CEO letter

Before summing up the year 2021, at the time of writing I would like to begin by expressing the company’s deep concern over developments in Ukraine and extending our sympathy to all those affected. We care about all our colleagues and join all those around the world who are calling for peace. At the present time we have temporarily paused all sales in Ukraine, Russia and Belarus.

Helena Helmersson, CEO H&M Group
Helena Helmersson, CEO H&M Group

2021 – a strong recovery

The H&M group’s recovery continued in 2021. Although sales were negatively affected by restrictions associated with the pandemic, customers showed clearly that they appreciate our offering. We ended the year with good sales development, greatly improved profits and in a strong financial position.

At the end of 2021 sales were back at the same level as before the pandemic and profitability was better than for several years, despite supply chain disruption and other geopolitical challenges. The H&M group’s net sales in local currencies increased by 12 percent in the 2021 financial year. Earnings after financial items amounted to SEK 14,300 million.

I would like to thank all colleagues in the group for their efforts over the past year. Our strong culture with our shared values has been important for our ability to manage the challenges during the pandemic, which contributed to the good recovery. Our colleagues everywhere in the organisation have demonstrated great commitment and worked to meet customers’ expectations despite the challenges, restrictions and lockdowns due to the pandemic. The increase in profits also means that we have been able to contribute a further SEK 224 million to the H&M Incentive Program, our incentive scheme for all employees of the H&M group.

Our customer offering and our stores

To meet customers’ ever-increasing expectations, we are continuing to develop the customer offering for all our unique brands by offering customers the best combination of fashion, quality, price and sustainability. Demand for good value and sustainable products is expected to grow and our customer offering is well positioned for this. We develop the customer offering constantly by broadening the assortment and expanding the range of services for a more sustainable life style. Engaging our customers in various ways allows us to build long-term, value-creating relationships and attract even more customers around the world. Among other things, customers can today carry out repairs, rent clothes or buy and sell second-hand.

Our physical and digital sales channels complement and strengthen each other. We are continuing our work to integrate the channels further in order to create a shopping experience that is as smooth and inspiring as possible. Along- side our continued initiatives for digital growth, we are intensifying our work to ensure that the store portfolio is optimised.

Product flow initiatives

For many years we have been working to make the supply chain faster, more efficient and more flexible – and this has benefited us during the pandemic. The significant investments we have made in tech, AI, advanced analytics and logistics enable us to always have the right product in the right place at the right time and at the right cost.

Continually enhancing our improved accuracy is not just good for the customer offering, but also contributes to a more sustainable use of resources.

Integrated sustainability

In 2021 we took further steps to improve sustainability in all parts of the business. For example, we continued to increase the share of recycled or otherwise more sustainably produced materials in the collections, with the percentage of recycled materials tripling; we further improved product transparency for customers using the Higg Index tool; we launched the “Circulator” circular design tool; and we reduced scope11 and 2 carbon emissions by 22 percent and scope 3 emissions by 9 percent in absolute figures compared with 2019.

Our sustainability efforts were recognised on various occasions during the year, including being ranked second in the Fashion Transparency Index of 250 fashion brands. We were also appointed as UN Global Compact LEAD for our commitment to the UN Global Compact and its Ten Principles for responsible business.

This year is the first year that we at the H&M group are integrating our annual and sustainability reports. This is an important step, but also a natural development since sustainability has been an integral part of our business for a long time. One example of this is the sustainability targets highlighted in conjunction with our full-year report for 2021, when we communicated that by no later than 2030 the H&M group will double sales while at the same time halving its carbon footprint. Profitability is to exceed 10 percent over time2. Continued focus on customers, investments, partnerships and innovations are important for achieving our ambitious goals.

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This year is the first year that we at the H&M group are integrating our annual and sustainability report. This is an important step and a natural development since sustainability is an integral part of our business.

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Helena Helmersson, CEO H&M Group

Investments in tech and sustainability

Our financial strength and long-term approach give us the ability to invest in innovations within tech, materials and sustainable initiatives, with an ambition to lead the change in the fashion industry towards becoming circular and renewable. We are constantly evaluating investments and acquisitions that could contribute to our continued sustainable growth. Through our investment arm Co:lab we have around 20 investments in new companies – such as Re:newcell, Ambercycle and Infinited Fiber, which is developing new techniques within textiles recycling. These companies’ solutions are now being scaled up and by investing early, we have secured access to these innovative sustainable materials.

Outlook

We remain focused on developing the customer offering and delivering the best combination of fashion, quality, price and sustainability. We are proud that our strong recovery continued in 2021 with much appreciated collections and products, continued customer focus and strong relations with our partners.

At the time of writing, however, we are deeply concerned about the course of events in Ukraine and our thoughts go out to all those affected. We are monitoring developments closely and doing all we can to help people as much as possible. The H&M group, the H&M Foundation and the Erling Persson Foundation have donated millions of kronor as well as clothing and other essentials to organisations such as UNCHR, Save the Children, the Red Cross and UNICEF. We join all those around the world who are calling for peace.

Helena Helmersson

CEO, H&M Group

1. Scope 1: All direct greenhouse gas emissions from our own operations. Scope 2: Indirect greenhouse gas emissions from the consumption of purchased electricity, heat or steam used in our own operations. Scope 3: Other indirect emissions, such as the extraction and production of purchased materials and fuels, transport- related activities in vehicles not owned or controlled by the reporting entity, electricity-related activities (e.g. T&D losses) not covered in scope 2, outsourced activities, waste disposal etc. Includes emissions related to raw materials, fabric production, garment making, manufacture of other products and consumption of electricity by customers. Scope 3: In 2021 we continued the efforts to improve the accuracy of the scope 3 emissions data. This has resulted in certain changes in our reported emissions compared with previous years. Read more about the updated scope 3 emissions data on page 63 of the statutory sustainability report. The customer use phase is not included in the scope 3 element of this target.

2. The baseline for the sales goal is 2021. The H&M group’s goal is to reduce its carbon footprint in absolute figures by 56 percent by 2030 (baseline 2019) in accordance with our commitment at COP26. Profitability refers to operating profit in relation to sales. The ambition is to achieve the profitability target no later than 2024. The H&M group’s target to increase sales by 10–15 percent per year with continued high profitability remains a long-term target.

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