H & M Hennes & Mauritz AB Nine-month report

Nine months (1 December 2016 – 31 August 2017)

• The H&M group’s sales including VAT increased by 7 percent to SEK 173,290 m (161,767) during the first nine months of the financial year. Sales excluding VAT amounted to SEK 149,597 m (139,547), an increase of 7 percent. In local currencies sales increased by 4 percent.
• Profit after financial items amounted to SEK 15,936 m (16,630). The group’s profit after tax amounted to SEK 12,191 m (12,722), corresponding to SEK 7.37 (7.69) per share.

Third quarter (1 June 2017 – 31 August 2017)  

• The H&M group’s sales including VAT increased by 5 percent to SEK 59,383 m (56,802) during the third quarter. Sales excluding VAT amounted to SEK 51,229 m (48,982), an increase of 5 percent. In local currencies sales increased by 4 percent.
• Gross profit amounted to SEK 26,350 m (26,471), corresponding to a gross margin of 51.4 percent (54.0).
• Profit after financial items amounted to SEK 5,016 m (6,301). The group’s profit after tax amounted to SEK 3,837 m (4,820), corresponding to SEK 2.32 (2.91) per share. Profit development is mostly explained by large markdowns in order to give the autumn garments the best possible conditions for the new season.
• Continued rapid and profitable growth of the group’s online sales, which in some established markets already account for 25 to 30 percent of total sales.
• COS, & Other Stories, Monki, Weekday and H&M Home had a continued very good development.
• Successful reception of the new brand ARKET in London as well as online in 18 markets.
   
  
• H&M’s online store will open in a further two markets in 2017 – the Philippines and Cyprus – in addition to the six online markets that have already opened in 2017. The roll-out of online markets will continue during 2018 with among others India. The plan is to offer e-commerce in all of the store markets in the future as well as in other markets.
• Successful openings of the first stores in the new H&M markets of Kazakhstan, Colombia, Iceland and Vietnam. Georgia will open later this autumn. New H&M store markets planned for 2018 are Uruguay and Ukraine.
• Continued investments with a digital focus. The group’s online sales are estimated to grow by at least 25 percent per year going forward.

 
Comments by Karl-Johan Persson, CEO

“The fashion retail sector is growing and is in a period of extensive and rapid change as a result of ongoing digitalisation. The competitive landscape is being redrawn, new players are coming in and customers’ behaviour and expectations are changing, with an ever greater share of sales taking place online.

This shift is clearly reflected in our online sales, which continue to develop very well. However, our growing online sales did not fully compensate for reduced footfall to stores in several of our established markets, which has resulted in our total sales development not reaching our targets so far this year. This is of course something that we are not satisfied with and which, among other things, resulted in that we entered the third quarter with inventory levels that were too high.

Through our aggressive summer sale we succeeded in improving the inventory position. This contributed to the autumn collections getting off to a good start, although sales slowed somewhat towards the end of September. As always, however, sales should be viewed over a whole season.

We are continuing to develop our assortment within all our brands, while at the same time rapidly making the following investments in order to seize the opportunities that arise with the shift within the industry:

• Omni-channel – continued integration and development of our online store and our physical stores. We are continuing to improve the online store and are adding more and faster delivery options, while at the same time further broadening the range of products online. The physical store is increasingly being integrated with the online store for a more convenient shopping experience. We are also testing out new store concepts for H&M, to offer our customers an even more inspiring store.
• Expansion and optimisation – in our established markets we are focusing on optimising the store portfolio through renegotiation, rebuilds and relocations, adjustment of store space and through closures. Overall we will be closing around 90 stores during the year, resulting in a net addition of approximately 385 new stores. We still see good potential for more physical stores primarily in many of our growth markets. In the year to date we have opened four new H&M store markets: Kazakhstan, Colombia, Iceland and most recently Vietnam. With Georgia which will open later this year, H&M will be present in 69 markets. This year we are also opening eight new H&M online markets, so that online shopping will be available in 43 markets by the end of the year. Next year we plan to continue our online expansion into further countries, including India. The plan is that in the future we will offer online shopping in all store markets as well as in other markets.
• New technology, more efficient supply chain and changes in working methods – advanced analytics offers opportunities to improve quantification, allocation, pricing, design and personalised communication. Technology is also enabling improved purchasing methods that allow shorter lead times and greater precision when planning the product range. Faster lead times, a more efficient supply chain and more purchases during the season provide us with great opportunities to achieve lower stock levels in future.
• New brands – the H&M group has several new brands that are growing rapidly and have great future potential. Our most recent brand ARKET was successfully launched in 18 European online markets and with stores in London, Copenhagen and Brussels. Creating and launching new brands is an important part of our growth strategy, and next year we plan to launch another new brand.

We are looking forward to our capital markets day in February 2018, at which we will have the opportunity to tell more about how we are addressing the significant changes taking place in the industry and how we will further strengthen our position going forward.”
 

Communication in connection with the nine-month report on 28 September

The nine-month report will be published at 08:00 CET on 28 September 2017. A telephone conference for the financial market and media will be held in English at 09:00 CET, hosted by CEO Karl-Johan Persson, CFO Jyrki Tervonen and Head of Investor Relations Nils Vinge.

For login details please register at: 
https://eventreg3.conferencing.com/inv/reg.html?Acc=450101&Conf=372571  

These login details are also available at about.hm.com.

To book media interviews with CEO Karl-Johan Persson and Head of Investor Relations Nils Vinge, please contact:
Kristina Stenvinkel, Communications Director
Telephone: +46 8 796 39 08
E-mail: stenvinkel@hm.com

H & M Hennes & Mauritz AB (publ)
SE-106 38 Stockholm
Phone: +46-8-796 55 00, Fax: +46-8-24 80 78, E-mail: info@hm.com
Registered office: Stockholm, Reg. No. 556042-7220

Information in this interim report is that which H & M Hennes & Mauritz AB (publ) is required to disclose under EU Market Abuse Regulation (596/2014/EU) and Sweden’s Securities Market Act. The information was submitted for publication by the abovementioned persons at 8.00 (CET) on 28 September 2017. This interim report and other information about H&M, is available at about.hm.com.

H & M Hennes & Mauritz AB (publ) was founded in Sweden in 1947 and is quoted on Nasdaq Stockholm. H&M’s business idea is to offer fashion and quality at the best price in a sustainable way. In addition to H&M, the group includes the brands COS, Monki, Weekday, Cheap Monday, & Other Stories and H&M Home as well as ARKET. The H&M group has 41 online markets and more than 4,500 stores in 68 markets including franchise markets. In 2016, sales including VAT were SEK 223 billion. The number of employees amounts to more than 161,000. For further information, visit about.hm.com.