Good morning. I'm Kate Ferry, CFO of Burberry, and with me today are Josh Schulman, our CEO, and Jo Kennedy, Head of Investor Relations. As you will have seen, we published our Q1 trading update this morning. There are slides to accompany this call on our corporate website, and a transcript will also be available later today. In terms of running order, I'll go through our performance in the first quarter, and then Josh and I will be happy to take your questions. We have continued to make progress with our Burberry Forward strategy this quarter. Comparable retail sales grew 5% versus last year, led by continued strength in Americas and Greater China. We sustained brand momentum through culturally relevant storytelling and activations, driving sales and engagement across key markets.
We are cementing our authority in outerwear and scarves, with outerwear growing double digits in the quarter, supported by demand for heritage rainwear, lightweight jackets, and seasonal products. We are also encouraged by the performance of our silk scarves. At the same time, we're extending our product authority into ready-to-wear and women's bags. Overall, and for the first time in three years, we saw growth across our womenswear, menswear, accessories, and childrenswear divisions. We're seeing a positive customer response to our product and pricing strategy. We are successfully offering value for money in a luxury context across each category with good, better, best pricing tiers. This is supporting our quality of sales through growth in full price and lower markdown year-on-year. We grew our customer base in the quarter with Gen Z customers up double digit for the group.
We continue to improve store productivity through clienteling and cross-merchandising, supported by the rollout of category destinations, including 97 polo galleries launched by Father's Day. E-commerce showed good growth, up mid-teens in the quarter. Finally, we have increased half one FY 2027 wholesale guidance, reflecting the positive response from our partners. Moving on to the quarter's retail performance. As mentioned, comparable retail sales grew 5% in the quarter. The contribution from space was a 1% headwind, resulting in retail sales growth of 4% at constant exchange rates. Currency represented a 1% tailwind, with retail revenue landing at GBP 455 million, up 5% at reported exchange rates. Turning now to regional performance. Americas delivered the strongest performance in the quarter, with comparable retail sales growth of 12%. This was supported by local spend and broad-based customer acquisition.
Mother's Day was particularly successful for us in Americas, driving customer engagement and growth in our bags business. Greater China grew 9%, supported by local spend and particularly good growth in Gen Z customers. While the operating environment in China remains mixed, our actions are driving outperformance. Asia Pacific grew 3% in the quarter. South Korea continued to perform strongly, growing 11% on a more challenging comparative base, with growth supported by both local demand and tourist spend. Meanwhile, Japan declined 2%, impacted by continued weakness in inbound tourism from Chinese visitors. EMEIA declined 3%, reflecting the ongoing impact of the Middle East conflict and lower tourist spending. Tourism in Europe was impacted by the Middle East conflict. However, despite that, we've seen good trends from American visitors and encouraging full price sales. Excluding the Middle East, the region declined by 1%.
Turning now to our strategic progress across brand, product, and distribution. On brand, marketing investment is sustaining brand momentum and supporting sales. Our Portraits of an Icon campaign brought new customers to our brand with a 19% increase in new rainwear customers. A Good Sport supported growth in House Check bags and polos. In addition to global campaigns, we have continued to celebrate relevant local content with the launch of the first installment of a three-part short documentary series created in partnership with Chinese National Geography. The series showcases brand ambassador Chen Kun exploring China's natural landscapes in Burberry's signature outerwear. To complement our High Summer campaign and swimwear collection, we extended our brand codes through hotel takeovers in Antibes, Bangkok, and Athens.
In product, we continued to build on our authority in the categories where Burberry has the greatest authenticity. Outerwear grew double digit during the quarter, supported by strong demand for heritage and transseasonal products, including summer weight outerwear such as our Tropical Gabardine range and our short Mayfair trench. We've also been encouraged by the performance of silk scarves in these warmer months. We're extending our momentum across product categories outside of our hero categories with particularly strong performance in knitwear, polos, and swimwear in this quarter. We're seeing good performance in women's bags overall, driven by growth across several families, including the Cotswolds, the House Check, and Horseshoe. In distribution, we continue to make choiceful adjustments to our store network, including investing in a new location on Via Monte Napoleone in Milan, which is set to open in FY 2028.
The rollout of our category destinations remains on track, supporting store productivity and cross-category merchandising opportunities. We launched 97 polo galleries by Father's Day and will launch trench destinations and cashmere shops in the second half of the year. Finally, we continued the rollout of a clienteling tool. This tool enables a more intuitive and user-friendly experience for our client advisors, while also allowing improved planning and productivity in-store and a more engaging customer experience at scale. Turning now to the outlook. As we look ahead, we're encouraged by the progress of Burberry Forward, and will build on it to drive performance and deliver sustainable long-term value. In the full year, we expect to make further progress on our financial ambitions, including delivering revenue growth and margin expansion in line with expectations. We remain mindful of the uncertain geopolitical and macroeconomic environment and its potential impact on consumer confidence.
To help you with modeling, in FY 2027, retail space is expected to be broadly stable. As I noted at the start of the call, wholesale revenue is expected to grow by a high single-digit percentage in the first half of FY 2027, an increase from the mid-single digit expected at the start of the year. Annualized cost savings are expected to reach GBP 100 million, of which GBP 80 million were delivered in FY 2026. We expect restructuring charges of around GBP 5 million and capital expenditure of approximately GBP 120 million. Based on June 26th spot rates, currency is expected to provide a circa GBP 20 million tailwind to revenue and have broadly neutral impact to adjusted operating profit.
We continue to expect an adjusted effective tax rate of between 27% and 30%. As we move through the year, we remain confident that we can build on the progress we have made in quality of sales, continue to improve performance, and drive sustainable long-term value. With that, we will now be happy to take your questions.
If you would like to ask a question, you may do so by pressing star followed by one on your telephone keypad now. If you would like to withdraw your question, please press star followed by two. When preparing to ask a question, please ensure your phone is unmuted locally. To confirm that, star followed by one to ask a question. First question comes from Anne-Laure Bismuth with HSBC. Your line is open. Please go ahead.
Yes, hi. Good morning. I have two questions, please. The first one is on the sales by nationality. Can we go back to the performance by client cluster and share a bit more color on the growth by nationality, particularly for the Chinese cluster and the evolution between onshore and offshore versus Q4? My second question is about the retail like-for-like performance for the rest of the year.
As you mentioned, you expect to deliver revenue growth in line with consensus, which is consensus is at +5% for the full year, implying roughly the same growth for the rest of the year. The basis of comparison is getting tougher through the rest of the year. What gives you confidence you can continue to deliver a solid performance through the rest of the year? What are the elements in terms of product category, full price sales that is supporting that outlook? Thank you very much.
Hi. Morning, Anne-Laure. Perhaps I'll start with the clusters, then we'll talk about the outlook. In terms of clusters, the first thing I would say is that the comp growth overall, we're certainly seeing a really good growth in local customers everywhere. If we look at regions, you'll have seen Americas was very strong, both in the region and by cluster. We saw a growth in locals and in tourists. The one thing I would call out there is that certainly we've seen Americans traveling to EMEIA. I think the strength of the brand locally is actually having a really good halo effect in that they're coming to Europe and they're really wanting to shop with Burberry. The EMEIA region was down, but the EMEIA cluster was up. Again, if I look at the region, I would call that locals improved.
They were down in Q4, but locals were up in Q1. No surprise, you've heard it from everyone, tourists in the EMEIA region were down, but really that's very much the impact of less Asians coming over. Clearly, with the Middle East conflict, that is having an impact on that travel hub. We're seeing less tourists from Greater China and APAC, but as I've just said, American tourists in EMEIA were certainly very positive.
In the Middle East region, clearly now we're dealing with one month of impact, with three months of impact, sorry, rather than one, but we did see a bit of an improvement in locals from Q4 to Q1. Greater China, very much driven by locals and intra-region tourist shopping. The cluster there, we talked about it being up mid-single digit in Q4. No change there, still up mid single- digit in Q1. The APAC region driven by both locals and tourists
Hey, do you want me to take the-
Oh, sorry.
The second part?
Yes, absolutely. Go ahead, Josh. Sorry for.
Okay.
That second question.
Hello, Anne-Laure. Today happens to be my second anniversary at Burberry, in fact. Sitting here today with our fourth consecutive quarter of positive comps, we're looking forward with clarity and confidence that the Burberry Forward strategy is working. This was our first print where we had women's, men's, accessories, and children's wear, all four of our divisions, positive comping together. We get the confidence because we've had a very deliberate product strategy, and we're seeing the benefits of that strategy and the building blocks of that strategy come through in the financial performance of the business. We've always said in product, we would lead with outerwear and scarves. A big, I think, question that many of our analyst friends had was around the seasonality of those businesses.
We've been very deliberate in outerwear in terms of having a seasonally appropriate offer for all four seasons of the year. In this quarter, we had very strong sales of our new Tropical Gabardine introduction. On the backs of Portraits of an Icon, we were also selling these lighter weight Tropical Gabardine items in the quarter. Shorter trenches, like our Mayfair jacket. Then, of course, all of our lightweight nylon jackets as well. This is the peak time of year, and you can see the growth that we've had in outerwear was really from those different building blocks. In scarves, again, this is a category where we have a lot of historic credibility and I've said many times, we have the most opportunity where we have the most authenticity.
The authority that we have in cashmere scarves, we've been very deliberate about extending that authority to silk scarves, which were really a highlight in this quarter as well. Likewise, we've had a very deliberate merchandising strategy around the summer categories. Whether that was swimwear, where a brilliant predecessor of mine, Rose Marie Bravo, was the first one to put Kate Moss in a Burberry check bikini and make this a 12-month-a-year business. We built on that heritage this quarter with the Hunza G collaboration, which helped double our swimwear business for women and for men. In men's casual ready-to-wear, a polo shirt is something where we had great authority in our Eddie polo shirt. I remember talking to all of you a few years ago and saying that we had taken that out of the collection at one time.
Now it's heroed and available in our polo galleries in 26 options. Those moves are also driving productivity in our stores. When we introduced the scarf bars, when we introduced the polo galleries, we're seeing productivity growth in our store network, which I know has been something very important for our analyst community, and very important, frankly, for us to drive the productivity of these spaces. We'll be building on that with destinations for trenches going forward. Also, outside of our core, I have been very reticent to talk about this over the last quarters until we had real proof points. Now handbags, women's handbags are becoming a more meaningful part of the business, and this has been a very deliberate strategy of finding our sweet spot with good, better, best pricing in a luxury context.
In the middle of the quarter, we had a very positive Mother's Day in the Americas where we were up double digits in the handbag category. We have strength in women's handbags now across the geographies, and that's attracting new customers to the brand. I think all of these initiatives help reaffirm my confidence of Burberry's place in the market as a luxury brand with broad universal appeal. As the luxury customer is looking for great value for money, whether that's a scarf for GBP 195 or a beautiful cashmere trench for GBP 4,000, or a leather trench for GBP 8,000. They want great value for money and to feel like they're getting a product with real authenticity. There's never been a better time to be Burberry and to have our unique position in the market.
Thank you very much.
We now turn to Luca Solca with Bernstein Societe Generale Group. Your line is open. Please go ahead.
Thank you very much. Josh, you were referring to space productivity improving. I wonder if you could give us a little bit more granularity on that front and how you are satisfied with both traction in what you're bringing to the market as well as right-sizing some of the stores that were diluting retail space productivity, as far as I understood. My second question is on brand excitement and getting Burberry at the center of the stage. I thought the initiative you're taking in China is impressive. It dovetails with the DNA of the brand. I wonder if you have thought about a pipeline of initiatives like this that could potentially re-energize the excitement and the buzz around Burberry. My understanding is that you've done a lot to get the foundation correct, to get the market position correct, to go back to Britishness and the icons.
Now that you have the foundation right, you could potentially work on that to get Burberry even more exciting, and I wonder if you have any input that you could share on that front. Lastly, my usual focus I guess. How is off-price proceeding? Are we right to understand that this is now less important than it had been in the past, and can you give us any granularity on that? Thank you.
Yeah. All good questions.
Yeah.
Do you want me to take that, Kate, or do you want to start?
Yeah, fine. I can start with the productivity and space.
Okay, perfect.
Yeah, just on your first point, Luca, obviously with comp at +5% in Q1 and Q4, space slightly down absolutely indicates the positive trajectory of our store productivity. Look, we've guided broadly flat space for the year, but within that, we've always been very clear that there will be movement, as you saw in the last quarter. Absolutely moving out of non-productive stores, adjusting space where we need to. Do you want to take, Josh, the second?
Yeah, absolutely. In terms of brand excitement, you're absolutely right. We have worked really hard to build the foundation. We are very excited about the momentum we're having in the marketplace. We had an extraordinary fashion show for this winter collection, and the campaign that accompanies it, I believe, will attract new customers to our brand. We saw that also with our Portraits of an Icon campaign, specifically, which had 23 global celebrities, and we used that as really an anchor to our 170th anniversary celebration. As we move through the year, we have some particular other initiatives that are happening. Burberry is this unique British brand that has so many stories to tell, and we are really at the nexus of speaking to our heritage and innovation. In the fall, we will have a special display on the trench at the V&A in London.
As we move later in the year, we will cap off our 170th year with an extraordinary exhibit in Shanghai to keep that drumbeat of activities with an emphasis, yes, on our hometown in London, also on the Chinese customer and the American customer. We're very excited about this large-scale exhibition that we will be doing in Shanghai later this year. Having built a strong foundation, we are going forward with confidence that the best is yet to come. In terms of the off-price component, I think throughout our business, what you'll notice is the quality of sales improving. Whether it's in our full-price channel or in our outlet channel, the quality of sales is improving. We had less markdowns for this season because we had higher full-price sell-throughs.
The customer is liking what they're seeing at full price, which is not requiring the amount of discounting and the type of markdown activity we did last year. That is very much under control. While we don't comment on the specifics of the outlet performance versus the full-price performance, I would say that the outlet villages, particularly in Europe, continue to be very challenged with traffic. The performance that you're seeing is really led by the full-price channel. A little more granularity on the full-price channel, and particularly within EMEIA, because that is a diverse market. We are seeing double-digit growth right now in our flagships in London and Paris. Those are being fueled by both the local customer, but also an influx of the American tourists.
We're seeing the halo from the marketing investment that we have done in the U.S., literally traveling across the pond as those customers are spending more, engaging with us more in these cities. As a signal of our confidence, today we're announcing our new flagship in Milan Via Monte Napoleone. This is a return to Monte Napoleone, where we left a few years ago, to a really prime space right near the corner of Via Gesù. You'll see the latest expression of Burberry in that environment. You also made a comment about the space reallocation in terms of productivity. We have several good examples of that around the world. One relatively close to home in EMEIA, where we exited a large aging store that was not particularly productive in Brussels. We moved to a better location, which is smaller.
This new store has some of the visual merchandising and product destinations, like the scarf bar and the polo gallery, and we're driving a much higher productivity in this space. You'll see examples of that, really like that, throughout the world, including at our Regent Street flagship, where we will have more to share in due course. We've given up some underused back-of-house space in a former restaurant that was attached to the store. We're going to be able to reformat the space in that very important store, which will be more productive in less square footage.
Thank you very much indeed.
Hope to see you soon, Luca.
We now turn to Antoine Belge with BNP Paribas. Your line is open. Please go ahead.
Yep. Good morning. It's Antoine Belge at BNP Paribas. Two questions that's in the game. First of all, you highlighted that the performance that you're achieving is really reaching out to most categories. By region, and I understand that the macro might be different. We have a very strong U.S., and in China you are regaining consumers, especially Gen Z. Europe, the local consumer seems to be a bit lagging behind, which I think is not really new. Even so, it has been a bit tougher for Burberry to convince English, French, and Italians, just to mention a few. I don't know if there is something that would explain why you're doing much better in U.S. and Greater China than Europe, or yeah, if you have any thought on that.
The second question is about the share price reaction today on a, I would say, in-line number. It seems that there could be a seasonality in the margins, starting with the gross margin. If maybe we could understand why that's the case, especially since that from the previous question, the sell-through are quite good. I'm not sure I understand why the margin, especially in H1, be, I don't know, maybe a bit below what people expected. Also, since you're happily confirming the consensus for the EBIT for the full year, which I think is GBP 246 million, could you maybe mention some kind of a EBIT figure that could be sensible in H1 and H2? I know it's usually not the podium or the audience for today, but in light of the sharp price reaction, I think that probably what is on our clients' mind. Thank you very much.
Morning, Antoine. Just on your first point, I'll probably point you back to some of the comments that Josh has just made around actually, we're seeing really strong growth in European cities. Actually, what we are seeing is that locals are positive across the world. I think if you're listening to my comments about clusters, calling out in particular in EMEIA, where we are now seeing locals up. Of course, they were down in Q4. I would say quite the reverse actually. We're seeing really good traction in our European cities. Really the reason for the EMEIA negative overall comp is, of course, the tourist situation, and that really We're seeing strong American tourists, as Josh mentioned. It's really the lack of Asians, of course, with the disruption of the Middle East travel hub. That really is continuing to affect tourist flow into EMEIA.
I think really actually encouraged by performance in European cities. Look, on the second point, on the gross margin phasing, I would take you back to this point that we've just talked about around an improvement in quality of sales overall. That's stronger full price, lower markdown, clearly feeding into margin. For FY 2027, we absolutely expect to achieve another year of gross margin expansion. That guidance remains. I think what you're referring to really is a phasing point. This is actually about the fact that we are now returning to a much more normalized phasing. Historically, pre all of the disruption of the past couple of years, we've always generated a higher gross margin in the second half as compared with the first half. Actually, this reflects, there is a seasonal nature to the business.
We do have more revenue in H2 versus H1. We do tend to build up inventory ahead of our peak period, and therefore, naturally you're going to get a little bit more provisioning in the first half as well. Growing, which is what we're now into growth mode. We are growing this business. The business is normalizing, you would expect higher gross margin in the second half versus the first half. I would say for the full year, all as expected, you will see margin growth. I think that really is going to play into a higher profit in the second half versus the first half. In terms of consensus, yes, we're happy with the GBP 246. There's a broad range out there. This is just Q1. You probably wouldn't expect me to start trying to move consensus at this stage.
Are we feeling more confident? Whether it's in the short and indeed more importantly, the longer-term trajectory for Burberry, absolutely. Just to reiterate some of the points that Josh has made, we are continuing to see improvement quarter-on-quarter. We're seeing more and more proof points that the strategy is working, and therefore, while we are not changing consensus at this early stage of the year, we are certainly increasing in our confidence in Burberry Forward.
Maybe just to follow up very quickly. Gross margin, I understand, stronger in H2 versus H1. For H1 of this year, will it be down year-on-year compared to H1 of last year?
It may be down slightly. Probably may be down ever so slightly.
All right. Thank you very much.
We now turn to Thomas Chauvet with Citi. Your line is open. Please go ahead.
Good morning, Josh and Kate. Thanks for taking my question. The first one on China versus Chinese. It's been three consecutive quarters that Greater China LFL have outperformed the Chinese cluster by about five percentage points. That suggests Chinese traveler spend outside Greater China remains quite negative, maybe in Europe and Japan. Do you think it could reflect a shift in shopping preferences where Chinese consumers are responding positively to initiatives in China? Localized marketing, client events, and perhaps the price gap is irrelevant, and the Chinese consumer starts to ignore the higher retail price they face when they shop at home versus abroad. My second question on licensing, could you comment on the Coty destocking of all Burberry fragrances lines that was a drag on royalty sales and profit last year? Will that be largely over after the first half?
I see consensus licensing is still plus one for the year. Could you also update us on your relationship with Coty at the time that just returned the Gucci license to Kering a year earlier than planned? Does that put you in a position of strength with Coty as one of their most important partners to strengthen the business from here, or to reconsider certain aspects of the relationship of the contract? Thank you.
Thank you, Thomas. Josh, do you want to talk a bit about the China market, dynamics of licensing?
Sure. I think what we're seeing in China is actually very positive. We're very pleased to see our product and marketing continuing to resonate in one of our largest and most important markets. We're seeing their response both to our big global initiatives like Portraits of an Icon, which was very focused on our trench category. They were among the regions which were first on the Tropical Gabardine trenches, which have contributed a great deal in this quarter, and of course, lightweight jackets, as well as an anchor. We also, in addition to our large global activations, we have done this localized content, which also is generating positive brand sentiment in the market.
I think what we're seeing is simply a consequence of the travel patterns. We have seen disruption in the typical Chinese and Asian travel patterns to Europe ever since the start of the Middle East war. Frankly speaking, what I have also heard anecdotally, and this is broader than Burberry, but that the Chinese customer, which pre-COVID was spending a lot of time shopping in Europe. I think we hear this from our department store partners in Europe as well, that this isn't the era of the big Chinese tour groups coming to Europe. It's more individual shoppers. The volumes of tourists are down coming to Europe, but they're finding what they want at home. Frankly, when you walk the malls in China, you're getting, in some cases, the best assortment in the world, too.
It happens to be, we just launched our Chinese Valentine's Day capsule this week. You have all of these capsule collections that ourselves and peer brands are doing that are giving the Chinese customer more and more reason to shop at home. We welcome that. We will welcome the Chinese consumer wherever they want to shop.
Just on your second question, Thomas, you'll obviously remember that licensing revenue did decline 9% in FY 2026, and that was impacted a little bit by the soft fragrance market. As we called out at the time, there's also this lag in brand alignment between our licensing partners and the current Burberry Forward aesthetic. We've addressed that. We definitely expect an improvement from the -9%. For the full year, we probably still expect a small decline. I would call low single digit for the full year. On the relationship point, Josh, do you want to pick up on that?
Yeah. We don't comment on the specifics of our contractual agreements or our discussions, but what I would say is that we are working very closely with Markus Strobel and his team. And specifically, as Kate said, there is a lag time in the license categories to reflect the evolving brand expression. And our goal is to work closely with them during this period so that the consumer-facing brand expression of the beauty and fragrance lines aligns with what you see in our fashion. And we have some very exciting developments in the year ahead.
Thank you.
We now turn to Carole Madjo with Barclays. Your line is open. Please go ahead.
Hi. Good morning. Two questions on my end as well. The first one, can you come back maybe on the key retail metrics such as AUR traffic, sales conversion, and just share how these metrics have evolved in this first quarter? The second question, just to come back on the topic of the gross margin. As you said, we might have some slowdown in H1, anything to share on OpEx and the EBIT margin for the first half? Anything here to keep in mind? Thank you.
Yes. Hi, Carole. I think I'd start in terms of metrics, reasonably similar trends to what we saw in Q4. Really very encouraged by what we're seeing in terms of conversion. You know, product resonating, and when people are coming into stores, they're clearly finding more product that they like. Conversion, very strong. AUR, small positive in the quarter. I think we're still saying for the full year probably AUR neutral. Again, slight positive in the quarter. I think fair to say, traffic is as it is for the whole industry. Traffic remains challenging, of course, we're very pleased with our result, and that is all down to very strong conversion. In terms of OpEx. Look, again, no change to the full year guidance here. We remain committed to broadly flat OpEx for the year.
I think as we start to get into the real detail or the modeling detail or detailed plans of our customer-facing investment for the year, we may well spend a little bit more towards the end of the first half. I'm thinking right towards the end of the first half because of course we want to prepare for peak trading periods, so for festive, for Lunar New Year, so potentially a little bit more OpEx than H1 last year. Again, I'm really getting into the detail here, and we're just laying out our plans for the year. The key is no change to our expectations of marketing investment for the full year. Absolutely committed to flat OpEx for the year and gross margin expansion and revenue growth.
Thank you.
We now turn to Zuzanna Pusz with UBS. Your line is open. Please go ahead.
Morning. Thank you for taking my questions. I'll stick to two as well. Maybe first of all, to follow up on the wholesale outlook. It's pretty encouraging that you're expecting to grow high single- digits. Can you maybe tell us which specific region is driving that? I guess it's usually seen as a bit of a lead indicator of the brand momentum. Yeah, if you could just tell us if maybe there's anything one-off in nature in there, that would be helpful.
Secondly, maybe coming back to profits. We are all seeing on our screens the share reaction, right? I think part of it is, as I think Antoine mentioned earlier, the phasing, but then also the EBIT outlook, which you expect to be unchanged despite more positive FX, and obviously also that wholesale upgrade. I'm just wondering, is there really a small underlying downgrade in there? Which really, I guess that's how the market understands it, given the share price reaction. Or if you can tell us if you're just being extra cautious. That'd be very helpful. Thank you.
Do you want to take the wholesale one and give a bit more flavor there, Josh, and then I'll talk to consensus.
Sure. Indeed, we are very pleased with the wholesale numbers. Even more than the numbers, we're pleased with the underlying sentiment and what we hear from the wholesale partners. This is one of the few areas where we can get an objective benchmarking of our performance versus our peers. Because when the teams from Burberry stores come into our showroom, they have an open to buy and they will tell us what they think, but they have to buy Burberry. Our wholesale partners can buy any luxury brand, and they have been voting for Burberry with their open to buy. I think it's a couple of things. I think one is the strategy is working, they're seeing higher full price sell-throughs from Burberry, and they really loved some of the innovations and newness that they saw in our collections.
Particularly, we have a cashmere shop that will be in our flagship stores and in many of our wholesale partners that will be anchoring our assortment for the festive period. There was a lot of excitement there. There was a lot of excitement for new directional outerwear shapes that were linked to what Daniel put on the runway for the winter show. The styles that were derived from the runway expression. All of that was really positive. From a geographic point of view, we're seeing it across the board. Obviously, America wholesale is very important to us. We've strengthened our presence there across our partners. The situation with Saks Global, now the Exemplar Group, has stabilized. We're actually going to be in fewer doors year-on-year with that group.
Overall, even in fewer doors in America across all of our partners, this is another story of quality of sales. We had a strong increase in our America's order book, notwithstanding a tighter, better distribution. Going around the world, there's a significant consolidation of the main wholesale partners. In Asia, the duty-free channel in China has really consolidated with the China Duty Free Group, and we have a terrific relationship with the China Duty Free Group. Again, that's based on the strong performance in their market. Picking up on what Thomas was mentioning before about Chinese shopping regionally, we're also seeing strong growth in Hong Kong and Macau which are now being operated through Chinese partners in the duty-free area. So that has been very positive for us as well.
In Europe, there's been a big consolidation with the Central Group, and they are very strong partners with us, and a consolidation with LuxExperience. Having these strong, larger partners who we're working with around the world, coupled with the most opinion-leading boutiques in key markets in America and Europe all basically voting with their open to buy for Burberry. Even though wholesale is only about 12% of our business, we consider this leading indicator to be a great sign of the brand momentum and our resonance with the consumer.
Just to follow on from that and the question on consensus. As you've just heard, firstly, we are very encouraged by the wholesale results. Yes, clearly there's an underlying upgrade there. On FX, again, you're right, sitting here today, it's certainly less of a headwind than it was just eight weeks ago, but it is a moment in time. Actually, I think that the pound over the last few days, it's literally strengthening as we speak. I think it's just too early in the year to move the outlook.
There's a very broad range in consensus. I just want to state, there is absolutely no underlying upgrade. In fact, quite the opposite. You asked me about being cautious. I think I would prefer to be cautious just three months into the year. Am I encouraged by how we've started the year? Absolutely. I think, our focus now is on execution and on delivering revenue growth and margin expansion this year and beyond.
Sorry, can I just follow up, because I think maybe you may have said it back, you said that there is no underlying upgrade. Did you mean there's absolutely no underlying downgrade? Just to clarify.
Sorry. Apologies. I actually meant, yes, Apologies. There's no downgrade at all. I think my point being, we're encouraged by wholesale. FX is a moment in time. We're really encouraged by our performance, so absolutely no downgrade. Apologies. Thank you for clarifying that.
Excellent. Thank you so much.
We now turn to Grace Smalley with Morgan Stanley. Your line is open. Please go ahead. Grace, your line is open.
Hi. Hi, can you hear me?
Yeah, we've got you.
Yes, we can hear you.
Great. Hi, thank you so much. My first question, please, would just be, I appreciate it's a sales call, but just to touch base on an update on your medium-term margin outlook. Kate, very clear from your comments on this year on the margin expansion you expect, but if you could also just come back to the medium-term margins and walk us through your confidence on Burberry's medium-term margin trajectory and the confidence that you have to return to a high teens margin over time. How we should think about the building blocks to get there, so sort of what top-line growth we need, and how it's split between gross margin and OpEx leverage from here. More one on the multi-year margin story than this year.
Sorry, just to come back again on this H1, H2 gross margin dynamic, just given the amount of questions we're getting on it this morning. Just on the inventory provisioning, can I just confirm that your comments on gross margin potentially being slightly down in H1 is not a function of increased discounting, and that you are comfortable with your inventory levels given all your comments on full price selling. It sounds like it's more a function of just normalization of the business and growth in the business and you're building inventories into kind of your expectations for growth in H2. If you could just double-click back on that. Thank you so much.
Absolutely. Look, I think firstly, in terms of the long term, I hope you picked up from our comments today that our confidence in the long-term trajectory of this business is certainly increasing. The strategy's working. I think with every time we come to talk to you, we have more and more proof points that Burberry Forward is delivering, and ultimately, it is this that is going to drive the revenue growth. On the margin, absolutely. We've stated an ambition to get back to 70% gross margin. We were there just a few years ago. You saw a really good uptick in the year just reported, and we will continue with gradual improvement back towards the 70%. Likewise, on OpEx, we've guided to broadly flat OpEx this year. You will really start to see the leverage coming through.
I think all the building blocks that we laid out for the year just reported remain, and as I say, our confidence is certainly growing on that. On the margin point, we are very comfortable with our inventory position. I think as you've just heard, the quality of sales is really the point that we want to land today. Lower markdown year-over-year. Certainly less discounting. Productivity is growing. You are absolutely right. This is just a point that we are now returning, if you like, to a more normalized level of provisioning.
Don't forget that during FY 2025, we raised significant inventory provisions, you'll remember. We recognized the gross margin impact at the time. Of course, FY 2026 first half, gross margin did benefit from the sale of the inventory that had already been provided for in an earlier period. That just naturally creates tougher year-on-year comps for H1 this year for FY 2027. Your comments are absolutely right. It is not to do with inventory positions. We are very comfortable. We are in a cleaner position than we have ever been.
Great. Thank you very much for clarifying.
We now turn to Charles- Louis Scotti with Kepler Cheuvreux. Your line is open. Please go ahead.
Good morning. Thank you for taking my questions. I have two, one on the Middle East and one on e-commerce. The first one, you mentioned that trading with local customers in the Middle East improved during Q2. Was this improvement gradual on the month-by-month basis throughout the quarter? Also, could you give us an indication of where local demand currently stands versus last year? What level of impact have you assumed in your budget for the next three quarter? Secondly, on e-commerce, it seems to be very brilliant.
Could you remind us how large this channel is within your retail business and whether the strong momentum is broad-based across geographies? I assume this performance is primarily driven by new customer acquisition. Could you provide some color on the mix between new and existing online customers? Has this contribution from new customers increased meaningfully in recent quarters? Thank you.
Perhaps I'll just take the Middle East one first. Just as a reminder, the Middle East is just 2% of our global sales. When the conflict initially kicked off, we did have some stores closed, but they quickly all reopened. Generally the Middle East for us, it's therefore not that material, and it's very much a tourist market. I did make some comments that the local performance has improved quarter- on- quarter. Really the main dynamic there is of course the influx of tourists. Sorry, the second question on.
E-commerce.
Yeah. Sure.
Do you want me to take that? We're really pleased with the traction that we have in e-commerce. In many cases it's the front door for Burberry and as you will recall, several years back, Burberry was famous for its e-commerce business. We have been rebuilding that and we're seeing very good traction there. It's high single- digits of sales. This is the eighth quarter of consecutive growth. We started to see the response to Burberry Forward earliest in the e-commerce channel. The channel is particularly strong in the Americas. We're starting to see a younger customer come in through the e-commerce channel. A lot of what we have been doing there is about enhancing the customer journey with more personalization and making sure that the content is really engaging and shoppable.
A great example is how we used to style our product in a very almost clinical manner. Now we've been doing much more robust styling. We've been doing category destinations, the category destinations, it's something like when we launched our Portraits of an Icon campaign, the best place to go was to our e-commerce site because we changed the experience around trench to show the full variety and to really have our heritage trench, an area for our Tropical Gabardine trench so you have stronger storytelling, better visualization, and a 360-degree approach.
We've also brought more the blend of art and science here to target our customers. The good, better, best strategy is really working in e-commerce. When you go through and you look at the assortment, there are really key recruitment drivers here. It's a place where we can bring to life ideas, creative ideas like our Zhang Jingyi collaboration, which was the anchor to our summer shop. In a quarter like this, we saw an important uplift in transactions and we're looking forward to build on this with all of our initiatives for the autumn and winter ahead.
Thank you.
This concludes our Q&A session for today. I'll now hand back over to Kate Ferry for any closing remarks.
Thank you, all of you for joining us this morning. We'll look forward to updating you again with our half one results post summer