H & M Hennes & Mauritz AB Three-month report

 

First quarter (1 December 2017 – 28 February 2018)

• The H&M group’s sales including VAT amounted to SEK 53,554 m (54,369). Sales excluding VAT amounted to SEK 46,181 m (46,985). In local currencies, sales including VAT were unchanged in the first quarter.
  
• Gross profit amounted to SEK 23,040 m (24,466). This corresponds to a gross margin of 49.9 percent (52.1).
  
• Profit after financial items amounted to SEK 1,263 m (3,212). The group’s profit after tax amounted to SEK 1,372 m (2,457), corresponding to SEK 0.83 (1.48) per share. Profit development in the quarter was negatively affected by weak sales development as well as higher markdowns.
  
• The group had one-off positive tax income of SEK 399 m as a result of the US tax reform (Tax Cuts & Jobs Act).
  
• H&M’s online store in India, which was launched in mid-March, has got off to a very good start.
  
• The launch of H&M and H&M Home on Tmall in China on 21 March exceeded our high expectations.
  
• In 2018 Uruguay and Ukraine will become new H&M markets in the second half of the year.
  
• The global roll-out of online continues. With the launch of H&M online via franchise in Saudi Arabia and the United Arab Emirates in spring/summer 2018, H&M will offer online shopping in 47 markets.
  
• Afound will be launched as a new brand during 2018. Afound will be an off-price marketplace offering products from well-known and popular fashion and lifestyle brands, both external brands and those from the H&M group. Its first stores and a digital marketplace will open in Sweden to start with.
  
• AI and advanced data analytics – very good results from ongoing projects.
  
• Three new highly automated logistic centres with significantly increased capacity and efficiency and faster lead times will be introduced during the year.

Comments by Karl-Johan Persson, CEO

“The rapid transformation of the fashion retail sector continues. As communicated previously, the start of the year has been tough. 2018 is a transitional year for the H&M group, as we accelerate our transformation so that we can take advantage of the opportunities generated by rapid digitalisation.

Weak sales in the forth quarter, partly caused by imbalances in the assortment for the H&M brand, resulted in the need for substantial clearance sales in the first quarter. The high level of clearance sales combined with unusually cold winter weather had a negative impact on the sales of the spring garments. In the first quarter the H&M group’s sales were unchanged in local currencies.

Many of our ongoing initiatives are giving good indications and results, even though they have not yet been implemented at a large enough scale to have a decisive effect on the overall results. The weak sales development combined with substantial markdowns had a significant negative impact on results in the first quarter.

Our transformation work continues with full force within the following priority action areas:

Restlessly develop our brands, focusing on H&M

• Assortment – always have the best combination of fashion, quality, price and sustainability.
  
• Physical stores – develop new concepts and new formats at the same time as optimising our existing store portfolio.
  
• Online store – further enhanced through additional testing and faster development.
  
• Seamless – continued integration of the physical and digital stores so that customers can move frictionlessly between channels, for example through faster and more flexible delivery and payment options.

Accelerate our key enablers

• Our supply chain – ensure a faster, more flexible and more efficient supply chain.
  
• We are expanding our initiatives relating to advanced analytics and AI.
  
• Continued investments in our tech foundation with robust scalable platforms, faster development of various customer apps and new technologies.

New growth

• Continued digital expansion of existing brands into new markets and by working with external partners and social platforms. Widen the product assortment.
  
• New stores for existing brands, H&M focusing on emerging markets.
  
• We are developing new concepts and business models.

Good cost control and efficiencies

• With good cost control, operating costs are expected to continue to increase at a slow rate.
  
• Ongoing efficiencies, with several promising initiatives within buying and production. In addition, the weaker US dollar is currently having a favourable impact on our purchasing costs.
  
• Great potential for lower markdown costs in relation to sales from 2019 onwards.

Our assessment remains that sales for online and New Business will grow by more than 25 percent during the year, and that the H&M group will achieve a somewhat better result for full-year 2018 compared with the previous year. We take a long-term view that together with our knowledge and experience enable us to navigate through times such as this. We look forward to telling you more about the H&M group’s continued transformation work, which will lead us back to healthy growth in both sales and profitability.”

Contact
A telephone conference for the financial market and media will be held in English on 27 March at 9:00 CET in which Karl-Johan Persson CEO, Jyrki Tervonen CFO and Nils Vinge Head of IR will participate.

For log-in details and registration please visit:

about.hm.com/en/media/calendar/three-month-report0.html

Registration can be made until 27 March 10.00 CET. After 10.00 CET Nils Vinge will be available on +46 8 796 52 50 or via email: nils.vinge@hm.com.

For interview requests with Karl-Johan Persson CEO and Nils Vinge Head of IR in conjunction to the three-month report please contact:

Kristina Stenvinkel, Communications Director
Phone: +46 8 796 39 08
Email: 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 the EU Market Abuse Regulation (596/2014/EU). The information was submitted for publication by the abovementioned persons at 8.00 (CET) on 27 March 2018. 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 45 online markets and more than 4,700 stores in 69 markets including franchise markets. In 2017, sales including VAT were SEK 232 billion. The number of employees amounts to more than 171,000. For further information, visit about.hm.com.