Q3 2016 Burberry Group PLC Trading Update Call
Jan 14, 2016 AM GMT
BRBY.L - Burberry Group PLC
Q3 2016 Burberry Group PLC Trading Update Call
Jan 14, 2016 / 09:00AM GMT
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Corporate Participants
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* Carol Fairweather
Burberry Group plc - CFO
* Fay Dodds
Burberry Group plc - VP, IR
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Conference Call Participants
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* Antoine Belge
HSBC Global Research - Analyst
* John Guy
MainFirst Bank AG - Analyst
* Elena Mariani
Morgan Stanley - Analyst
* Thomas Forte
Brean Capital, LLC - Analyst
* Thomas Chauvet
Citigroup - Analyst
* Tom Gadsby
Unidentified Company - Analyst
* Mario Ortelli
Bernstein - Analyst
* Rogerio Fujimori
RBC Capital Markets - Analyst
* Julian Easthope
Barclays Capital - Analyst
* Warwick Okines
Deutsche Bank Research - Analyst
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Presentation
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Operator [1]
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Good morning, ladies and gentlemen, and welcome to the Burberry third quarter investors and analysts call. My name is Suzanne and I will be your coordinator for today's conference.
(Operator Instructions).
I will now hand you over to Carol Fairweather to begin today's conference. Thank you.
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Carol Fairweather, Burberry Group plc - CFO [2]
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Thank you. Good morning and welcome to Burberry's third quarter trading update conference call. With me this morning is Fay Dodds from our Investor Relations team.
I will make a few brief comments on this morning's announcement, and then we will be happy to take your questions.
In a tougher external environment for luxury than we were expecting, retail revenue for the third quarter was up 1% underlying.
Comparable sales were unchanged year on year, an improvement from Q2, but below our internal assumptions, principally in Hong Kong and the United States.
The trading pattern throughout the quarter was uneven with a very late Christmas; accessories were more resilient than apparel which was impacted by the unseasonably warm weather in many of our key markets.
Ahead of Lunar New Year, and in what remains a challenging external environment, we currently expect FY16 adjusted PBT to be broadly in line with current market forecast. This outcome will be supported by a further reduction in the performance-related pay charge, additional discretionary cost savings, and an FX benefit of about GBP10 million.
So let me take you through the revenue detail by region.
In Asia Pacific, comparable sales improved versus Q2, with a mid single-digit decline in the quarter. Mainland China and Korea both returned to growth; and our relatively small business in Japan once again posted exceptional growth. Hong Kong and Macau again saw comparable sales decline by over 20%, with a continuation of very weak footfall for us and for the sector.
To give you an indication of the adverse impact of these markets, comparable sales for Asia Pacific would have been up by a mid single-digit percentage excluding Hong Kong and Macau; and the comp for the Group as a whole would have been 3% positive rather than unchanged.
EMEIA achieved mid single-digit comp growth consistent with the second quarter, with an improvement from domestic consumers, offset by slowing but still positive growth from traveling luxury customers, although these patterns vary by country.
The UK, our largest market in EMEIA, became more challenging in the third quarter with a slowdown from traveling customers, particularly Chinese and Middle Eastern consumers, likely related to the strength of sterling compared to the euro. However, this was more than compensated for by Italy and Spain, which continued to deliver growth in excess of 20%; and a strong performance from Germany.
These performances were underpinned by the traveling luxury customer, but we also saw a return to growth among the Continental Europeans at home.
And finally in the Americas, we saw the region improve to marginally positive growth in the quarter, with Canada, Brazil and Mexico together again up double digit, and the US local consumer returning to growth.
So before turning to 2017, let me just highlight some of the positive results for the quarter.
First, digital commerce outperformed in all regions, seeing the benefit of our investment in both mobile, which now represents the majority of traffic to the dotcom site, and with improved conversion, is our fastest-growing divisional channel. And also the rollout of the single pool of inventory model into our largest digital markets, the US and the UK, following the trial in China.
While we continued to work with companies including Apple, Google, DreamWorks and WeChat to ensure newness in our brand's reach.
Second; given that Q3 is more heavily weighted towards domestic customers, we were pleased to see them return to growth in all three regions, helped we believe by a good response to our festive initiatives in terms of marketing, customer service and product, where small leather goods and scarves, including monogramming, were a highlight.
And finally, our focus on retail productivity drove positive results in terms of improved conversion, both in store and online globally.
Initiatives included better leveraging our customer insight and Burberry private client programs, incentivizing our sales associates differently, and fast tracking best-selling lines including ponchos, lightweight cashmere trench coats, new quilts and key bag shapes including the Banner bag.
So before we take your questions, a few words on the outlook for 2016 and 2017. As you work through your model we will, as usual, in April give specific guidance on the contribution from new retail space, wholesale and licensing. And please remember that Japanese licensing will step down by about a further GBP15 million compared to 2015/2016.
On operating expenses, while we remain very focused on tight cost control, underlying cost pressures persist across the whole sector, and we currently expect around a mid single-digit increase in our OpEx.
With the uncertain outlook for luxury, as you would expect, we are responding by accelerating our productivity and efficiency agenda, particularly looking at our ways of working, while addressing how to optimize new organic revenue growth opportunities, the resulting investment plans, and our capital structure.
And we will provide updates on all of these at the preliminary results in May.
So thank you, and we'd now be happy to take your questions.
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Questions and Answers
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Operator [1]
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(Operator Instructions). Antoine Belge, HSBC.
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Antoine Belge, HSBC Global Research - Analyst [2]
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I've got three questions please. So back in October, you gave this mid single-digit guidance for comps, which was a bit unusual for you, since you usually don't give that type of guidance. So what was on your mind then? And what was different, apart from the warm weather and maybe the attacks in Paris?
The second question is on your PBT guidance, actually not so much for this year, but when we look at next year, given that you said that OpEx would rise mid-single digit. I think when I look at consensus today, I see people expecting like a mid-single digit increase in PBT. So in your view, is it possible for PBT not to be down next year?
So if you could shed some light on the way your performance-related pay works, because obviously with a GBP60 million saving this year, the PBT next year will be highly dependent on that PRP.
And finally, I think in the press release you mention that you will be looking at your capital structure. What does it mean? Would that mean for instance, that you could be returning cash to shareholders? Thank you.
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Carol Fairweather, Burberry Group plc - CFO [3]
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Okay, so Antoine, in terms of your first question, in terms of mid single-digit guidance, I think you're saying where did we -- we've come in unchanged, and how did that change?
I think when we spoke to you in November, that was -- we said that the world remained very uncertain out there. What happened subsequently was clearly the events in Paris, which I think affected consumer sentiment and the traveling luxury consumer globally.
We talked about the US being very uneven, and that persisted throughout the quarter. That's well reported in terms of what we've seen in terms of US wholesale accounts. So the US was another area where perhaps we were impacted.
And of course, Hong Kong where we had seen some improvement through October, albeit still declining, I think our internal assumption was not that it would continue at over minus 20% down. And therefore that also impacted.
So I would say it was broadly the significant continuing declines in Hong Kong, which we hadn't assumed. The US remained uneven, possibly impacted by unseasonably warm weather and consumer sentiment, but they're really why we ended up flat for the quarter, albeit we would have been up 3% ex-Hong Kong and Macau.
And then turning to PBT for next year, we're saying that at the moment, it's too early to guide on a number of the metrics. What we are flagging is that the environment does remain uncertain. In light of that, as you would expect, we are responding by effectively accelerating our productivity and efficiency agenda.
And also, anticipating how consumer demand in this evolving luxury world will continue to change, and therefore looking at what new growth opportunities there may be, by channel, region and product line. What we're saying is we'll come back and update you on all of that, in May, and I'll come on to your point in capital structure in a moment.
And therefore, I don't think we can guide specifically today on 2016 and 2017 because we're saying it does remain uncertain. We're saying that we do see underlying OpEx increases in the business, be it annualization, rent increases.
On PRP, to your point, again that's not a matter -- we can make a planning assumption, but it will really be for the remuneration committee, to agree what level of PRP should be reinstated, once we have rolled up our budgets.
And therefore, there's lots more work to do, in terms of the budget, but what we're saying today is that in light of that, we are responding by accelerating productivity agenda, particularly looking at our ways of working, and really looking at future growth opportunities.
And then to your point on capital structure, and that will very much determine, as we come and talk to you in May, around growth opportunities, the investment plans required, and therefore what that means in terms of running an efficient balance sheet. So the plan is to come back to you in May with all of that.
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Antoine Belge, HSBC Global Research - Analyst [4]
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Thank you very much.
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Carol Fairweather, Burberry Group plc - CFO [5]
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Okay, thank you.
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Operator [6]
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John Guy, MainFirst.
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John Guy, MainFirst Bank AG - Analyst [7]
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Just a couple of questions from me. Just with regards to the digital outperformance, if you could highlight the quantum of the outperformance please.
Secondly, could you give us an update in terms of how your inventory position stands? It was obviously very well managed during the first half of the year, so I just wanted to get a handle on any particular changes over the quarter.
And could you update us in terms of any potential savings that you'll make? I appreciate it's a very small part of your business anyway, but on the discontinuation of the watches line, which is probably something a bit overdue, and I think probably quite welcome as you focus more on your core areas. Maybe start with those three please.
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Carol Fairweather, Burberry Group plc - CFO [8]
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Okay, so digital. As you know, John, we don't ever split out our digital performance separately. That's not how we think about it, or the consumer. What we are saying though is that if you do look at the pure digital metrics, they did outperform our mainline stores. We've always talked about the fact you can't look at one in isolation of the other.
We do think that comes off the back of though the investment we continue to make in digital. So the fact that we have rolled out these single pools of inventory in the UK, collect in store is now in 219 of our stores.
So all of the investments we make in digital, and particularly in mobile -- I think you heard me say that over half of our traffic now comes via a mobile device. So that the investment we made in our mobile platform this year I think is what's enabled us to deliver that again strong performance in digital.
In terms of the inventory position, at the end of December, I'm comfortable with where we are from an inventory perspective.
And then in terms of the watch license, as you say this is very much about focusing on our core categories. And it's really about making sure that we're dedicating our time and the space in our stores to driving those core categories. So no significant cost savings, but just another item under the productivity agenda.
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John Guy, MainFirst Bank AG - Analyst [9]
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Okay. And then maybe just a follow up on the OpEx, and clearly you're guiding to that mid single-digit inflation, which is not just Burberry specific.
When you think about upward only rent reviews, and you think about the longer-term picture, I appreciate that Hong Kong, at the moment, all of your stores are still profitable. But if you still believe, or if you start to believe that the market is going to be on a prolonged structural decline, then that might not necessarily be sustainable.
So over the longer term, should we start to think about the possibility of you downsizing your Hong Kong operations, and potentially allocating capital elsewhere?
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Carol Fairweather, Burberry Group plc - CFO [10]
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John, as you say, all of our stores remain profitable. And since we've seen the more challenging environment in Hong Kong, we have been out renegotiating rents. We have -- we talked to you back in November about reducing our floor space at Pacific Place, albeit it remains our flagship store in Hong Kong.
I think we will continue to responsibly manage the portfolio as we move forward as we do in all markets. As all stores come up for rent reviews and leases come to the end, we always look at whether we want to stay there, relocate or expand or whatever, and we won't do anything different in Hong Kong, but just behave responsibly as you would expect us to. Nothing new to announce today in relation to Hong Kong.
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John Guy, MainFirst Bank AG - Analyst [11]
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That's great, thanks.
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Carol Fairweather, Burberry Group plc - CFO [12]
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But as you say, all the stores do remain profitable and we've taken actions. We've talked to you before about actions around staff, actions around rent review to protect profitability in that difficult market.
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John Guy, MainFirst Bank AG - Analyst [13]
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Okay great. Many thanks, Carol.
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Operator [14]
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Elena Mariani, Morgan Stanley.
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Elena Mariani, Morgan Stanley - Analyst [15]
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I just wanted a couple of clarifications; the first one is on these additional savings that you've identified. If you could please give us a better idea of how much of this is of the additional cost savings you have identified is going to be recurring going forward, and what is exactly the saving coming from?
And then the second question is about the gross margin. What is actually implied right now in your PBT guidance and what should we expect also for next year? Thank you very much.
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Carol Fairweather, Burberry Group plc - CFO [16]
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So in terms of the additional savings, as you will remember, between June and November we took out over GBP20 million of planned investment in people in other areas of projects and discretionary spend across the business.
As we have moved through what has been another challenging quarter, that rigorous and robust cost discipline has been maintained. In light of that, we have continued to look at how we don't replace people when they leave, how we reallocate headcount, how we become more efficient in our ways of working, critically reviewing all discretionary spend. And that's allowed us to take out over another GBP5 million worth of costs compared to when we last spoke to you.
And that will remain. So those costs that we have avoided this year will not go back in next year, clearly. All we're saying today is there is some underlying cost pressure in the business from the annualization of new stores' rent increases. But the GBP25 million we have saved against our plan this year absolutely stays out. And then we'll look at what else we can deliver in terms of future savings under this accelerated productivity agenda, really looking at our ways of working.
And then in terms of gross margin, it's only a sales update today so we haven't got anything new to say on the gross margin. I think what we've said to you in the past is that don't look for a lot of expansion from gross margin; it's currently around that 70% level and so it's not going to be a key growth driver for us.
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Elena Mariani, Morgan Stanley - Analyst [17]
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Okay, thanks a lot.
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Operator [18]
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Thomas Forte, Brean Capital.
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Thomas Forte, Brean Capital, LLC - Analyst [19]
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I wanted to find out a little more information on to what you attribute the improvements in conversion for your mobile and digital efforts. Thank you.
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Carol Fairweather, Burberry Group plc - CFO [20]
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Yes, I think we know that more and more people are going to a mobile device. We've made it much easier for people to shop off of that site; we've improved our payment mechanism; we've got the single pool of inventory so when people come to the site on a mobile device now -- previously if they'd have looked at inventory from that site and we weren't in stock in our digital warehouse, they wouldn't have seen -- they wouldn't have been able to purchase that.
Now given we've opened up these pools in the UK and Americas, so it's really a combination of all of the investment we continue to make in our digital platform, be it mobile, single pool of inventory payment system. So the ongoing investment which we believe is delivering returns.
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Thomas Forte, Brean Capital, LLC - Analyst [21]
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Thank you.
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Operator [22]
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Thomas Chauvet, Citigroup.
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Thomas Chauvet, Citigroup - Analyst [23]
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I've got three questions please. The first one, I'm trying to understand a little bit FY17, various moving parts beyond like-for-like assumptions. Just a clarification on FX; so the GBP10 million benefits first of all for FY16, is it based on the spot GBP/USD at the end of December, so GBP1.48? Or closer to GBP1.44? Which would probably imply further benefits in March 2016.
And was wondering what math you've done internally if you apply GBP1.44 GBP/USD, maybe a weaker GBP/euro, what does it do to next year's profit? Would maybe GBP15 million/GBP20 million benefit be a realistic assumption?
On your OpEx growth guidance for next year, is it in constant currency, the mid-single digit? And I understand the GBP25 million of OpEx savings won't come back next year, but are you actively looking to take more costs out? Have you identified costs potentially not taken out this year but that you could look to remove next year? I assume also this cost guidance excludes the PRP.
And finally, could you elaborate a little bit on what you are seeing in Mainland China, the return to positive LFL? Are you assuming like some of your peers that trends have bottomed out? I would also think that the RMB weakness, maybe the travel fear factor to some parts of Europe would bring back some Chinese tourist demand onshore. Is it what you've seen and what you're perhaps expecting for the rest of the year?
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Carol Fairweather, Burberry Group plc - CFO [24]
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Okay, so in terms of your FX question or FY17, so the FX this year was done at December 31 spot, which as you say was closer to GBP1.48 than where we're tracking today at around GBP1.44. So at today's rate, there would be a little bit further benefit. But clearly we update you at the closing rate at each quarter and that's what we've factored in.
So at today's rate, yes possibly a tad more, but remember the FX benefit we've talked to you about today is also the FX benefit that we saw through November and December compared to when we last spoke to you. It's not just for the last three quarters.
And as you say, at today's rate, there would be a benefit next year. We haven't thoroughly worked through our budgets yet and therefore we're not quantifying that at the moment. But yes, at today's rates, there would be a benefit from FX next year.
In terms of OpEx, yes the guidance is at constant currency. As you say, the GBP25 million of costs we've taken out this year we will not be reinstating next year, but we are absolutely actively looking at where we can drive more cost efficiencies out of the business.
And therefore this -- there will be a continual focus on discretion -- on all discretionary costs, together with this more detailed review of our ways of working; how we become more efficient as an organization. And that's what we'll come back and update you on in May.
And then in terms of China, we're pleased that that's returned to growth. There's an improvement both in footfall and conversion, and I think it's really down just to all the initiatives that we've had in place over festive in terms of fast tracking product; using our customer insight data in that market. I don't think we're brave enough to say it's necessarily on an improving trend, but we were certainly pleased with the third quarter performance. And clearly, as we look into the fourth quarter, it's all eyes down for Lunar New Year where we've got lots of exciting initiatives as well.
And then you asked about the RMB weakness and whether that will drive. Clearly it may, but remember it may drive, depending on where FX rates are, to Europe rather than necessarily to the UK. There may be a benefit but we'll have to wait and see.
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Thomas Chauvet, Citigroup - Analyst [25]
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Have you measured the demand of the overall Chinese cluster globally in the third quarter versus maybe Q2 or H1? That Chinese demand, is it improving?
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Carol Fairweather, Burberry Group plc - CFO [26]
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No, no actually it was down to low-single digit in the second quarter and actually it's now down mid-single digit. Unfortunately, we saw growth in Mainland China, Hong Kong and Macau remained very, very difficult. We still saw growth in Europe from the Chinese tourists but at a lower rate than in the second quarter.
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Thomas Chauvet, Citigroup - Analyst [27]
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Okay, so Chinese demand overall is slowing down a little bit?
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Carol Fairweather, Burberry Group plc - CFO [28]
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Yes.
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Thomas Chauvet, Citigroup - Analyst [29]
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Okay, thank you very much.
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Operator [30]
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Tom Gadsby.
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Tom Gadsby, Unidentified Company - Analyst [31]
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A quick question on wholesale. I know you've only just given bare bones on that today, but Nordstrom commented at their Q3 update in November that they were going to be paring back on inventory given what was happening in the US at the time. How has that affected your order book? Is anybody else doing similar -- what's the order book looking like for the next year?
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Carol Fairweather, Burberry Group plc - CFO [32]
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Yes, in terms of -- we guided back in November for our H2 wholesale outlook and we said that in apparel and accessories, we did expect it to be down mid-single digit, but there's been no change to our guidance since we spoke to you in November. We did say that was reflecting cautious ordering by wholesale customers globally, but no change to our wholesale guidance today.
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Tom Gadsby, Unidentified Company - Analyst [33]
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Well what about -- that's for the balance of this year, but what about for spring/summer?
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Carol Fairweather, Burberry Group plc - CFO [34]
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As we said, we'll come back and guide in April as we always do for the first half of next year.
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Tom Gadsby, Unidentified Company - Analyst [35]
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Okay. Thanks.
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Operator [36]
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Mario, Bernstein.
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Mario Ortelli, Bernstein - Analyst [37]
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Three quick questions for me. You mentioned that the winter was very warm and the festive season started very late. Should we expect more volumes or markdowns this season? And did you make any change in your markdown policy starting maybe before or with higher percentage of discount?
The second question is, given the volatile environment and your cost cutting measures, are you reviewing the CapEx that you will assign for this FY15/FY16?
And the last question is, the underlying sales for this quarter were below your internal projection. How are you changing your internal projection of estimate for Q4?
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Carol Fairweather, Burberry Group plc - CFO [38]
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So in terms of the weather and any impact on markdown or duration of sales, nothing significant to call out. In fact, our sale period, we had planned to be slightly shorter than last year and we very much stuck to that. We did see people going on sale earlier in certain markets. We didn't change the timing of our sale. And our markdown cadence overall was exactly in line with what we had planned. So nothing really significant to call out in terms of any change to our markdown strategy.
And remember, we've got quite a lot of replenishment product in there. So although the unseasonably warm weather may have impacted our outerwear sales in this quarter, half -- over half of our outerwear sales is probably on replenishment anyway.
And then in terms of volatile environments and CapEx review, of course, we constantly reprioritize and relook at our capital expenditure plans, and we will continue to do that as we go through the balance of this year and next year. So nothing new to call out. We had talked about CapEx maybe moderating as we looked forward, but we'll come back in May and update you with our guidance for the following year.
And then in terms of underlying sales in Q3 being below our expectations, yes, they were, for the reasons we just chatted about previously, earlier on the call.
In terms of Q4, we're not guiding, but safe to say it's Lunar New Year; in the same way that we had a great festive campaign, we've got all of our teams working very hard. We've got special product in the store for Lunar New Year; we've got a dedicated marketing campaign and all of our teams remain very, very focused on driving conversion.
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Mario Ortelli, Bernstein - Analyst [39]
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Thank you.
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Operator [40]
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Rogerio, RBC.
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Rogerio Fujimori, RBC Capital Markets - Analyst [41]
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I have three questions; the first one about pricing architecture. I know you constantly monitor pricing versus peers, but some peers like Prada are talking about the need of slowing regional price caps further, so do you believe there's further work for Burberry as well? Or are you satisfied for now with the current situation?
Second question about Japan. Could you give us an idea about how much Japan accounts as a percentage of your total retail/wholesale sales today?
And my third question is about the inventories. You have been tightly managing inventories. Could you give us some color on your inventory position at the end of December? Thank you.
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Carol Fairweather, Burberry Group plc - CFO [42]
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Yes. So in terms of pricing, nothing new to announce today. As you say, we've got our pricing strategy in place and we're monitoring, as we always do, but nothing specific to announce today from us in terms of pricing.
In terms of Japan, I think it's around 2% of retail wholesale sales globally. As we said, small for us, but we did see again great growth off of a tiny base.
And then in terms of inventories, as I said earlier, I think we are comfortable with our inventory position at the end of December. We'll continue to tightly manage that as we move forward.
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Rogerio Fujimori, RBC Capital Markets - Analyst [43]
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Thank you.
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Operator [44]
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(Operator Instructions). Julian, Barclays.
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Julian Easthope, Barclays Capital - Analyst [45]
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I suppose one of the downsides of being last in the queue is I always end up asking the [nerdy] question, so here it goes (laughter).
I think there's probably been about a 10-year incubation period for the Accounting Standards Board to come up with their lease standard, so I just wondered if you'd taken a look at the implications of that; and whether it will have implications for the capital structure comments that you made in your call?
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Carol Fairweather, Burberry Group plc - CFO [46]
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Trust me; we have had our team looking at that for some time. I know it was issued earlier this week and we're busily working through what that means. Clearly, there's a lot of work to do.
I don't think fundamentally -- I think it's an accounting rather than a -- commercially, we still need to look at how we want to run the business rather than being driven by accounting standards, but lots of work to do to understand how that will change our reported numbers as we look forward.
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Fay Dodds, Burberry Group plc - VP, IR [47]
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But when we look at capital structure, you know we always look at our lease adjusted net debt rather than the actual just straight net cash position.
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Julian Easthope, Barclays Capital - Analyst [48]
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And the lease adjusted net debt that you have, is that materially different from the new standard that they put out?
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Fay Dodds, Burberry Group plc - VP, IR [49]
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We're working through that at the moment, Julian. I think the way in which we're looking at the moment, I think it's helpful to us. We need to understand exactly what that will look like when we have to put that onto the balance sheet, but we'll come back and begin guiding on that. We're working through how that will look.
Clearly, we've got a couple of years to prepare for it, but trust me; my accounting teams are gearing up for it.
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Julian Easthope, Barclays Capital - Analyst [50]
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That sounds great. Okay, thanks.
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Operator [51]
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Giles, Deutsche Bank.
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Warwick Okines, Deutsche Bank Research - Analyst [52]
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Warwick Okines, Deutsche Bank. Sorry, you may well have mentioned this right at the start, but I will have missed it. Have you said what the total PRP and bonus reduction year on year in the current financial year is expected to be?
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Carol Fairweather, Burberry Group plc - CFO [53]
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So we said there was around GBP30 million saving year on year when we spoke to you in November. We're saying it could be around double that now, so maybe around GBP60 million, but we've still got the fourth quarter to go. And remember, the total PRP charge relates to the in-year bonus pot and also to the LTIP charge which also depends on future growth.
So as we go through this quarter, finalizing this year's number and our outlook for the next couple of years, then we will true that number up. But we're saying possibly around GBP60 million, something like that at the moment.
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Warwick Okines, Deutsche Bank Research - Analyst [54]
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And obviously, for next year, lots of uncertainties and I'm sure you'll report back in May with a bit more clarity on this cost line as well, but are there commercial reasons why you'd have to rebuild that in the year ahead? Competition for talent I'm really thinking about.
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Carol Fairweather, Burberry Group plc - CFO [55]
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It's absolutely a matter for the RemCo and not for management to decide, but clearly, they will be factoring all of that in as they decide what an appropriate level of PRP is to back to reinstate next year. But remember, it's always based on performance and therefore, it will be looked at through that lens as you would expect us to do so. But that's a RemCo matter and we'll be able to update in May on where we land on that.
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Warwick Okines, Deutsche Bank Research - Analyst [56]
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Brilliant. Thanks very much.
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Carol Fairweather, Burberry Group plc - CFO [57]
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Okay. So as there are no more questions; in conclusion, the third quarter has been tougher than we were expecting, but our focus on growth and cost control has driven a number of positive results which support FY16 profits.
While the outlook for the sector remains uncertain, we are responding to this with an intense focus on optimizing new growth opportunities, and accelerating our productivity and efficiency agenda whilst always protecting and building the brand.
So thank you, and we look forward to speaking to you again on April 14 when we have our second-half trading update.
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Fay Dodds, Burberry Group plc - VP, IR [58]
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Thank you.
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Operator [59]
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Ladies and gentlemen, thank you for joining today's conference. You may now replace your handsets.
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