Specialist
Former senior executive at Hugo Boss AG
Agenda
- Demand-side dynamics, expected losses, potential recovery in H2 2020 and online growth for Burberry (LON: BRBY)
- Ability to match supply to new demand and move through excess inventory
- Fixed vs variable costs through the P&L and cost mitigation opportunities
Questions
1.
What is the expected shape of recovery by key regions for Burberry following the coronavirus pandemic?
2.
What are your expectations for growth in Q2, Q3 and Q4 as the restrictions are eased and the luxury market begins to recover?
3.
Do you have a sense of how trading conditions have changed in China since the lockdown has been lifted?
4.
When you say that luxury still does not have the full assortment for spring/summer, how shallow is the assortment relative to what it should be?
5.
Why do you think China’s customers are unwilling to return to the market? As you say, footfall is down 60- 70% in malls. What is really driving that decline?
6.
What is your view on the expected recovery in Europe and the Americas from the opening programme perspective? What is the timeline for reopening and how do you think customers will react?
7.
What are luxury brands doing to ensure safety while providing the luxury customer experience?
8.
Which player has the most advanced click-and-collect offering? Who could potentially benefit from customers prioritising this format over visiting and shopping in-store?
9.
Are you expecting beauty and fragrance, womenswear and accessories to recover first in Europe and America?
10.
Do you have any indication of what the share of international vs domestic customers is for Burberry in Europe and the Americas?
11.
What was Burberry’s global Q2 decline number for luxury? You said Europe was 30-40%. What is your expectation globally for the decline in luxury?
12.
Do you think Burberry will be particularly disadvantaged due to its heavy reliance on ready-to-wear?
13.
What is the share of evergreen vs seasonal products typically at Burberry?
14.
What are the opportunities to move through this inventory at Burberry? Which channels do you think will be used, and how significant do you think the discounts will be at Burberry in Q2?
15.
Do you have a sense of the size of Burberry’s outlet channel relative to total revenue?
16.
What are you expecting the outlet channel penetration to be in 2020, if we assume that it was roughly 20% in 2019?
17.
Is the high outlet share a benefit in today’s climate for Burberry as it gives it more of an opportunity to move stock through this channel?
18.
What are the margin implications of this pricing dynamic?
19.
How flexible is the supply for 2020? How much can be cut back on for the spring/summer collection but also the autumn/winter collection?
20.
Are you expecting supply chain shortages to continue in 2020? As you say, there are stores in APAC with limited availability.
21.
Do you think shortages will be offset by lower demand, or will the shortages be in specific categories and, therefore, will they be quite visible?
22.
Are you expecting any suppliers to become insolvent and, therefore, perhaps to create a structurally lower level of supply in the medium term?
23.
Do you know how much of Burberry’s production is in-house vs outsourced currently?
24.
What would be a more suitable share between in-house and outsourced for Burberry as it shifts into premium luxury? How easy is it to build out those capabilities?
25.
What are the implications of the coronavirus on the wholesale network? Are there any key differences regionally?
26.
Are you expecting a further reduction in wholesale doors in the US market due to partners becoming insolvent?
27.
Do you anticipate that Burberry will likely try and take back stock from this channel, or do you think the company may allow more significant discounting to move through some of the excess inventory?
28.
I assume that wholesale partners such as Nordstrom and Neiman Marcus are not taking orders for H2 2020. Is that likely to impact performance further?
29.
If one of these players was to go bankrupt, is there any issue around potentially outstanding receivables that Burberry has not yet received and that could, therefore, be written off as a loss?
30.
If one of these players went bankrupt, is there insurance on those receivables? Would Burberry eventually be able to reclaim that lost money?
31.
How large is Burberry’s travel retail channel?
32.
Which luxury brand is more exposed to travel retail than Burberry, or most exposed to travel retail?
33.
Is there any potential to reduce rents in Europe or the US within the directly operated store network for the period of closures and the rest of 2020?
34.
As the stores are reopened, do you anticipate that landlords in Europe or America will be flexible with rent? Given the lower level of top line and, therefore, the potential impact on margins if Burberry was to pay full rent once stores are reopened.
35.
What would be the typical fixed vs variable costs split for Burberry?
