INVESTOR PACK JANUARY 2018 - Burberry

I N V E S TO R PA C KJANUARY 2018

OUR VISIONF I R M LY E S TA B L I S H O U RP O S I T I O N I N L U X U RY FA S H I O N ,INSPIRING CUSTOMERS WITHO U R U N I Q U E B R I T I S H AT T I T U D E

OVER 10,000 EMPLOYEESWORLDWIDEBRITISHLUXURY BRAND Authentic British heritage Made in England Founded in 1856 byThomas BurberryFTSE 100MEMBER Ordinary sharestraded in London ADR programmeSUSTAINBILITY AGENDA Dow Jonessustainability Indexmember Principal PartnerLiving wagefoundation Five yearresponsibility agendaFY 2017 2.8bn revenues 462m adj. PBT

B U R B E R R YGROUP REVENUE BYCHANNELLicensing: 1%(48%)Wholesale:22%(14%)I NFY 2017: 2,766m% Growth on underlying basisS N A P S H O TR E TA I L / W H O L E S A L EREVENUE BY PRODUCTR E TA I L / W H O L E S A L EREVENUE BY REGIONBeauty: 7%(18%)Childrens: 4% 5%Mens: 22% 1%Retail:77% 3%AAccessories: 38% 2%Womens: 29%(4%)FY 2017: 2,741mAmericas: 25%(11%)Asia Pacific: 39%UnchangedEMEIA: 36% 3%FY 2017: 2,741m

BURBERRY IS AN ICONIC BRANDO N E O F T H E M O S T VA L U A B L ELUXURY BRANDS IN THE WORLDBRAND VALUELuxury player 1Luxury player 2 Luxury player 3Source: Interbrand Best Global Brands 2017 RankingsLuxury player 4Luxury player 5S T R E N G T H A C R O S S M U LT I P L EC AT E G O R I E S

W E H AV E A N E X T E N S I V E ,LUXURY DISTRIBUTION ASIA PACIFIC212* Burberry also has 48 franchise storesNote: Asia Pacific concessions include some mall storesAs of 31 October 2017

W E A R E T H E D I G I TA L I N N O VAT O RIN THE INDUSTRYApple Music streaminglaunchedInstagram launchesvideo service2004First websitelaunch2009BurberryFacebook page20102011First to live streamsfashion show2013Burberry launchdigital catwalkIn China, Burberrytests instant orderson WeChatTwitter launches“Buy Now” button2014Burberry launches“Buy Now” buttonPeriscope launched20152016Burberry SnapchatFirst brand withApple Music channel2017First to runSnapchatDiscoverBurberry AppFirst luxury brand with globalreach (Burberry.com in 44countries, 11 languages)Launch of in-storeiPadsSource: Vogue, Mashable, TheVerge.com, digiday.com, elleuk.com, risnews.com, thedrum.comMajor social mediainnovationsMajor Burberryinnovations

NOW OUR SECTOR IS h13%11%8%The "new luxury norm"Globalisation of luxury brandsChinese luxury goods boomSlower industry growthEvolving consumer baseDigitalisationLuxury industry growth is expectedto be 4-5% in the medium-term12%10%8%7%6%5%4%3%4-5%3%0%Industry economics are evolving,with growth becoming moreexpensive than in the past0%-2%-4%Comparable growthSpace growth-8%2001020304050607080910111. 16/17 growth is 5% based on current exchange rate, but 6% with constant exchange rateSource: Bain luxury goods worldwide market study, October 20171213141516Future growth will be driven by- Comp vs. space- Volume vs. price- Digital17118192020

LUXURY CUSTOMERSARE ALSO CHANGINGF R O M T O TRADITIONALLUXURYCASUALISATION,FASHION AND FUNEXCLUSIVEPRICE POINTSCREATIVITY ACROSSALL CATEGORIESLISTENING TOBRAND STORIESLIVING BRAND STORYAND EXPERIENCESBEING PARTOF THE ELITEINDIVIDUALSELF-EXPRESSIONSTATUSSHARED VALUESBRANDLOYALTYSWITCHING ACCORDINGTO RELEVANCESource: Burberry, Bain & Company Luxury Goods Worldwide Market Study, October 2017

I N T H I S E N V I R O N M E N T, W E M U S TSHARPEN OUR BRAND POSITIONINGHigh priceLUXURYFASHI ONH E R I TA G ELUXURYCONTEMPORARYLUXURYACCESSIBLELUXURYLow priceFashion forwardHeritage

T H E PAT H T O A C H I E V E O U R V I S I O NT H ER E N E WP R O D U C TE V O L V E T H EC O M M U N I C A T I O NT R A N S F O R MT H E E X P E R I E N C E

O U R P R O D U C T S T R AT E G YINCREASEFASHI ONCONTENTTRANSFORML E AT H E RGOODSCONTINUOUSENGAGEMENTWARDROBETHE CUSTOMERRe-invigorate ourproducts with a constantinfusion of newnessand excitementSignal significantchange in design andrelevance to win theluxury consumerMultiple curateddeliveries, with a directto consumer approachShift from items tooutfitting; drive UPT andfrequency of purchaseREBALANCEOUR PRICEARCHITECTUREMaintain competitiveprices, and offer abreadth of price pointsinjecting creativity acrossthe entire range

TA K I N G S H A R E I N T H E L E AT H E R G O O D SMARKETINDUSTRY-LEADING DESIGN TEAMEVOLVE THE CHARACTER OF THE BURBERRY HANDBAGINCREASE PROMINENCE AND SPACE DEDICATED TOLEATHER GOODS IN STORES

O U R C O M M U N I C AT I O N S T R AT E G YPRODUCTFIRSTCONTENTREVOLUTIONProduct at the heart ofour communicationsReimagine our content, takinga curated, edited approachFOCUS ONEXPERIENCESInvest in fewer, more meaningfulexperiences including collaborations

REVOLUTIONISE OUR CONTENT ACROSSTOUCHPOINTSTHINK DIFFERENTLY ABOUT ALL CONTENT From campaigns to what we publish across all digitalchannels and our own siteUPDATE OUR CREATIVE LANGUAGE It will be bold, dynamic, real, compelling – and the changeis underwayENSURE EVERYTHING IS NOT JUST RELEVANT FORSOCIAL, BUT MADE FOR SOCIAL It’s now the first access point to any brand

W E W I L L L E V E R A G E O U R D I G I TA L R E A C H T OCONVEY OUR NEW BRAND ENERGY50 MFacebook17.3MInstagram10.3MTwitter10.3MGoogle plus5.3MLine4.1MSina Weibo1.2MKakao331kFANSGLOBALLY15 Platforms11 LanguagesSource: Burberry social media listening data, Q2 apchat84kThe Net Set17kFacebookMessenger26kLinkedin342k

TRANSFORM THE CUSTOMER EXPERIENCEM A I N L I N ED I G I T A LW H O L E S A L ERejuvenation of ourmainline storesCurationImage-driving accountsContentNew store conceptPersonalisationSpecial productcollaborationsInstore experienceOmnichannel3rd Party playersIncrease our accessoriespresenceGrow travel retailO U T L E T SRight-size our network,in line with ourpositioning

THESE EFFORTS WILL IMPROVEO U R R E TA I L P R O D U C T I V I T YSALES DENSITY per sq metreBurberryFY 2017NOTE: NOT TO SCALEBurberryOpportunityLuxury Leather Goodsaverage2017

D I G I TA L W I L L C O N T I N U E TO L E A DI N N O VAT I O N A N D D R I V E G R O W T HCURATIONHighly curated productassortment andmerchandisingCONTENTAn editorialised websiteand meaningful socialcontentPERSONALISATIONCustomised, relevantand dynamic customerjourneysOMNICHANNELGive customers flexibilityin how they want to payfor and receive product3RD PARTIESStrengthenour digital partnerships

UPGRADE AND REDUCE OUREXPOSURE TO NON-LUXURY ACCOUNTSUS LUXURY VS. NON-LUXURY WHOLESALE(SHARE OF WHOLESALE DOORS)2017/182022/23To strengthen the brandexperience and ensureconsistency, we will:- Upgrade some doors todrive image- Reduce exposure wherenecessary to reflect thenew brand positioningLuxuryNon-luxurySource: Burberry Finance, Financial Ambition model v108

WE WILL RIGHT-SIZE OUR NETWORK,IN LINE WITH OUR POSITIONINGOutlet vs. mainline stores proportionOutletMainlineHermèsLouis VuittonChanelDiorLuxury playersPradaGucciHugo BossMichael KorsAccessible luxuryCoach

ADJUSTED EPS GROWTHAHEAD OF REVENUE GROWTHC O S T S A V I N G SO P E R A T I N GOperating cost savings support profitabilityFocused resource re-allocation from back to front officeL E V E R A G E Leverage the fixed and semi-fixed overhead costcomponents of our businessOperating expenses reduce as a % of sales (CER)RegionalT A XR A T EMarketing OtherMar-18FMedium term*Guidance assumes constant exchange rates, stable economic environment & current tax legislationImprovement in adjusted tax rate* by 200-300 bpsby FY 2020 from 26% in FY 2017

COST SAVINGS BY MAJOR SINFORMATIONANDTECHNOLOGYPROCESSSIMPLIFICATIONFY 2017FY 2018FY 2019FY 2020 20m 60m 100m FICIENCIESOpened October2017Cumulative cost savings from FY 2016*Annualised savings

C O S T S AV I N G D E L I V E RY B Y M A J O R L E V E RSPLIT OF 120M COST SAVINGSBY CATEGORY (%)F Y 2 0 1 7 2 0 M S AV I N G SH 1 2 0 1 8 2 0 M S AV I N G SOther 30%Announced in May 2016Committed to savings of at least 100mannualised by FY 2019Simplification of operating modelProcurement savings buildSimplification of operating model beginsProcurement savings startBurberry Business Services operational fromOctober and scope expandedProcurement 25%A C C E L E R AT E D D E L I V E RY T O C U M U L AT I V E O F 6 0 M I NFY 2018 AND 100M IN FY 2019E X PA N D E D S C O P E T O TA R G E T 1 2 0 M A N N U A L I S E DS AV I N G S I N F Y 2 0 2 0Operatingmodel &processsimplification 45%

THIS STRATEGY WILL BEUNDERPINNED BY OUR PEOPLE ENGAGEMENTC A PA B I L I T I E SLEADERSHIPW AY S O F W O R K I N GC U LT U R ERESPONSIBILITY

CAPITAL ALLOCATION FRAMEWORKREINVEST FORORGANIC GROWTHPROGRESSIVEDIVIDENDPOLICYS T R AT E G I CINVESTMENTSM A I N TA I N S T R O N G B A L A N C E S H E E T W I T H S O L I DINVESTMENT GRADE CREDIT METRICSRETURNEXCESS TOSHAREHOLDERS

DELIVERING SUSTAINABLELONG-TERM VALUEC A S HSIGNIFICANT CASH GENERATIONOVER THE PLAND I V I D E N DPROGRESSIVE POLICY WITH THE DIVIDENDAT LEAST IN LINE WITH THE PRIOR YEARR O I CROIC SIGNIFICANTLY AHEAD OF WACC

THIS WILL BE A TWO-PHASEDT R A N S F O R M AT I O N J O U R N E YBUILD THEFOUNDATIONACCELERATEAND GROW Commence programme to re-energisethe brand and establish our position inluxury, building on our productivity andefficiency agenda Complete full brand transformation,with a new creative vision Rationalise and invest to align ourdistribution Drive forward all elements of thestrategy Manage creative transition Accelerate growth

WHAT WE WILL ACHIEVEOne of the world’s most valuable and desirable luxury brandsPRODUCTCOMMUNICATIONA luxury fashionhouseAn inspiration forluxury consumersDISTRIBUTIONA luxury networkDIGITALUnrivalled in digitalinnovationOPERATIONALEXCELLENCEAn agile companyFirmly established in luxury – the most valuable and enduring segmentof the industry - creating sustainable value for all stakeholdersINSPIREDPEOPLEA highly engagedglobal team

OUR FINANCIAL PLAN*(AT CONSTANT EXCHANGE RATES)FY 2019 & 2020R E V E N U EO P E R A T I N GM A R G I N Sales broadly stable year-on-year Rationalise non-luxury distribution Adjusted operating margin broadly stable YoY, even duringperiod of investment in the brand 120m annualised cost savings by FY 2020 Capex of 150- 160mAMBITION High-single digit top-line growth Meaningful operating margin expansion Capex builds to 190m- 210mC A S HStrong free cash conversion and application of capital allocation framework including progressivedividend and shareholder distributions*Guidance assumes constant exchange rates and a stable economic environment

H1 2018 FINANCIAL HIGHLIGHTS---------- Change --------Six months to 30 September2017 m2016 %17%14.6%12.5%12710224%Adjusted diluted EPS32.3p24.4p32%Diluted EPS21.4p16.2p32%Free cash flow*17175Net cash65452911.0p10.5pAdjusted operating profitAdjusted operating marginOperating profitDividend per share5%

FY 2018 OUTLOOKS A L E SP R O F I TRETAILFocus on existing store productivity, no net contribution from new spaceWHOLESALEH2 underlying expected to decline by a mid-single digit % (H2 2017: 226m)LICENSING 20% underlying including new Beauty licence from H2ADJUSTED OPERATING PROFITNo change to our expectations at constant exchange rates*CUMULATIVE COSTS SAVINGS 60mONE-OFF COSTS 75m operational and 10-15m one-off tax adverse chargeTAX RATEEffective tax rate of c.25% (down 80bps year-on-year)FX 20m* negative impact of FX on adjusted operating profit vs FY 2017CAPEX 130mSHARE BUYBACK 350m shares to be purchased in FYC A S H* Effective rates as at 31 December 2017, taking into account the current hedged positions

APPENDIX

Q3 REVIEWR E TA I L S A L E S 7 1 9 M , 1 % U N D E R LY I N G Comparable store sales 2% Mainland China annualising start of Chinese consumer rebound UK annualising exceptional growth in prior year AUR headwindO P E R AT I O N A L P R O G R E S S Fashion outperformed Preparing for new leather goods offer Positive results from expanded outfit offer Creative partnerships across events, social and other media Piloted new in-store sales associate toolCommenced engagement with wholesale partnersExclusive capsule for NET-A-PORTER Burberry Business Services recruitment ahead of planLaunched global employee engagement programme3