Earnings Transcript for BRBY.L - Q3 Fiscal Year 2018

Executives: Julie Brown - COO and Financial Officer Charlotte Cowley - Head of IR

Analysts: Helen Brand - UBS John Guy - MainFirst Thomas Chauvet - Citi Mario Ortelli - Sanford Bernstein Elena Mariani - Morgan Stanley Ashley Wallace - Bank of America Merrill Lynch Antoine Belge - HSBC Zuzanna Pusz - Berenberg Rogerio Fujimori - RBC Capital Markets

Operator: Ladies and gentlemen, welcome to the Burberry Third Quarter Trading Update Call. My name is Todd and I’ll be coordinating your call today. [Operator Instructions]. I will now hand over to your host Julie Brown to begin. Julie, please go ahead.

Julie Brown: Thanks very much. Good morning and welcome to Burberry’s third quarter trading conference call which have accompanying slides that are available on the IR section of our Web site. I’ll start this morning with some brief remarks on four areas; first, a recap of our strategic vision that was shared in November; second, a quick review of our retail sales growth in Q3; third, our operational progress to-date; and finally, the outlook. With me this morning is Charlotte Cowley, our head of IR and will be happy to take your questions at the end. In November, we set out our plan to establish our position firmly in luxury by reenergizing our product, communication and customer experience. This plan is underpinned by our operational excellence and people strategies. This comes in a context of a changing customer who want the combination of luxury and fashion and this means frequently refreshed by high quality products with creativity across all categories. We have a clear strategy to address these changing dynamics and we’re excited by what the future holds for our business. We’ve begun to make operational changes; however, this is a multiyear program and it will take time to implement Burberry’s transformation. As we said in the first two years of the plan, we expect revenue and adjusted operating profit to be broadly stable at constant exchange rates with growth from full year 2021 and will remain strongly cash generative throughout. Now before I update you on operational progress, let me take you briefly through our retail performance in the third quarter. Underlying revenue was up 1% at constant exchange rates and down 2% at reported to £719 million. Comparable sales were up 2% with Asia Pac delivering mid-single-digit growth percentage broadly consistent with the first half. Mainland China delivered slower growth as we annualized the staff as the rebound in Chinese spending and with reduced promotion activity in the quarter. EMEIA saw a low-single-digit decline percentage and as expected, the UK declined given the exceptional 40% growth in spending in the same period last year. This was boosted by high tourist inflows which continued through the year. Excluding the UK, EMEIA performance was consistent with the prior quarter. In Americas, we have a low-single-digit percentage growth which is also in line with the performance in the second quarter. And in addition to these geographic trends we experienced a headwind from AUR due to product mix. Turning to our operational progress. Over the last couple of months since we announced our strategy we have begun to make operational changes within Burberry and we’re pleased with the early progress. Firstly on product. We continue to see the fashion content within our offer outperform. We are preparing for the start of the transformation of our leather goods offer with new styles launching from spring 2018. And we’re pleased with our expanded outfit offer is showing positive early results with more customers buying complementary trousers and skirts in addition to tops. Secondly on communication. We’ve creatively collaborated with key influences such as Christopher [ph] on social media platforms and with Blondey McCoy who created three large scale outdoor murals in downtown Manhattan for the Christmas season. And thirdly, the customer experience. In retail, we are piloting a new in-store digital sales associate tool with enhanced functionality such as allowing product searches by image or bar code and the ability to track inventory across our global distribution network. In wholesale, we have started to have conversations with our U.S. and European wholesale accounts to explain our brand ambitions and our wholesale aspirations and to begin the discussion around the location and presentation in our points of sale. And as an example of deepening relationships with digital third parties, we collaborated with NET-A-PORTER creating a 14-piece exclusive capsule. Finally, underpinning all of this work is our focus on operational excellence and people. Burberry Business Services in Leeds opened in October as scheduled, a key new way of working for Burberry. We’ve already sold close to 200 roles ahead of our plan enabling the center to deliver elements of work across five major functions and some of our core end-to-end processes including purchase to pay, sales order to cash and hire to retire. We also launched a global engagement program to equip our employees with the knowledge and the tools required to deliver our strategic priorities. Finally, turning to guidance. There is no change to our outlook for operating profit at constant exchange rates and we are on track to deliver the 60 million of cumulative cost savings in full year '18. We continue to expect currency to be a 20 million headwind to operating profit in full year '18 with the benefit of around 15 million expected on the top line. In full year '19, our initial indications are that currency will be a £25 million headwind to operating profit versus full year '18. You will have also seen that we’ve made a preliminary comment on the recently announced U.S. tax changes. We will provide more detailed information at the prelims in May, but currently estimate that we will see a one-off non-cash tax charge of 10 million to 15 million in our full year 2018 income statement relating to the revaluation of net deferred tax assets and this will not impact adjusted EPS. There’s no change to our guidance for the effective tax rate on adjusted profit for this or the after years. And finally just to update you on the share repurchase program, we have repurchased 242 million of the 350 million total share buyback that we’ve committed to complete by the end of March 2018. To conclude, there are two phases to Burberry transformation; build the foundation before accelerating and growing and we’re right at the beginning of this multiyear journey. There is a lot of work to do but we are pleased with the early progress we’ve made and we remain focused on our goal of positioning Burberry firmly in luxury and delivering long-term sustainable shareholder value. And with that, Charlotte and I, we’re happy to take any questions.

Operator: Our first question is from Helen Brand calling from UBS. Helen, please go ahead.

Helen Brand: Hi. Good morning, Julie and Charlotte. The first question please is on the Chinese consumer. Would it be fair to assume that that nationality globally was flat in the quarter after around mid-single digits in H1? Obviously you’ve had some tougher comps but peers still seem to reporting pretty strong Chinese consumer trends, so what do you think is the reason for the slow down? Secondly, just wanted to see if there were any actions in terms of the turnaround plan since we all last spoke particularly with respect to timings and scale of the wholesale door or retail closures and also any refurbishments? And any update you can give us on pricing architecture of the offer and how is that changing? Finally, no updates and no release today on the search for Creative Director. How soon before you think you can make an announcement on that? Thank you.

Julie Brown: Okay. Thanks, Helen. So in terms of China – taking your three questions, in terms of China we did see a deceleration in Q3. We saw very, very strong growth in the first two quarters but we saw a flatter picture in Q3. Obviously we were up against some very tough comps. So the tougher the second half of the year got a much tougher base we were actually in terms of Chinese consumers we were actually negative in H1 2017, positive in the second half. The Chinese consumer overall – obviously the population is both spend at home but also to spend abroad. And in terms of spend at home, it was impacted by the fact that we reduced promotional activity ourselves in China. In China, the Burberry brand is extremely strong. The brand is very strong, so we decided to reduce promotional activity and that impacted our – for the spend at home local Chinese results. And in terms of the traveling consumer, we saw a reduction in traveling consumer trade across the world and in particular in the UK was impacted by that. So that’s China. In terms of the turnaround plan, no major change at all. Obviously the strategy was only announced about nine trading weeks ago. No change to the plans we’ve got in wholesale retail. So we’ve had very good early dialogue with the wholesalers both in the U.S. and in Europe in terms of how we position our brand in the store and the point of sale and those initial discussions have gone very well, but no change to any of the guidance really that we’ve given in that regard. We’re still anticipating sort of mid-single-digit reduction in wholesale and the retail footprint we’re broadly happy with it. We don’t anticipate any change in this space. The store refresh plan that we talked about in November is progressing. The concept has been approved and we expect that to rollout towards the end of this financial period. In terms of price architecture, no change to the plans really at all. We expect to see a change – there will be no change to existing prices as such. But what we expect to do is in particular in emphasizing more leather goods and handbags which we expect to start from the spring of next year. There will be a degree of impact on price as we go through the five years of this strategy. But I would emphasize that these things do take time. This is a multiyear program and it takes a while to build a full leather goods offering that we’ve got in mind. In terms of the third element, the creative, obviously we’re pleased with the progress. Marco is leading the search and that’s progressing well, but nothing to announce in terms of timeline at this point. And obviously the time at which the person would join would depend on non-compete periods. Important to say that Christopher is still leading the February runway show. He leaves the board at the end of March and will continue to support us as needed throughout 2018.

Helen Brand: Great. Thank you. Just a follow up on refurbishments. Any ideas on which doors you plan to go forth first and any impact on fiscal '19 numbers at this stage?

Julie Brown: So in terms of the refurb program, we’re focused on the major cities. We certainly expect to see Bond Street being one of the first ones. So yes, the major cities are the area we’re focused. We’ve got eight in line with our first wave and we’re progressing that according to – but it’s the major cities where the big influences are in terms of Bond, New York, et cetera, LA. And the second part of your question to the physical space, I think in terms of physical space we expect no change in that space. We’ve had a minus 1 this quarter, but it’s largely just due to two mainlines closing, two opening. So it’s just the titration of the space as we move in some cases to more elevated positions which is our intension as part of the strategy.

Helen Brand: Great. Thanks so much.

Julie Brown: Thanks, Helen.

Operator: Our next question is from John Guy calling from MainFirst. John, please go ahead.

John Guy: Thanks very much. Good morning, Julie and team. A couple of questions please, maybe just starting with the 2% NFO, if you could break that out volume and value contribution? It seems like the value contribution was obviously negative. If you could comment on outerwear, it does seem that besides I think some specific collections like the doodle sketch example which I think was done well and outside of that within the heritage G&A outerwear, it seems like there has been a sort of deceleration. So could you comment on how you see that particular landscape vis-à-vis the competitors and your price points? And then on China maybe just thinking about Mainland Chinese growth, you’ve annualized the impact of Beijing. Mid-single digit does seem a little bit disappointing to be honest. Could you maybe just talk about how much you’ve reduced your promotional activity in China? I think you’ve made earlier steps to affectively cut out some of the promotional side of the things and raise – cut prices in some markets, raise prices in others namely in Hong Kong and other areas. What exactly are you doing in Mainland China today? Thanks very much.

Julie Brown: Okay. Thank you. So just in terms of the 2% comp, as you say, we won’t break out the sort of specifics of volume and value. But the AUR impact in the quarter did have a meaningful impact in the context of the 2%. Volume growth was actually underpinning it was strong and we’ve seen very good growth from our customers. From our elevated customers we’re seeing good growth from existing customers. In terms of other elements of the equation, we saw continued pressure on footfall overall, but our conversion was good and in particular it was very good in Asia Pac and then the U.S. EMEIA was somewhat challenged by the tourist impact in the previous year but conversion in the other two regions was very strong. So yes, the AUR impact is there on the basis of the 2% comp but we won’t give out the individual numbers. In terms of the outerwear performance, we were expecting a slight movement in the quarter and probably will also happen in Q4 as well. We are pleased actually with some of the innovative areas of the outerwear range and how well it has performed. So you mentioned the doodle sketch and we will be continuing to refresh the outerwear range coming in from March. And as you know we’ve had very good success with the tropical gabardine range that we launched about nine months ago now. We are finding generally that newest innovation is what is driving the consumer and the market and certainly the range in terms of puffers and quilts to do very well in this quarter also. Just moving on to China in terms of what’s happened there with the mid-single digit. The first thing to emphasize with China, this is the country as opposed to the population across the world. In terms of the country, we’re actually really pleased with how we’ve performed overall in China. We have got just into double digits growth rate if you look at the year-to-date numbers. So I don’t think we should take single quarters indicative of what’s happening. We’ve overall got a very good result year-to-date in China. In terms of specifics that have affected this quarter, we had price reductions made in September and November last year. So that obviously has an impact on AUR. And we were up against a very tough comparator base both in China and with the Chinese population because the population as a whole were influenced by Sterling weakening and coming to the UK to shop. So this is why one of the reasons we saw a deceleration in the Chinese as a nationality through the three quarters. Overall, Chinese and nationality year-to-date we’ve seen mid-single digit growth globally, so positive overall in that sense. I would stress that China is still – the Chinese are still a very important part of our business, still 40% of our business and therefore a much valued customer group.

John Guy: Thanks, Julie. Maybe just on that, I think your comps were high-single digit in Mainland China, double digit excluding Beijing last year, so I appreciate that there’s I believe a comp effect there. Just going back to the outerwear, doodle sketch and tropical gabardines aren’t really going to drive your full trench coat offering. So I’m just trying to get a little bit more granularity please around the fact that – it seems as if outerwear was down mid-to-high single digits. Could you just confirm that please?

Julie Brown: No, it wasn’t high single digits. We can come back to you with the number, but no.

Charlotte Cowley: Yes. And John I think what we’re saying is that we are very pleased to see the positive results from the outfitting. So clearly the fact that tops, bottoms, trousers, skirts performing well but clearly they are and intend to be a lower price point than something like a trench coat or a bag both of which are categories where you’ll see more innovation coming in the future rather than in next quarter.

Julie Brown: Yes. I think John, the final thing --

John Guy: Thanks very much indeed. Sorry, go on Julie.

Julie Brown: I think I may have mentioned it with Helen’s question but we know we did have this promotional – reduction in promotional activity. We haven’t given the exact percentage that impacted the results in China but we wanted to protect the strength of the brand in China and therefore did have reduced promotional activity which affected the growth. The mainline remains strong. Obviously we don’t split mainline and other data, but the mainline was very strong also in the third quarter in China.

John Guy: That’s very helpful. Thank you very much indeed.

Julie Brown: Okay.

Operator: Our next question is from Thomas Chauvet calling from Citi. Thomas, please go ahead.

Thomas Chauvet: Good morning, Julie, Charlotte. Three questions please. The first one coming back to China and the reduced promotional activity, are there any other markets that you’ve identified where you’d like to follow a similar strategy maybe as part of your five-year plan and your brand elevation strategy? Related to that question on promotions impact on LFL, could you perhaps give us an indication whether at group level outlets have generally performed better in the Christmas quarter than full price stores or maybe slightly differently whether your full price store LFL globally were positive in the period? And finally on your unchanged FX headwinds of £20 million that was struck at the end of December, obviously the plan was 5% lower than current spot for the U.S. I think nearly 10% lower for the euro. Could you give us your maybe best estimate for FX in FY '18 based on those much higher spot rates and perhaps comment a little bit on FY '19 at least directionally given we’re not going to hear from you until May and your full year results? Thank you.

Julie Brown: Okay, so if I take the China promotion and other market if Charlotte could take the promotional impact on LFL. I normally wouldn’t give my stage on that. And then thirdly, I can come back on exchange. So in terms of – yes, a key part of our strategy is clearly as we explained to remove or reposition some of the non-luxury elements within our distribution and clearly that goes hand in hand with our own retail network and what we do with promotions in our own retail network. So what we want to do is keep all the channels in complete synchronization through retail through to wholesale. So we would expect over the course of the plan to reduce our own promotional activity. In this quarter in particular we were only really calling out China because in the U.S. we decided to move really with the peers in this period because peers went early with their sale period this time. So yes, I think over time you’re going to see us reduce promotional activity in line with the changes we’re making from non-luxury elements to the distribution channel. So the second question, Charlotte, for you.

Charlotte Cowley: Yes, we’re not going to start digging into those different – performance of the different channels in retail in terms of the comp. Clearly all the strategies are looking – focusing on driving our mainline performance and clearly firmly positioning ourselves in luxury. So that’s where we’re really spending our time.

Julie Brown: Yes. Moving on to foreign exchange in terms of the overall impact. Obviously what we’ve got in the results is the effective rate which we’ve included in the appendix. And then we run the final quarter through at the end of the period spot rates to see the impact. This is where we’ve seen no change to the previous guidance which was the minus 20 on profit. 15 positive on revenue because we noticed some models were a little bit out on that, so we decided to try and provide a bit more guidance on the revenue foreign exchange impact which is 15 positive. Next year we’re giving this heads up that we’re expecting minus 25 on the profit. This is coming from a combination of an adverse revenue movement together with hedges rolling off and further adverse cost of goods movement from exchange partially offset by a benefit from expenses. We haven’t run the exchange model again – I think we operate with about 28 currencies. We haven’t run the exchange model again for the latest spot. We’ve only run it at the end of December. But we could update you further should exchange rates move again more seriously but we wouldn’t anticipate doing that at this stage. Obviously we’ll provide further guidance in May.

Thomas Chauvet: Thank you, Julie.

Julie Brown: Thank you.

Operator: Our next question comes from Mario Ortelli calling from Bernstein. Mario, please go ahead.

Mario Ortelli: Good morning. I’ve got three questions for me. The first one is on the appointment of the Creative Director. You mentioned that the process is ongoing and the potential candidate can also have a non-compete agreement with the company. In the industry it’s not uncommon to see a [indiscernible] leave period for creative designer of one year. So can we expect that your company will not have a Creative Director even for all year '18 and the appointment will be at beginning of '19, or we should expect by far faster timing? The second is on wholesale. You mentioned that you have got very positive talks with the wholesaler regarding the requisition of Burberry. Can you give us an idea on when you think that wholesaler will increase? So after the appointment of the Creative Director when you will have these new handbags because it seems that now the plan is for a progressive decline of wholesale sale. The third question is about AUR that was a drag on this quarter result and from what I listened from your words, maybe I’m mistaken especially from outwear and leather goods, can you tell us if I’m right on the product categories and this AUR decline in which countries or geographies was especially strong? Thank you.

Julie Brown: Okay, no problem. So if I take the first two, creative and wholesale and then Charlotte can come back on the regional distribution, that’s the AUR point. In terms of the creative, we have no further comments really on that. The process is underway. We’re making good progress. It really does depend on the non-compete. In terms of what we’ve got in place in the meantime, clearly we have got a strong design team that currently works under Christopher. Christopher will be responsible for the February runway. That’s making great progress and continue to support the organization. But I would refer to the strength of the design team that Christopher has built over the years and clearly we’ll announce the creative as soon as we possibly can on that. I think it’s really important to say that Marco’s emphasis is to find the right candidate. So not to feel the pressure of time but to find the right candidate for the business because it’s such an important decision for the brand. In terms of the wholesale and the timeframe, yes, we will remiss over a period of time because the wholesalers are a really important part of our sales – the sales of our business. The wholesale business is a great way of introducing new consumers to Burberry who go into department stores as you know and therefore we want to retain the partnerships with the wholesalers. What we’re doing is having the dialogue about how we want to position the brand, where we want the point of sale to be in the department store, which floor, what are the adjacencies? And those discussions are going well but obviously it takes time to do this. So we’re anticipating the second half a mid-single digit decline. Next year, we’re anticipating a mid-single digit decline. Obviously with that result being probably a little bit more pronounced in the U.S. than it is in Europe. Its early days at this stage but the dialogues have been going very well. The U.S. wholesalers do appreciate where we’re coming from and they appreciate the brand strategy that we have. In the Americas, we have closed some accounts already and the dialogues with some of the EMEIA wholesalers of course there are many, many more wholesalers across Europe than there are in Americas. So we’ve managed to do that already because some of them were clearly non-luxury. So I think good progress but early days. We see this happening over a two-year period. So AUR?

Charlotte Cowley: Yes. Then AUR by region, there’s a little bit lack of impact in Americas but nothing really significant to call out; two to three different regions in terms of the AUR trends.

Mario Ortelli: Thank you very much. Julie, you referred just on wholesale in beat [ph] of rationalization of doors. Can you give us an idea of how many wholesale doors globally do you currently have?

Julie Brown: We haven’t given that data before. So no, we would --

Charlotte Cowley: The number of doors is very significant. We have a large number of very small accounts in one market and actually one partner in another region that can be a significant portion of revenue. So I think I’d probably use our commentary on the revenue guidance rather than focus on number of doors.

Mario Ortelli: Thank you.

Julie Brown: Thank you.

Operator: Our next question comes from Elena Mariani calling from Morgan Stanley. Elena, please go ahead.

Elena Mariani: Hi. Good morning. A couple of follow-up questions from me please. The first one is about your exit rate from this quarter. Thinking about sector trends, it feels like comp is becoming even tougher going into the new calendar year. Is there anything that you can share with us in terms of how things have been developing in the early part of 2018 and whether you expect softness that we’ve seen sequentially Q3 versus Q2 to continue? Secondly, could you remind us what’s the UK in terms of percentage of total sales as of today? And finally one question again on promotional activities. Given what you’re expecting to do in the next few months and quarters, how should we think about the impact on gross margin? I know you have guided towards pretty much flat EBIT margin for the next couple of years but do you think we could see some pressure there given what we have observed in terms of early results from this new strategy? Thank you.

Julie Brown: Okay. Thank you very much, Elena. Just running through those, in terms of the exit rate, as we say we do anticipate the second half of last year was a lot stronger for Burberry. We did have this impact in the UK which will extend obviously into the next few quarters. So we would expect the comp to be tougher and therefore that will affect our Q4 – would expect it to affect the Q4 results. And certainly the Chinese performance continued to improve between Q3 and Q4. There was a considerable strengthening in China. So yes, those two factors will certainly affect our comp in the third quarter. The AUR – the product mix is also likely to run through because it runs by season. So we’re also expecting an AUR impact in the fourth quarter as well. In terms of the UK percentages of total sales, it’s 11% at the moment. It was around a 10-ish mark but it’s 11%. And in terms of promotional activity impacting margins, we will see a positive impact. We’ve seen a positive impact in Asia from the reduced promotional activity. But net-net, we’d expect on an underlying basis to see some improvement in the gross margin. This is on an underlying basis before exchange, but exchange because of the hedges rolling off has a negative impact on our gross margin this year compared with last. So net-net, constant exchange rates underlying improvement in gross margin but net-net, I think post exchange is likely to be neutral would be our guidance overall on gross margins.

Elena Mariani: Thank you. Thanks a lot.

Julie Brown: Thank you.

Operator: Our next question is from Ashley Wallace calling from Bank of America Merrill Lynch. Ashley, please go ahead.

Ashley Wallace: Hi. Actually all my questions have been asked. So maybe just one follow up quickly if I can. Just in terms of FX headwinds that you’re talking about for 2019, the 25 million, can you give us any more color around the mark-to-market at current rates, the quantum of that?

Julie Brown: No, we can’t.

Charlotte Cowley: No. I think we’re just trying to give you an early indication because it just looked like not many people have really sort of thought it to look to us from our read of the numbers about the FX, so we thought we would guide on scope clearly at the end of December and we still would finish this year before we can firm up [ph] numbers that will give you clearly better guidance in May.

Ashley Wallace: Okay, sure.

Operator: Our next question is from Antoine Belge calling from HSBC. Antoine, please go ahead.

Antoine Belge: Good morning. Three questions please. First of all, following up on your comments about this outperformance of certain categories, I’m noticing you’re implying that trenches underperformed. So is that something that you’ve been driving? That’s at least my understanding and it is something that should be visible in the next three quarters? Second question on the U.S., I think it was part of the world where we’ve been quite happy with relative improvements and maybe a word on the U.S. and just some qualitative comment about what’s happening in your retail store network and outlets, et cetera? And finally maybe looking at consensus PBT, so I understand you don’t want to comment or quantify the additional headwind pressure occurring from the move from 1.31 to 1.38 dollar/pound since the clothing, but was this 2% like-for-like in line with your own expectation or was it disappointing and that we would need to maybe taking that into account in our estimate, or do you think that you can have mitigating factors against that. Thank you.

Julie Brown: Okay. Thank you very much for the questions, Antoine. In terms of categories it’s all about the relative performance of the categories obviously in the quarter reflected in the comp. And we did see a good performance in areas overall like rainwear was strong. It’s just that the relative portion of the performance of the tops and the bottoms following on from the work we’ve been doing on outfitting and looks that made a bigger difference in this particular quarter which has really driven the point on AUR. But obviously the strategy is multiyear. The leather goods component of what we intend to do strategically will start to take affect from the spring but it obviously takes a while to get the results going through the compound mix. In terms of the second question you raised about U.S., we have seen an improvement in the U.S. as we’ve been from Q1 to Q2 we saw an improvement. We got low-single-digit growth in the U.S. in Q2 and we’ve repeated that in Q3. Overall, the high rate that we get in the U.S. on U.S. performance is really down to the work that the team have been doing on conversion and the retail excellence program driving the [indiscernible], driving the returning of top customers and also just the conversion is very strong in the U.S., one of the strongest performances we’ve got across the world and that’s been very, very good. In terms of the third question relating to exchange, we’ve covered. So in terms of 2% like-for-like was it in line with our own expectations? It was. It was in the Bounds [ph]. We obviously do forecast it at different levels of scenarios and it was within the boundary of what we were looking at in terms of that. And just on the foreign exchange just to clarify, the 1.31 is the effective exchange rate for the nine-month period in 2018 and then we’ve used the rate in the third – at the end of December and replicated that for the fourth quarter to give us a full year effective rate just try to explain how we’ve done that. And then when we do the full year '19 calculation, we take the full year at the spot rate at the end of December. So that’s what we’ve done.

Antoine Belge: Okay, so thanks for the precision. So all-in-all, that consensus PBT number in your view there is no significant change to be expected?

Julie Brown: Yes. I think broadly when it comes to – the only thing is we’ve still got some – some of our analysts are at the higher end of that range, probably didn’t have the opportunity to fully reflect some of the guidance we’ve given and therefore we would expect some of the people at the top end of that range to move down.

Antoine Belge: Thanks. That’s very clear. Thank you.

Julie Brown: Okay. Thank you.

Operator: We currently have no further questions. [Operator Instructions]. Our next question is from Zuzanna Pusz calling from Berenberg. Zuzanna, please go ahead.

Zuzanna Pusz: Good morning, Julie and Charlotte. So I have just two remaining questions. First of all on the new products, so if I understood correctly the new handbags offering under the creative direction of [indiscernible] you will come into stores in Q1 FY '19? Is that right? And in terms of – and I appreciate that it may be probably a bit too early to share any specific details, but can you give us any idea in terms of how significant this could be? Can we expect completely – let’s say completely new model or just generally a refresh of your existing range and also your expectation of major marketing push behind that? And just secondly is a small follow up on the UK. I understand that the big part of the weakness was obviously driven by the tougher comparable basis because of the tourism. But also can you make any comments on the domestic consumer? Have you seen any notable weakness? I suppose [indiscernible] some comments made to the press earlier today that there’s been some trading down observed in the region. Thank you.

Julie Brown: Okay, sure. So taking into those, yes we do. The key thing with the handbags is we want to build out a full sort of architecture of handbags so that we’re looking at different functions, different usage; so day, evening; different sizes; different functionalities. We want to bring that out fully. We will initiate the beginnings of that from March 2018. You’ll start to see the first launches from that – I think it’s important to say that it’s all about building and also having stability in the range in terms of handbags over time. So that’s basically the strategy. In terms of the new models that we may expect to see, we will see a new model being launched in March which we’re very excited about. But the main emphasis that we’ve got is really around the start of the new product range and it’s building out the offering over time. We see this as a long-term way of building a sustainable leather goods business, not a short term sort of one product type approach. So that’s the really important thing to say. In terms of the UK in particular and domestic UK, the domestic data does indicate also a slowdown in the third quarter; however, a very big caveat around our UK domestic data what we record when a consumer purchases from Burberry is the home address and that dictates whether we’re attributing the person to UK domestic or overseas. And quite often people have second homes and therefore we can pick them up in our database as a UK national but they may not be. They may have a second home or be still a tourist. In our database what we’ve got is about 90% of our UK population is based out of London and Heathrow, so there’s probably a large tourist component to that or a traveling consumer to that. So although we’ve seen a weakening in the third quarter in domestic, it’s highly likely to have been influenced by tourist trade I should imagine. In terms of some of the press commentary it’s really all around the product mix in the quarter. What we were doing is obviously giving analysts and investors more of an insight into the 2% comp by referring to the product mix which had impacted the AUR and I think that’s what you’re finding the press will pick up on.

Zuzanna Pusz: Perfect. Thank you very much. That’s helpful.

Julie Brown: Okay. Thank you.

Operator: Our next question is from Rogerio Fujimori calling from RBC Capital Markets. Rogerio, please go ahead.

Rogerio Fujimori: Hi. Good morning, Julie. Good morning, Charlotte. I think in the press release you referred to good physical sales growth and I appreciate you don’t disclose specific numbers, but it’s such an important driver for Burberry. So I was wondering if you could qualitatively talk about how growth contribution from e-commerce in Q3 compared to the first half. Could you give us an idea of how much e-commerce contributed to growth in Asia? And could you confirm that your e-commerce penetration in Americas is still double the global average? Thank you.

Julie Brown: Okay. I think Charlotte will take this.

Charlotte Cowley: Yes. So we did see – it was nice to still see digital performing strongly for us. The growth was led by Asia, so that was the strongest growing part of our digital business. And as you know we’ve had a focus on some localization assets particularly in Asia, so might see that working for us. And as you say, yes, the U.S. is still the most penetrated market for us for digital.

Rogerio Fujimori: Thank you. And was the growth contribution from e-commerce in Q3 comparable to the first half?

Charlotte Cowley: It was very similar.

Rogerio Fujimori: Okay. Thank you.

Operator: We currently have no further questions registered. I’ll hand back to you, Julie.

Julie Brown: Okay. Thank you very much. So thank you for your questions and for joining our call. So just to close, we’re right at the beginning of a multiyear journey. There’s a lot of work to do. We’re pleased with our early progress and we remain focused on positioning Burberry firmly in luxury and delivering long-term and sustainable shareholder value. And we look forward to updating you at our prelim results which are going to be held on the 16th of May. Thank you very much.

Operator: Ladies and gentlemen, this concludes today’s call. Thank you for joining. You may now disconnect your lines.