Good morning. I'm Gerry Murphy, Chair of Burberry, and I'm joined by Julie Brown, our Chief Operating and Financial Officer. I'll start with a brief introduction before handing over to Julie to discuss our H1 results and give a progress update on our strategy. As a reminder, the presentation slides are available on the IR section of our website. The transcript will also be available. We'll be happy to take your questions at the end of the presentation. As announced in late June, our CEO, Marco Gobbetti, will be leaving the company at the end of the calendar year. I want to take this opportunity to wish Marco and his family well in their imminent return to Italy.
I also want to thank him for his vision and leadership in the transformation of Burberry, his strong partnership with me personally, and for his professionalism and commitment during the transition to a successor, Jonathan Akeroyd, whose appointment we announced a few weeks ago, with effect from the beginning of April next year. We're delighted that Jonathan will be joining Burberry as the next chapter in a very successful career in luxury fashion. Initially as Chief Merchandising Officer at Harrods, followed by 12 years at Kering as CEO of Alexander McQueen and most recently, five years in Milan as CEO of the iconic Italian brand Versace. Jonathan is an experienced leader with a strong track record in building global luxury fashion brands and driving profitable growth.
He shares our values and our ambition to build on Burberry's unique British creative heritage, and his deep luxury and fashion industry expertise will be key to advancing the next phase of Burberry's evolution. Four years ago, even before I joined Burberry, Marco set out a strategy for transformation and growth by elevating Burberry's luxury status and building on the legacy and values of Thomas Burberry. This transformation has involved some pretty heavy lifting, including rationalizing our distribution to focus more on full price sales of higher value product, eliminating markdown in our mainstream retail channels, and a stronger focus on inventory management and sell-through rates to improve gross margin, targeting increased investment in key consumer facing areas, including transforming our product quality and offer, especially in our strategic categories of leather and outerwear.
Re-energizing and elevating the brand to true luxury status and building more luxurious stores and a stronger digital platform. Mostly funded by some tough choices to reduce costs, improve efficiency, and expand operating margin. I believe we've made huge progress in what we set out to achieve. On a like-for-like basis, at constant exchange rates, Burberry looks and feels like a higher quality business. Full price business is now a much higher percentage of retail sales. Our own retail sales now account for around 80% of the business. The other 20% coming from our true luxury wholesale partners around the world. Our financial security is underpinned by leverage of less than 0.5 times and cash conversion of over 100%. Critically, Burberry is now firmly in the luxury consideration set, attracting new and younger customers, and our key categories are delivering strong full price growth.
Burberry is now a substantially restructured business with a much stronger foundation to accelerate revenue growth and deliver positive operating leverage in the years ahead. Central to our ambitions for the future is our determination to integrate responsibility and sustainability into everything we do, building on Thomas Burberry's legacy to secure Burberry's future as a global luxury brand powered by our unique British cultural and creative identity. Thank you. Over to you, Julie.
Thank you, Gerry. I shall now update you on the progress we've made in the half. In half one, we achieved 18% full price comp store sales growth versus two years ago, with both quarters up double digits as our collections continue to attract a new, younger clientele to the brand. We have seen particularly strong growth in markets not impacted by COVID travel restrictions or tourist flows. Hence, they're more representative of the underlying performance of the brand, notably Americas and South Korea. Mainland China also continued to perform well despite some COVID-related travel restrictions. Full price sales are driving margin accretion, and over the last two years, we've seen increases in gross and operating margins in line with our plan to deliver meaningful margin improvement. We are continuing to deliver our brand and product priorities, elevating the customer experience both in stores and online.
A key point that I want to make today, as the world focuses on COP26, is that we continue to drive performance with a strong focus on sustainability. We have set ourselves industry-leading targets to be climate positive by 2040 and to reduce Scope 3 carbon emissions in our wider supply chain by 46% by 2030. Thomas Burberry was a pioneer in sustainability, and it remains at the heart of our brand and integral to our strategy to deliver positive change for our employees, customers, and investors. Finally, we've delivered excellent cash conversion in the H1 with over 100%, and we have a strong balance sheet enabling us to grow the interim dividend and recommence the GBP 150 million share buyback program. I'll cover these main five topics, starting with revenue.
Turning now to the detail of our H1 performance. Slide five shows the group revenue summary with comparable store sales up 37% compared with last year and space up 4% at constant rates. Wholesale was particularly strong, up 69%, driven by the excellent order book, including in-season orders, bringing total revenue to 45% above the prior year before the currency headwind. Turning to retail revenue on Slide six, where on the right we share our performance versus two years ago due to COVID. This shows retail revenue flat with comp sales up 1% offset by space. Within this, full price revenue in the H1 grew 18%, with our overall comp impacted by our strategy to exit mainline markdown and the tight management of outlets as we guided.
The markdown exit reduced our comp growth by a mid-single-digit percentage versus two years ago. Taking a closer look at regional retail performance versus last year on slide seven. Americas has been the standout region, up 38% and accelerating in Q2. The full price business was excellent, almost doubling in the period with strong sales to new and younger customers. Overall, Asia Pac grew by 5% with full price up 14%. Strong growth in mainland China and South Korea that we will describe shortly in more detail was partially offset by trading in Japan and South Asia Pacific, which were impacted by COVID-related travel restrictions and store closures. EMEA continued to be challenging given around 60% of Q2 pre-pandemic revenues were generated by tourists. Against this backdrop, EMEA fell by 31% in the half, but improved sequentially to - 25% in Q2.
The region benefited from mainline stores reopening and growth has been driven by local customers and improving trends in both new and repeat business. Within the mix, there was strong growth in the Middle East, good progress in Continental Europe, while the U.K. remained challenged by reduced tourists in London. Encouragingly, EMEA has continued to strengthen as we enter our Q3. I would now like to share more details of our underlying brand performance from the two regions undisrupted by travel patterns, Americas and South Korea. First, Americas, which is an excellent example of a region where our strategy is driving accelerated performance. Having successfully repositioned the brand, we are focused on increasing engagement with local consumers, and we've continued to launch multiple brand activations, including a dedicated U.S. capsule designed by Peter Saville and location takeovers in celebration of our summer Monogram collection.
As a result, we saw our brand continuing to strengthen with the brand consideration significantly increasing quarter on quarter in the United States. In terms of product, we are seeing success with leather goods full price sales growing high double digits in half one, again supported by dedicated product activations with accessories also performing very well. As I mentioned earlier, full price sales in the region almost doubled, driven by a triple-digit growth in the U.S. market versus two years ago. In South Korea, a region which was relatively unaffected by COVID lockdowns, we saw good evidence of our strategy driving accelerated growth.
Building on our efforts to strengthen the brand over the last four years, we have continued to drive increased engagement with local luxury consumers, signing a new brand ambassador, singer and actor, Cha Eun-woo, and planning exciting customer activations such as the immersive outerwear experience that went live on Jeju Island earlier today. These activities have driven much greater reach and engagement with our brand. For example, 1.5 times increase in reach and a 2.5 times increase in engagement on social media versus last year. In terms of product, we're also pleased to see our strategic categories performing well with strong full price performance in both leather and outerwear, which are attracting new younger customers to the region. As a result, we delivered 79% growth in full price sales and a doubling of business from new local customers.
In mainland China, we have continued to deliver double-digit growth in both quarters, driven by traction with our new strategic product categories, outerwear and leather goods. This result was achieved in the context of regional lockdowns and extreme weather, particularly impacting August before recovering in September. We have driven engagement in mainland China through highly localized, culturally relevant programs of activities. This included a dedicated capsule collection and campaign for Chinese Valentine's Day and a series of unexpected partnerships with local Chinese artists for the summer Monogram collection, resulting in 1.5 times more engagement on social media in Q2 this year compared with last year. We also continue to take steps to strengthen our commitment to consumers in China, and I would like to highlight two initiatives. We are focusing on promoting culture and supporting youth by partnering with local organizations.
In line with our decarbonization agenda, our new store in Plaza 66 opened earlier today and is carbon neutral. Turning to slide 11 and taking all regions and looking at the quarterly progression, we continue to show strong full price sales growth in the last 4 quarters compared with pre-pandemic levels. Overall, we've now delivered a better quality business, both due to the improved mix of full price revenues and the business being driven by local clientele, with tourists now less than 10% of sales this quarter, compared with almost 30% two years ago. Turning to the underlying performance of the business on slide 13. Full price sales have helped to drive strong margin improvement over the last two years.
The first chart shows the gross margin adjusted for currency, where we've seen a 210 basis point improvement at constant rates since full year 2020 and 180 basis points reported. Adjusted operating profit margins are 120 basis points up at constant currency over two years, and this is less visible in the reported numbers due to the adverse impact of currency. Cash conversion has remained consistently high, and in half one is over 100%. I'd now like to take a closer look at how we've advanced our strategic priorities regarding brand, product, consumer experience, and ESG.
Turning to brand, we continue to strengthen our positioning and drive engagement with a drumbeat of activities in the H1, including reinforcing our luxury fashion positioning through our spring/summer 2022 womenswear fashion show, which generated 1.5 times more reach than last year. Engaging with our consumers with innovation, for example, through our partnership with Blankos Block Party, creating our first NFT, which sold out in 30 seconds, and bringing new immersive experiences to our consumers, including launching an interactive augmented reality brand filter on TikTok for our Summer Monogram collection, which generated 3.7 billion views. This was an industry and platform first. Moving to product on slide 16, we continue to strengthen our strategic product categories.
First, in terms of leather goods, by strengthening our women's bag pillars, by delivering a program of 70+ pop-ups on Olympia and by expanding the Lola family and introducing a new shape, the Rhombi, as part of our spring/summer 2022 womenswear show. As a result, we continue to drive full price sales growth in this category. Turning to outerwear, growth accelerated in the Q2, and we've launched a dedicated product moment for this category in the H2 of the year, involving dedicated outerwear brand, film and campaign, which launched in October with strong storytelling on key social media, including a TikTok takeover, as well as activations across physical and digital channels.
We also have a dedicated edit showcasing the EKD fabric, developing a new lightweight gabardine and applying it to more casual styles to create a EKD down, combined with new special details including quilting techniques, cashmere linings and leather details that are resonating strongly with our consumers. We continue to elevate the customer experience across all our channels as shared on page 17. Our new store concept rollout is progressing well, with 15 stores completed so far and around 50 planned in total by the end of the year. These stores are resonating well with new customers and are driving significant increase in higher spending clientele across renovated locations. We are particularly excited about the launch of Plaza 66 in Shanghai, which will strengthen our luxury position in the region, as well as our commitment to addressing climate change.
Additionally, we strengthen the integration between our on and offline channels by launching new content sharing tools for our sales associates, increased appointment functionality and improved messaging and omnichannel services. Turning to digital, we maintain strong engagement in the half through interesting content such as Monogram takeovers on dot.com and enhancing product discovery by launching an outerwear hub as a dedicated part of our website. As a result, we've seen good traction with digital full price sales almost doubling compared with last year. To share an insight from our new customer experience in mainland China, I'd like to share a video of our recently opened store in Plaza 66, Shanghai. Turning now to ESG and guided by our purpose and values with sustainability at the heart of the business and brand.
We advanced all our priorities within our industry-leading ESG agenda, climate and nature, building true allyship, and investing in youth and creativity. Our brand is rooted in nature and in the outdoors. We recognize that success for our business depends on conserving the environment, and we've been committed to sustainability from our earliest days. We have made significant progress against our goals. We remain on track to become carbon neutral and source 100% renewable electricity across our own operations by the end of 2022. In June, we pledged to become climate positive in the wider supply chain by 2040, setting a new industry standard that goes beyond net zero. At COP 26 in Glasgow this month, we introduced our biodiversity strategy to protect, restore, and regenerate nature.
This includes a significant five-year investment in the LEAF Coalition, the largest ever public-private initiative to finance the protection of tropical forests, and a partnership with the Savory Institute to help regenerate the world's grasslands and the livelihoods of their inhabitants. We have laid out a five- and 10-year roadmap to deliver our ambitions. We also continue to make strong progress against our D&I ambition, widening the scope of our internal council, expanding company-wide training, and implementing focused action plans for every region and every function. We strengthened our wellbeing program, introducing new global policies to support colleagues. We also expanded our strategic partnerships, and we're proud to be the lead sponsor of the inaugural British Diversity Awards in March 2022.
Continuing our support for youth and creativity, we've expanded our education programs globally, and we also made a further donation to the UNICEF COVID-19 Vaccines Appeal via the Burberry Foundation, enabling more equitable distribution of the vaccine around the world. As we've just shown, we have achieved a lot over the last six months, and I now wish to take you through the main financials on slide 21. Looking at the results for the H1 of full year 2022 and referring to year-on-year changes at constant rates, total revenue was GBP 1.2 billion, up 45% and back to pre-COVID levels. Gross margin increased by over 100 basis points, and adjusted operating profit margin increased significantly and is now ahead of pre-COVID levels, driven by the gross margin expansion. Adjusted operating profit was GBP 196 million, despite a GBP 20 million currency headwind.
Adjusted margins came in at 16.2% and represented an improvement in quality of earnings. The effective tax rate fell to 24%, and we continue to expect this to be around 22% for the year. Adjusted diluted EPS of GBP 0. 335 was up more than 7 times against last year. Free cash flow in the half was an inflow of GBP 104 million, with strong conversion levels of over 100%. I shall now review these elements in more depth. Slide 22 shows the main moving parts within the gross margin, which increased 120 basis points to 69.3%. The increase is due to business benefits from a higher mix of full price sales and the product range driving higher average prices.
These benefits were more than enough to offset the headwinds we described at the prelims from channel mix, Brexit duties, and stock provisions. Turning to the adjusted operating profit margin on slide 23, we saw growth to a margin of 17% at constant rates. Trading delivered the greatest benefit of GBP 270 million. The cost reduction program delivered a further GBP 20 million of savings in the half, and cumulatively, savings now of GBP 205 million. We have delivered a completely restructured cost base, laying the foundation for future operating leverage. Included in this half, we also have a property disposal gain of GBP 5 million. The other major factor to note is the investment in the business of GBP 125 million, which comprises investment in marketing, visual merchandising, the retail network, digital, and ESG, as well as cost normalization post the pandemic.
Our H1 margin was 17% at CER, up over 100 basis points on two years earlier, before the currency headwind. On slide 24, we show the adjusted items recorded in the H1 and note that COVID-related rent concessions are treated as an adjusting item in our accounts, consistent with last year. Turning to the cash flow on slide 25. Free cash conversion was strong at 104%, reflecting tight working capital management, even as we approach the seasonal inventory build ahead of festive. Despite COVID-19, there were no closures in our hubs or manufacturing sites, and there was no material impact on our supply chain. We continue to deliver on time and with high customer satisfaction, managing inventory levels closely to drive positive working capital performance.
This is reflected in the reduction of gross inventory of close to GBP 100 million versus both last year and two years ago. Capital expenditure amounted to GBP 39 million, and we expect it to accelerate in the H2 and be around GBP 160 million for the year. Lower than guided due to efficiencies and phasing. Turning now to our cash position on slide 26. We have a strong balance sheet position, affording investors financial security and with net cash of GBP 0.8 billion and leverage is low at 0.3 times net debt to EBITDA. There was a net cash outflow of GBP 73 million in the half, largely due to the payment of a full-year dividend.
We have recently undertaken a full strategic review of investments and decided to accelerate investment in the new store concept in full year 2023 and recommence the share buyback program of GBP 150 million to be completed in the H2 of this year. Our financial policy remains consistent to maintain a strong balance sheet, and we intend to return to our target leverage range of 0.5-1 times in the near term. I thought it was worthwhile reinforcing our medium-term value creation model that has two components on slide 28. Firstly, from our operations, we remain committed to achieving a high single-digit revenue growth and meaningful margin accretion from a full year 2020 base at constant currency.
Secondly, our capital allocation model, which prioritizes, firstly, organic investment, secondly, a progressive dividend, and today we have declared an interim dividend 3% ahead of full year 2020. Thirdly, inorganic investments, which are by their nature infrequent. Finally, returning excess cash to shareholders while maintaining a solid investment-grade credit rating. Turning to our outlook on slide 29, the execution of our strategy is on track, with the management team focused on delivering the growth and acceleration phase laid out in May. By the end of this financial year, we will have finalized our markdown exit from digital and mainline stores, and this headwind will no longer impact next year's performance. As guided, there will be a mid-single-digit headwind from markdown in the H2 of this year compared with last year.
A strong order book has resulted in us increasing our expectations of wholesale, and we're now anticipating wholesale revenues to increase by around 15% in the H2 and a mid-30% range for the year, which will lead to wholesale being ahead of pre-pandemic levels. Currency is expected to be a GBP 40 million headwind to adjusted operating profit in the full year. Regarding the current year, we are comfortable with market expectations, with adjusted operating profit margin accretion at constant rates likely now to be offset by adverse currency movements. Medium-term guidance remains unchanged with a high single-digit top-line growth and meaningful margin accretion with a target to achieve a 20% profit margin barring any unforeseen macroeconomic events. As Gerry mentioned at the beginning, we have undertaken considerable change in Burberry under Marco's leadership.
We have transformed our product offer, driving growth in strategic product categories. We've re-energized the brand, which is now firmly in the luxury consideration set. We've rationalized distribution, focusing on luxury doors and reoriented the business towards full price, including the exit of markdown. We've maintained our leadership as digital innovators and improved our operational efficiency. Throughout this journey, sustainability has and always will be at the core of our brand and business. We are now in the accelerate and growth phase of the journey and well on track to realize our commercial ambitions. I'd like to thank Marco personally for his partnership and leadership over the past five years for what he has brought to Burberry and wish him every success in the future. Now I will hand back to Gerry.
Thank you, Julie. Today, we reported a strong set of results for the H1 of the year, of which the board and management are rightly proud. We remain focused on driving our full price business across all regions while leveraging the brand to deliver high-quality product through an elevated customer experience. Our financial performance demonstrates our recovery to pre-COVID levels with operational leverage driving the bottom line and cash generation. We've grown the interim dividend and recommenced our share buyback. As always, we continue to put ESG at the heart of our brand and business. Finally, I'd like to thank Marco, Julie, and our leadership team for delivering on our strategy, and we look forward to welcoming Jonathan in April next year. We now show a short video showcasing some of our H1 highlights.
We are the past, we are the present, and we are the future.
Thank you for watching and listening. Today, eleventh of November, is a special day on our calendar, being Armistice Day, which we at Burberry acknowledge with a moment of silence at 11:00 A.M. U.K. time, 12:00 P.M. Continental European time. We will complete the Q&A by 10:45 A.M to allow everyone time to honor all those young men and women who died protecting our freedoms. We can now open the call for questions. Operator?
Your first telephone question comes from the line of Louise Singlehurst with Goldman Sachs. Please go ahead.
Hi. Good morning. Thank you for taking my questions, everyone. First question, if I could ask, Gerry, if I may. Thank you very much for joining the call this morning. It's really helpful to hear your perspectives as well. I think in the opening commentary, you touched on clearly the elevation improvements that we've seen, the high quality of sales coming through the business today. I suppose the obvious question to ask is if you're comfortable this is where you want to be, you know, where you want the business to be to achieve that acceleration in growth. To cut to the chase, I suppose following discussions with Jonathan, you're confident that there's no second reset with the advent of a new CEO in next year.
Then my second question would be for Julie, if I may, just in terms of the guidance and the outlook, you've obviously made it very clear that you're happy with existing consensus for EBIT for full year 2022. Given the beat in the H1, it does feel a little bit conservative. Just to clarify, is that more the timing of the OpEx which you've highlighted on between H1 and H2, or are we just taking a little bit more caution with regards to the like-for-like progression? Thank you.
I'll start. Thanks, Louise, for the question. Yes, I mean, Jonathan has been very complimentary about the progress made by Burberry under Marco, Riccardo, and Julie's leadership in all manifestations really, particularly around elevation, around the repositioning of the brand as a credible luxury fashion brand, around the building of a new cohort of younger clients, the progress we've made in Asia particularly, and of course the continuing development of our digital platform. He's very supportive of the direction of travel, and I don't expect any significant strategic shift. Naturally, he'll make his own of all these elements in terms of nuance and execution. One would expect that from a new CEO. I would expect no less.
In terms of overall strategy and direction, Louise, we certainly don't expect major strategic shifts from the change of CEO.
Okay. Morning, Louise. I'll take your second question. Just wanted to check the sound is okay. Can you hear me fine?
Can indeed. Thank you.
Okay, excellent. In terms of the consensus and the guidance, yes, we're broadly happy with where consensus is. There is an underlying improvement in the business in terms of margin accretion for the full year. It's just that in the reported numbers, it's been offset by a currency headwind, which we anticipate being, you know, based on rates just at the end of last month, around the 70-80 basis point mark. We're pleased with the overall progress. You know, the H1 full price business is up 18%, which we're really pleased about. I think it's just a case really of there is an OpEx phasing point, but we've got this currency headwind also coming into the reported numbers, and OpEx phasing is half-year weighted.
Great. Thank you.
Thank you.
The next question is from the line of Belge with Exane BNP Paribas. Please go ahead.
Yes, good morning. It's Antoine Belge with Exane BNP Paribas. Two questions, both of them actually on China. It seems that when we spoke in September, I think in that store tour that you organized and at that stage you had mentioned that August had been weak but September had recovered. I don't know. I mean, since then, were there further sort of deterioration towards the end of the quarter? Now that you have almost half of the quarter behind your belt, I mean, have you seen a sequential acceleration in October in China versus September?
The second question relates to China because I understand the COVID restriction, but also I remember that, you know, around the issue of the cotton in China, you lost some brand ambassadors there and you probably had to lie low a bit in terms of communication and on events and also, you know, your own activations there. What is in your view the real impact of that issue? Also when do you think that you could be back in terms of share of voice and you know marketing participation in China? Thank you.
Okay, thank you very much. Taking the first question. In China, we were pleased with the results. You know, mainland China grew 30% in the H1, and the full price was up 40%. This is all compared with two years ago. Again, the performance was driven by outerwear, very strong performance in full price and leather goods as we've seen. These are also categories that are attracting new consumers to our brand, you know, growing double digits. Overall, very positive. The impact in the quarter was really in August, and it arose for two reasons. One was the COVID-related travel disruption that did cause reduced traffic going into our stores. The second issue was just weather patterns in that particular month. We've seen this impact largely across the industry.
As you say, we recovered well in September and really October, without giving too much trading information, is basically performing in line with our expectations. You know, no concern in terms of the first part. The second part of your question regarding brand ambassadors, we have had a recalibration of some of our investments and communication channels in China. I believe we're managing the situation well. We've continued to innovate in how we serve our customers, partners, and communities to maximize the opportunity in the region. We take a very long-term view in China. We invest for growth, and we're confident in the long-term opportunity. You will see, and you will have seen from the video, we've just opened our flagship store in Plaza 66 earlier today. Again, supporting our sustainability initiative, it's also carbon neutral.
We look forward to hearing the feedback from that, but there was a really big build up to Plaza 66. I think really that's it in terms of the answer to your two questions.
Maybe just to follow up, if I may. I mean, we've heard that some brands are now a bit moving away from the model of, you know, having brand ambassador in China. I mean, is this something that you're going to pursue or are you trying to replace the brand ambassador you lost?
I think the focus is very much on localization in China. We've had some very focused activations around Valentine's Day and, you know, we'll continue to work on that basis. In terms of, you know, we've always been respectful of the situation in China. We're responsible corporate citizens, and we've continued to support the themes that are important to China, such as education, sustainability and other societal values.
Thank you very much.
Thank you.
The next question comes from the line of Luca Solca with Bernstein. Please go ahead.
Yes, good morning. Two questions. One is related to Jonathan Akeroyd, and I'm quite interested in understanding the criteria that you used in researching and recruiting the new CEO for Burberry, what specific skills or experiences or competencies you thought are most relevant. I'm imagining, but correct me if I'm wrong, that you are looking for specific elements that could further enhance Burberry's progression. I wonder what those would be and what are the areas where you expect Jonathan will provide a most important contribution and improvement relative to where you are today. The second question is about full price progression.
If we look at two years ago, there seems to be quite a significant disparity in the progression between the two quarters. In the Q1, full price was up relative to two years ago. It was flat relative to the Q2, so the third calendar quarter, and again, in comparison to two years ago. I wonder how you think about that. If there were any sort of specific reasons to precipitate this result, or if you think that the brand is needing more oomph, more momentum in terms of its ability to drive full price. Attached to this, what you believe is the appropriate level of full-price sales as a percent of the total. Thank you.
Mm-hmm.
Good morning, Luca. Thank you for your questions. I'll take the question on CEO succession, and Julie will take the question on full price sales. Look, I'll go back to the answer I gave Louise earlier on. Our strategy is well established, and it's working. The focus of the recruitment was to find a replacement for Marco, a worthy replacement for Marco, to continue the development of the business pretty much along the current lines, with the continuing focus on elevation, continuing focus on key categories, continuing focus on key markets where we expect the growth to come from and on demographics, as well as continuing to progress better stores and a better digital platform.
Very much strategy as usual, but looking to take the business forward. Frankly, we were looking for somebody who could do all those things. The brief was to find a CEO who is experienced and credible at managing a creatively led business like Burberry and who had the commercial and operating expertise to run a business like this and of this scale. We also wanted somebody who would be a good cultural fit with Burberry, with the great team we have here. Those are the broad characteristics that we looked for. In Jonathan's case, we think he brings pretty much all of those dimensions. He was and is a very good fit to our wish list, Luca.
I think if you ask Jonathan himself, he would describe himself as a sort of natural merchant. I think there is in our next phase of growth, with a strong focus on product and merchandising and elevating the store experience, I think there's a very strong element of merchant and merchandising in the next phase of execution that I think Jonathan will bring to the party. We're also very keen to have his fresh take on the brand and the way that we project and communicate it. That's not to criticize where we are today. I think these things evolve over time, and we'd like him to take the best of the work that Marco and Ricardo have done and go forward with that. I think the priorities are pretty set.
I think Julie has described them well. They are about product, stores, digital, and continuing to ensure that we've got a proposition that appeals to a broad range of consumers around the world.
Thank you, Gerry.
Thank you, Luca. Julie on full price.
Yes, thank you. Thank you, Luca. Just looking at the full price performance, and I think you're referring to the quarters. As you say, the full price comp base does get tougher because it was two years ago we were rolling Ricardo's product out. It reaches much higher levels of the business in the H2 of the year and indeed Q2 over Q1. Turning to full price in terms of the regions, Americas remained very strong across the two quarters. We were dealing with Americas in the Q1 was over 100% full price growth. In the Q2, it was in the 80% range. EMEA strengthened slightly also in the Q2. The change between the two quarters performance versus two years ago was really occurring in Asia Pac.
This was coming through China, where we had a softer Q2 because of the August effect that I was just talking about, together with serious headwinds we encountered in South Asia Pac and also Japan. Japan post the Olympics, but South Asia Pac because of closures relating to COVID. That really talks about, you know, the two features. In terms of the markdown, we did have a headwind on the markdown. This is versus last year of mid-single digits, so there was an impact of mid-single digits. In terms of the prognosis in terms of full price, the full price, I think as Gerry mentioned in his introductory comments, the full price business is in a strong position.
We've completely changed the makeup of the business over the course of the last 2 years, with the most work being done in this last 12 months. We will have finished the exit of markdown, or I should say we will have finished the exit of markdown by the end of this year. Therefore, the headwinds to our comps from the markdown will be over by the end of this year, the majority of which will actually be over by the end of the Q3. We're overall pleased with the full price business in terms of the split of the channels. I think it's important to say that we are very, very much focused on the full price as a lead indicator. We're very focused on inventory.
The inventory purchases are tight because we're targeting higher sell-through levels of that inventory, which means, therefore, that you've got the opportunity to have lower product, lower levels of product going into the outlets. Which means, again, you can improve gross margins through this route, so it turns into a virtuous circle for the business. Outlet is a considerably reduced proportion of our business than it was a number of years ago.
Understood. Thank you very much indeed, Julie.
Okay. Thank you, Luca.
The next question comes from the line of Zuzanna Pusz with UBS. Please go ahead.
Good morning. Thank you for taking my questions. I have one which is a bit, I would say, more broader question. I understand that you're quite happy with how the strategy has been progressing and sort of, you know, the elevation of the brand. But if we take a step back and, you know, kind of trying to put ourselves in the shoes of the shareholders, I mean, effectively, we look at a company that for the past 10 years has seen flat EBIT, compared to a sector that has seen on average double-digit growth in the EBIT. I'm just wondering, you know, how do you assess really the strategy?
Kind of, you know, what is the timeline when you actually expect the brand to catch up with the industry, because I guess, you know, for shareholders, you know, at the end of the day, they are comparing where we were flat a bit for the past 10 years to peers that have been actually growing. So it'd be interesting to kind of, you know, have your take on that and what is the timeline that actually, you know, you use to assess if the strategy is working from the financial perspective or not. And the second question is more on, I guess it's just a kind of a clarification on your retail full price sales.
I mean, you've been referring to them for a while now, and it's very helpful, and they've been clearly outgrowing total like-for-likes for a while. I would expect them maybe at some point to convert with the like-for-like. Could you please maybe remind us what is the split right now? What is the full price as a percentage of total retail? Just so that, you know, we can get our head around that calculation. Because the differences between the numbers are quite meaningful and it's been two years, and they don't seem to be converging for now. Thank you.
Okay. Thank you very much for the question. Taking the first one, our strategy is progressing well. When we announced the strategy at the end of 2017, we did say that we were going to undertake some considerable restructuring in the business. One of the biggest examples of that was removing non-luxury wholesale doors 60% in the U.S. Obviously, they're on high margin. For the first two years, we guided broadly stable revenues and broadly stable EBIT, and that's exactly what we delivered. We were going to enter the accelerating growth phase in full year 2021, of course, when COVID struck. I think luxury in that particular year was expected to fall around 30%.
In terms of our revenues, we kept it below minus 10% in a very, very difficult year to manage. We've now come out of that. What we've said this year very clearly is that we would undertake the removal of the markdown from the business, which we're in a very good position now to do, so we will have exited the markdown at the end of this year. We also wanted to focus on investing in the business to build the brand, to build the core product categories, to elevate the luxury experience with regard to stores, and also to supercharge digital. This will drive considerable leverage opportunity in the business.
If we take, you know, we're delivering what we said this year, the H1, we've got 18% full price growth, and we've also got considerable margin accretion. When we take a look at the growth margin versus two years ago, it's up 210 basis points at constant rate. If we take the operating margin, it's up 120 basis points at constant rate. We're very pleased actually with the overall leverage in the business. The headwind we are facing to these margin statistics is foreign exchange. We've got a, you know, a hit on foreign exchange that's removing around 8 basis points from the EBIT margin at the half. Just coming back to your question about the timeline, we see full year 2022 as being a focus on investment.
Having said that, we're getting margin accretion even with that investment. Then in terms of the coverage or when the retail comp and the full price will converge, we see that convergence occurring much more next year. They will never completely converge because we've obviously got an outlet business. As you go through the inventory cycle, there will be cycles of inventory levels, different inventory levels occurring. Basically, at the end of this year, the markdown headwind will be finished, and we'll then just be dealing with a full price business in mainline and an outlet business, depending on the liquidation of inventory. I think, you know, shareholders can be confident of that from full year 2023 going onwards.
Zuzanna, if I can just qualify, Julie's response to the first part of your question. In my remarks, I said that Burberry looks and feels like a much higher quality business than it was a few years ago. When we look at this from the board perspective, you know, we look at sustainability in all its manifestations, including the sustainability of the business model. It's very clear, looking back, over the periods that you mentioned before either Julie or I arrived, that the business model at the time was much less sustainable from an economic perspective than the business model today.
We've got a business now with a much better margin structure, with a much better level of reach to younger consumers in growing markets, but frankly, with a much stronger right to exist and prosper into the future. I think it is a fair challenge to look at the longer term progression of the numbers. I think behind the numbers, one has to also look at the quality of the earnings and the quality of the business.
Thank you. That's extremely helpful. Sorry, just maybe to follow up. I completely agree with you when it comes to the quality of the business, and I think that's, you know, pretty well-recognized by investors. I guess, you know, given that there is a transition ahead of us with the new CEO, I mean, what is the timeline where you feel like we could start seeing profits growing? Because I do understand there's been some FX headwinds, but equally in FY 2017, there was over GBP 100 million tailwind. I guess, you know, if we look on a multi-year view, there was probably a bit more benefits from FX effect given after Brexit. Putting that aside, kind of, you know, what is the timeline? Is it three?
Is it 5? 10 years, I think, you know, we are in an industry where people are patient, and they're happy to invest in the brands and wait in the long term. Just, you know, maybe to get at least any idea you may have about the timeline, where we can see that, margin improvement and EBIT growth coming through. Thank you.
Yes. We absolutely see this occurring. You know, with the medium-term guidance that we went out with was a high single-digit revenue growth. This is on a full year 2020 base, which was largely undisrupted by COVID. We definitely see this occurring. We gave that guidance out to full year 2024. We definitely see the high single-digit revenue base coming through. The markdown headwind will be gone by the end of this year, and that's a major contributor to that. Also the margin accretion, because we deliberately took the strategy of investing in the business in full year 2022 to improve that margin accretion and the momentum of the business into 2023, 2024, and beyond. We're building the brand, you know, into the true luxury setting.
I think you can be sure of that. Barring macro events, you know, you can be sure of us delivering that. I think just to reiterate Gerry's point, we've created a much stronger foundation for the business. You know, the whole cycle in terms of full price focus in the business, inventory management, very productive sell-through rates. This all leads, you know, a product line now that's very well established and has elements of carry forward and replenishment. It all leads to a virtuous cycle of a sustainable and profitable business model, and that's what we aim to deliver.
Also just to complete the picture, we're very proud of the fact that the business is in a very strong financial position. Got a very strong balance sheet. We're in a position with our current capital allocation model to increase our dividend and to resume the share buyback program. I think if you take the whole thing as a pieces on it, I think one can claim as indeed I did in my remarks, that we've made, I think, pretty good progress over the last few years.
Perfect. Thank you very much for your answers.
The next question comes from the line of Thomas Chauvet with Citi Research. Please go ahead.
Good morning, Julie and Gerry. Two questions. Firstly, on product, when we met you back in September, your Head of Ready-to-Wear, Adrian Ward-Rees, really talked about his expectations of a shift in the fashion cycle with a return to formal wear and tailoring, after a decade of high growth in casual wear. Are you starting to see that in your H1 numbers or in the H2 wholesale order book? This goes beyond the reopening of stores and return to back to the office kind of trade, but a shift maybe from casual wear that could be more profound. Are you seeing that? Related to that, you mentioned in the release, womenswear was more challenging in the half.
What do you think is required to get that important part of the business up strongly again, whether you know from product merchandising or communication? Secondly, on capital allocation, you had a very high net cash position in the H1, GBP 850 million excluding leases. If we project ourselves at March 2022, you should be close to a billion net, still rolled out. That means that you're debt free, including the leases if I did the math correctly. That's below your target of 0.5-1 times net debt to EBITDA. Does that give you appetite to reinforce the second and third pillars of your capital allocation framework, so dividends and...
Adrian's comment. What we're still finding in terms of the business is the ready-to-wear is strong, casual wear is still strong. We have seen a return to some elements of more formal wear, so outerwear in particular has strengthened through the H1 and into the Q2. Double-digit growth in full price in the Q2 from outerwear. In particular, we're seeing coats, jackets, quilts with increasing momentum this period. We've just done the brand campaign, which you will have seen from the video and hopefully seen on the website. This is also generating increasing traction as we move into the Q3. Menswear again has performed very strongly. In womenswear, we've seen a good performance in terms of trousers and elements of womenswear.
Basically, what we're also finding is that women are buying the menswear range in this increasingly sort of unisex way of doing business. We're finding that there's a large amount of crossover business. I think Adrian is right, particularly as we come into the festive season, we do expect there to be more of an emphasis on formal wear, probably more of an emphasis on formal shoes as opposed to casual shoes coming about. In terms of the next part of your question, relating to capital allocation. Yes, I mean, we've got a very strong position with the balance sheet. As you say, GBP 850 million of cash and a low leverage level at the end of the period of 0.3 times net debt to EBITDA.
We're in a strong position. We have recommenced the share buyback program. It's going to be GBP 150 million basically in less than 6 months, so it's going to move at quite a pace. Then we will review it again at the end of the year. We have a very clear target leverage level in place, which is 0.5-1 times. We will use the capital allocation policy, which first looks at investing in the organic business, second, the dividend, third, inorganic investments. Those types of initiatives are likely to be in the vertical integration space because we want to continue to support the capabilities in the business. Then obviously, fourthly, we return excess cash to shareholders when we're under the leverage level by way of a buyback or a special dividend.
We will continue to do that. Now, I think it's important to say that in terms of strategic investments, we've recently done a very thorough review with the board around our strategic investments, and we do intend to accelerate the investment in our new store concept. We're seeing great traction from our clientele, high-spending clientele coming to the new store format, and so we want to accelerate that as we go into next year.
Thank you, Julie.
Thank you.
The next question comes from the line of Rogerio Fujimori with Stifel. Please go ahead.
Oh, hi. Hi. Good morning, Gerry and Julie. Thanks for taking my question. My first one is on outerwear. You're just coming into your key selling period for outerwear. How confident are you in terms of your products and marketing initiatives to accelerate growth in the H2? I think you said that coats and jackets led to a strengthening improving in Q2, but you also said that women's rainwear was a bit challenging in Q2 after the price hikes you implemented in June. If you could talk about rainwear and your level of confidence for H2 would be great. My second question on bags, how confident also you feel about your handbag pillar sustaining their sales momentum in H2? Thank you.
Thanks, Rogerio. Turning to outerwear, first of all, we see this as a very strategic area of the business. We have, as you saw, launched a dedicated product moment involving a brand film and a campaign centered, you know, on the story of the Burberry outerwear, the outdoors, the freedom to go beyond. That was all put into the storytelling. We've also included a TikTok takeover relating to this, and we've now just recently launched a dedicated edit that is showcasing the EKD fabric, but using it in a different way in terms of puffer coats, et cetera. It's a sort of Burberry specific EKD element. We've engaged in many activations now across physical and digital channels relating to outerwear moments.
It's a key strategic area. We have seen an improvement. You mentioned rainwear. We've seen an improvement in rainwear, a much better performance in Q2. It remains under some degree of pressure, but we're now coming into the season where this will inevitably pick up. We are seeing very strong growth as well in the regions not disrupted by tourist flows, you know, particularly in Asia. China is very strong. Korea is very strong. We've seen outwear perform extremely well in those regions. In terms of handbags, turning to leather. We're very pleased with the leather performance. We've strengthened our bag pillars through this period.
We had a dedicated campaign centered on Olympia, featuring a number of key influencers, and we've actually done more than 70 leather goods pop-ups, featuring Olympia during you know the course of the last six months. We've also recently extended the Lola family. We've extended it into the crossbody, the bucket. The small leather goods are also doing incredibly well as part of the winter collection. We've introduced a new shape, the Rhombi, as part of the spring/summer 2022 runway collection. Overall, we're finding leather goods is an area that's attracting new and younger clients. Marco always talked about establishing a strong architecture for bags, and we've managed to do this. We've now got the top five female bags accounting for more than or around 70% of the business.
All the shapes are contributing to a good level of the sales. In terms of the price rises that you mentioned, we actually saw no resistance to the price increases that we took in May this year. A good overall performance.
That's great. Thank you.
Thank you.
The next question comes from the line of Carole Madjo with Barclays. Please go ahead.
Yes. Hello. Good morning. Two questions from me, please. First of all, can you remind us what is your exposure to e-commerce per region, and notably in China? I think it's quite small there still, but, when we think about the slowdown in traffic in August, did you see any support from e-commerce or were the trends similar, in both offline and online? A second question, just to clarify, have you returned to positive comps in Asia in October, on the back of the better trend that you're seeing in China? Thank you.
Okay. By taking the e-commerce piece, we don't give a split of our channels in terms of digital versus physical, because what we believe and see in our business is it's the only channel combination that is the key part. It's the connectivity and allowing the consumer to move between physical and digital at ease and having a CRM system that talks to both channels equally so that we give the clients an extremely luxurious and tailored focus. We don't give a split. In terms of the regions, though, you're absolutely right. China has a lower exposure to e-commerce generally than we find, for example, in the U.S. market, where it's already very, very high in the U.S. market. It's building in China.
We are finding that the growth in China is very strong because it's coming from a smaller base. In terms of the offset, in August, yes, there was a transfer of business from physical to digital. What we find generally is that when we've got physical stores closed, even if we've got a strong digital channel as we have in the U.S., it's more developed, we still find that it doesn't offset the physical store closures. In our business, physical stores are a very important part of the luxury journey, so you don't get the complete offset. In terms of the comps, just in terms of if we take versus last year, then we had a positive comp in Asia Pac in the Q2.
The dip that we saw coming in versus last year, like one year ago, one, we had a very strong base in Asia in the Q2 because it was the first region to reopen. Two, we did have this impact coming through from both China because of August, but also we had a softening in South Asia Pac and in Japan because of lockdowns, COVID-related lockdowns. The thing that we never know is when COVID-related lockdowns are going to impact the business. Assuming things continue according to plan, we would expect to return positive comps. Bearing in mind, though, that compared with last year, there was a very strong performance in that Asian base just one year ago.
Thank you.
Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Gerry Murphy for any closing remarks. Thank you.
Well, thank you, everybody, for dialing in and for listening to our presentation and for your great questions. As I said earlier on, we're going to finish now because of the Remembrance Day observations around the world at noon. Thank you for your attention, as I said, and we look forward to seeing you again in January for our Q3 update. Thank you.