Bismuth with HSBC. Please go ahead.

Anne-Laure Bismuth: Anne-Laure Bismuth from HSBC. I have two questions, please. So on your plan also, 80-store refurbishment plan for this year, is there any particular phasing for the next three quarters? And then regarding the store openings, so you opened nine stores in Q1, three in China, can you give us -- can you remind me of what is the plan for this year please in terms of overall openings and the store openings in China? Thank you.

Julie Brown: Okay. So, in terms of phasing of the stores, we would anticipate the second half to have a higher degree of store refurbishment. This is our plan at the moment. We have done now 23 to-date and we would expect to pick up in the second half and largely the teams have gone through the planning stage and they can move towards execution. We're still on track for delivering eight by the end of this year. In terms of the store openings this year the plan going forward…

Annabel Gleeson: So, we don't guide specifically on number of stores, but what we have said is that obviously, space for full year contribution to retail sales will be broadly stable and with minus one in the first half and plus one in the second half.

Operator: The next question is from the line of Melanie Flouquet with JP Morgan. Please go ahead.

Melanie Flouquet: Yes. Good morning. Thank you for taking my questions. So, first one is, I was wondering whether you can help us understand a bit better the markdowns impact. So the fact that you're aiming to reduce the markdown activity and have already done so in quarter one a little bit. So, may be you can share with you, I don't know, whether you can directionally, you know what sort of percentage in total whether markdowns and when you're aiming to get you it over the course of the next year and two year in your business? That would be my first question. So, the second one is on handbags and when did you expect that the pressure on the former collections stops and we start seeing the most recent preference positive momentum filtering into your numbers? I know you said it with longer, but when is that in flexion point in your mind? And my third question is on Europe and local consumer. We find this, well, the U.K. was particularly strong helped by tourism inflows, so the Europe consumer just to still be pretty weak in this turnaround. What are you aiming to do to revitalize this market? In particular, I appreciate the Americas well really take longer because there are some image issue that are stronger in U.S., but that was interacted in the European market? And my last question is, can you share with us how the Hong Kong is for you percentage terms and what was actually the performance in this quarter? Thank you.

Julie Brown: Okay. So first of all, in terms of the markdown impact. To start with, our strategy has been really clear about removing non-luxury distribution from our network, and this has been focused initially on wholesale with some outlet closures. And simultaneously, our objective is to drive full price, mainline and digital growth, and therefore we expect over the years of the strategy to have a regime elements of markdown. Last year, we did have -- we’re obviously going through a creative transition, and in the third quarter particularly, we were managing those inventory levels accordingly. This year, what we’re trying to do is be as open and transparent as possible and assist with the guidance around the comp over the quarters. And this was the main sales period in our industry appearing in the third quarter, predominantly, we’re really flagging to use it. We have reduced levels of inventory going into markdown in Q3. And this was first stage of modeling we’re anticipating that the Q3 comps in aggregate will probably be lower than Q1 due to this factor. Over the next one to two years, we’d expect this further trend to continue with more focus on mainline and digital full price. If we move now to the question about the handbags and the collections becoming positive, you know, we’ve always said that in terms of the leather we're building out the architecture, we're using much more solid leather shapes as opposed to canvass-type material, and we definitely focused on the value being set both on the consumer hence one of the pressures on the growth margins. And we have got the headwinds from some of the oldest styled bags and some of the previous collections, and we anticipate that remaining headwind probably during the course of this year but expect to see some signs of improvement in the next financial year, but clearly we'll keep you updated on the progress. In terms of the tourism flow in Europe and how we intend to revitalize Europe. In intent of our brand and the image of our brand, when we did the brand work couple of years ago now, our brand was the strongest in Asia. And as we mentioned Melanie, we had a weaker positioning in the U.S. wholesale presence in non-luxury. And what we've seen as the traction, as the traction is coming through Asia. We’ve also seen an improvement in European performance. You've mentioned about Europe, so in terms of Europe overall, last year we were low single-digit. We've had a slight improvement in this quarter and we've had more marked improvement coming through in the UK probably impacted by tourists. The revitalization of Europe is very much positive, the revitalization of the Burberry brands holistically. So, the use of social media, the use of influencers, the collections of B Series, the Monogram collection recently are all designed to reignite heat around the Burberry brands and that has been successful as you know we’ve seen double digit increase in the levels of engagement around this, and Europe is very much part of the activation campaign. The store refurbishment program runs globally with the focus also on Europe. So, we do expect to gain traction although I think inherently it is more difficult market and so Asia at the moment. In terms of Hong Kong, Hong Kong is 6% of our sales and the performances in Hong Kong has generally been somewhat mixed largely because we have tourists flow going to Hong Kong and we recently have the impacted the protest that we mentioned in answer to John's question earlier. And we have had some store closures relating to those protests as we mentioned five days in total. So yes, Honk Kong is I think reasonable, I would say, it's reasonable, but it still slightly in decline in this quarter.

Operator: [Operator instructions] The next is from the line of Rogerio Fujimori with RBC Capital Markets. Please go ahead. So your line is currently open.

Rogerio Fujimori: Could you please -- two questions, please. Could you talk about the ASP trend in Q1 with the greater visibility of Riccardo's new collections? My second question is on e-commerce. I appreciate, not disclosed, but if you could give qualitative idea of how online retail growth in Q1 '20 compared to online growth in Q1 '19 or Q4 '18? And if you could talk about the performance of Burberry.cn would be helpful. And my third question is just if you could a talk a little bit about what do you see in terms of U.S. luxury market trends in the June quarter versus the March quarter?

Julie Brown: Yes, sure. So, first of all in terms of the ASP trends, we've seen Q1 driven largely by at mix, product mix, and in certain categories, it has done extremely well. As we mentioned, apparel across men's and women's and little volume. So it comes from many sources. No major changes to like-for-like crises, but obviously, there has been changed to the product range due to effect to the mix performance. In terms of e-commerce, the performance in the stores led by China and we see stronger double digit growth targeted, through targeted innovation such as social gifting on WeChat that we gave launch WeChat mini program on Chinese's Valentine Day is one example of what we've done. We continue the success in generating integration to the B Series and the monogram program we're very successful in terms of exclusive product being available and on Instragram and then on WeChat. And as you probably know, we received prestigious Webby Awards in April 19th for the best social content within fashion and beauty. And recent innovation also on the Chinese platform with the use of Doujin where we had the monogram challenge, and again, that was reaching 1 billion views for you to generate innovating content. But I think it would be really successful in that space. In China, the digital performance is being very strong equally across burberry.com and also party providers, so both are being performing extremely well. In terms of U.S. luxury trends, we have currently seen softness in tourist flows in to the U.S. And particularly, when we look at airlines, flight bookings, et cetera from the Chinese, we've seen a weakening of tourist flows in the Chinese. It's largely a domestic market. And we actually saw, when we look at U.S. alone, not Americas. We actually saw an imprisonment from Q4 to Q1. So, we were slightly negative in Q4 and we delivered a low single digit growth in the Q1. So, we are starting to see an improved traction in the U.S. market.

Operator: The next question is from the line of Peter Testa with One Investments. Please go ahead.

Peter Testa: I had three short questions, please, like one at a time. When you get to the end of the year, you have about 25% that is not on Riccardo Tisci product. Can you give a sense as whether there's any particular category concentration of what will remain at that point?

Julie Brown: Yes. Sure. So, it's really the need to Riccardo to develop the replan lines, so that we have new icons to the future. It's really building across these categories. I mean there maybe more focus there on the trench range, but it's building across the categories.

Peter Testa: Okay. And as Riccardo's product, say, it takes up a larger proportion of a range, is there a point or a threshold of Riccardo Tisci density that pulls through the balance of the range probably because maybe then what's left is a little more simple but also just a general category is pulled by his products, so people buy the balance of the category as well. Do you see thresholds points there?

Julie Brown: We haven't seen that particularly. I think we haven't seen that.

Peter Testa: Okay. So if you crosses, say, 60%, 70%, it doesn't -- you don't see necessarily a pull, say, the simple black shirt or the trouser matching the top or the sort of thing?

Julie Brown: Not at this stage. His collections -- they've been quite distinct from the previous replan line and the previous collections. So, no we haven't seen this sort of pull through factor at this stage, but I think his corrections build. There could be halo effect from that, but I don't think it would be worth calling it out at this stage.

Peter Testa: Fine. And then the last question is just on the gross margin. You've talked about the investment made last year and primarily in leather and shoes impacting gross margin rolling across -- annualizing through the first half of this year and then the base effect balance is off. I was wondering, on the other side, if you could give any comment about how Riccardo Tisci-designed product, which is not so much affected by this, has an impact on gross margin through content or just through the heat and newness, maybe pulling better price performance, better ASP performance mix you highlighted earlier, does that have a -- and is that having an opposite or different effect on gross margin?

Julie Brown: Yes. At this stage, what we're see is that Riccardo's product across the board at this stage, particularly in the leather range is at a lower gross margin due to the investment we're making and the value being susceptible to consumers and in particularly new consumers. So, there is increased investment in design fabrication in order to elevate that product and at this stage we're being very careful about moving the price accordingly. So you've got this gross margin impact coming from the new range.

Peter Testa: Alright.

Julie Brown: As you say, the second half, that becomes more muted as we annualize that.

Peter Testa: Okay. But the first -- second half last year, you had little Tisci product that's more leather. So is that then in the second half being the higher Tisci product being basically set off by lower markdown?

Julie Brown: We did have an impact. Even though Riccardo's product launching in the final month. The design charges are going through the P&L ahead of that, so we did have quite an impact on the gross margin in the second half of last year, and as you say, the markdown does have an impact. So that will give us some gain in the second half of this year also yes.

Operator: The next question is from the line of Charmaine Yap with Redburn. Please go ahead.

Charmaine Yap: Hi there good morning thank you. Two questions please the first one. I wanted to clarify on your markdown strategy. There’s an injury that you will be protecting, all of Tisci's product from going into markdown and particularly, the leather bags?

Julie Brown: I mean, we're going to take pragmatic decisions around it. We’re not isolating any particular part of the range. We’re just saying that we will have reduced inventory. We've had improved sell-through this year compared with last year of the range and we just expect to have reduced inventory, but we’re not going into the specifics of what we’re marking down and what we’re not.

Charmaine Yap: Okay thank you. And also my second question will be, can you share some of the changes that you've done in terms of your store refurbishments other than the optical changes to the aesthetic? For example, are you deploying last part of density, maybe reallocating staff differently or reallocation of space? Is there anything you can share there, please?

Julie Brown: Yes of course. So, what we’re doing is, we currently designed the new look of the stores using a range of colors as you’ve probably seen, such as the honey and the pistachio. As family there, the pistachio from the English rose and the honey from the trench. We have given more space allocation to the leather range so you've probably seen, if you’ve been into some of our main store that there is focus on leather, usually on the floors as you walk in. And we’re often using furniture that allows the consumer to test to the bag, which is ultimately they want to do, not to say on shelving on the wall, but actually there, put on a table and test it. So, we’ve organized stores accordingly relating with that. We also go through you know the zones in the stores in terms of the red zones, the blue zones and making sure that the product is in the right location for the consumer for ease of the consumer. We've also done a huge amount of work on the back of house and making it easier for the retailers associate to ensure you know a more streamline service to the consumer, and reorganizing showrooms and in particular in Asia that's been a quite a major project, and also driven, as you know the retail excellence program, which is designed to give our consumers a more elevated experience when they come into Burberry store.

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: Okay, well, thank you very much for joining this morning's call. Our next update is on 14th of November with our half year results and we look forward to speaking to you then and if not before. Thank you.