First half-year (1 December 2019 – 31 May 2020)
- The H&M group’s net sales decreased by 23 percent to SEK 83,612 m (108,489) in the first half-year. In local currencies, net sales decreased by 24 percent. The H&M group has been significantly negatively affected by the Covid-19 situation, particularly in the second quarter.
- The H&M group has taken rapid and forceful action to manage the Covid-19 situation. This has been done in all parts of the business, including areas such as product purchasing, investments, rents, staffing and financing. Since the majority of stores were closed, there was greater focus on the digital sales channels.
- Profit after financial items amounted to SEK -3,978 m. The group’s profit after tax amounted to
SEK -3,063 m, corresponding to SEK -1.85 per share. Excluding IFRS 16, profit after financial items amounted to SEK -4,114 m (6,977).
Second quarter (1 March 2020 – 31 May 2020)
- The H&M group’s net sales decreased by 50 percent to SEK 28,664 m (57,474) in the second quarter. In local currencies, net sales decreased by 50 percent. During the quarter stores were temporarily closed in many markets; in mid April around 80 percent of the group’s stores were temporarily closed.
- Online sales increased by 36 percent in SEK and 32 percent in local currencies.
- Gross profit amounted to SEK 13,284 m which corresponds to a gross margin of 46.3 percent. Gross profit excluding IFRS 16 amounted to SEK 13,273 m (31,825), which corresponds to a gross margin of 46.3 percent (55.4). The decrease in gross margin is mainly due to the costs included in “cost of goods sold” that cannot be adjusted at the same pace as the rapid evolvement of the Covid-19 situation. The cost of markdowns in relation to sales increased by around 3 percentage points.
- Selling and administrative expenses including depreciation decreased by 25 percent in the quarter.
- Profit after financial items amounted to SEK -6,482 m. IFRS 16 effects in the quarter were relatively minor. Excluding IFRS 16, profit after financial items amounted to SEK -6,532 m (5,934).
- The group’s profit after tax amounted to SEK -4,991 m, corresponding to SEK -3.02 per share. Excluding IFRS 16 profit after tax amounted to SEK -5,030 m (4,569).
- The stock-in-trade decreased to SEK 40,000 m (40,406). The stock-in-trade represented 19.2 percent (18.3) of sales for the rolling twelve months.
- The H&M group’s liquidity remains good. As at 31 May 2020, cash and cash equivalents amounted to SEK 12,704 m. Cash and cash equivalents plus undrawn credit facilities totalled SEK 31,241 m (22,515).
- Sales in the period 1–24 June 2020 decreased by 25 percent in local currencies compared to the same period the previous year. Currently 350 stores, representing 7 percent of the total number of stores, are still closed. A large number of stores still have local restrictions and limited opening hours.
A total of 48 of the group’s 51 online markets are open.
- The H&M group is continuing to take action to mitigate the Covid-19 situation. As the pandemic has speeded up the digital shift in the industry, the company’s transformation work relating to digitalisation, the supply chain and the organisation is being accelerated.
- The H&M group plans to establish an EMTN programme in July 2020 to allow the issue of bonds, primarily in EUR and SEK. This will complement the group’s long-term financing and is a way of further diversifying the group’s sources of financing. No decision has yet been taken on any first issue.
- For full-year 2020 the pace of closures is being increased and the number of openings reduced compared with what was previously planned. Around 170 closures and around 130 openings are planned, resulting in a net decrease in the number of stores of around 40.
“I am full of admiration for our employees’ commitment, drive and perseverance during this very challenging time. As we have reopened our stores, sales have begun to recover at a faster rate than expected. To meet the rapid changes in customer behaviour caused by Covid-19 we are accelerating our digital development, optimising the store portfolio and further integrating the channels. With our ambitious sustainability work we want to continue to lead fashion retail towards a more sustainable future,” says Helena Helmersson, CEO.
Comments by Helena Helmersson, CEO
“Covid-19 continues to impact people, communities and companies around the world and I am full of admiration for our employees’ commitment, drive and perseverance during this very challenging time. The safety of our employees and customers remains our highest priority and we are reopening stores in line with decisions by the authorities.
Before the pandemic hit, we performed strongly – a result of many years of long-term investments to create the best offering for our customers and to meet the digital shift in the industry. This, combined with the fact that we have acted quickly to counter the negative effects of Covid-19 and that we are speeding up the transformation of the H&M Group, makes me convinced that we will come out of the current crisis stronger.
At most around 80 percent of our stores were closed in the second quarter and in those markets where stores were open, demand was significantly subdued. Although we took rapid and decisive action which reduced our costs considerably, it was impossible to compensate for the 50 percent drop in revenue and, as we had previously communicated, the quarter was loss-making.
During the pandemic it became clear how important it is that the digital and physical channels interact to meet customers’ needs. When the majority of the stores were temporarily closed in the second quarter, we focused on redirecting product flow to our digital channels, which remained open at all times in nearly all our online markets. Online sales increased by 36 percent in SEK during the quarter. The positive development of online sales has continued since we began reopening our stores. As the stores have reopened, our total sales have gradually begun to recover. Our pace of recovery varies greatly between markets, partly because local restrictions differ, but has so far been better than expected. In the period 1–24 June 2020 sales decreased by 25 percent in local currencies compared with the same period in 2019. Although consumption generally remains subdued, our recovery as restrictions have been eased shows that our assortment is relevant and appreciated by our customers.
Rapid adjustments to product purchasing and buying plans meant that the stock-in-trade was able to be reduced somewhat in the second quarter compared with the previous year. However, since there is an oversupply of spring products throughout the industry, and the market remains weakened, we expect markdowns in relation to sales to increase again in the third quarter. We are continuing to adjust costs to mitigate the negative impact of the Covid-19 situation.
It is clear that the rapid changes in customer behaviour caused by the pandemic will further speed up the digitalisation of fashion retail. To meet this, we are continuing to adapt the organisation and improve our ways of working, which will make us more flexible, fast and efficient. We are accelerating our digital development, optimising the store portfolio and further integrating the channels. Our leading sustainability work will also contribute to strengthening our position and ensure the long-term positive development of the H&M group.”
Read more about our inititives and sustainability on page 11.
Telephone conference in conjunction with the six-month report
The six-month report for 2020, i.e. 1 December 2019 – 31 May 2020, will be published at 08:00 CEST on 26 June 2020. A telephone conference for the financial market and media will be held in English at 09:00 CEST, hosted by CEO Helena Helmersson, CFO Adam Karlsson and Head of IR Nils Vinge.
For login details to the telephone conference please register at hmgroup.com or via this link:
To book interviews with CEO Helena Helmersson, CFO Adam Karlsson and Head of IR Nils Vinge in conjunction with the six-month report on 26 June, please contact:
Kristina Stenvinkel, Communications Director
Phone +46 8 796 39 08
|Nils Vinge, Head of IR||+46 8 796 52 50|
|Helena Helmersson, CEO||+46 8 796 55 00 (switchboard)|
|Adam Karlsson, CFO||+46 8 796 55 00 (switchboard)|
H & M Hennes & Mauritz AB (publ)
SE-106 38 Stockholm
Phone: +46-8-796 55 00, fax: +46-8-20 99 19, e-mail: email@example.com
Registered office: Stockholm, Reg. No. 556042-7220
For more information about the H&M group visit hmgroup.com.
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 08:00 (CEST) on 26 June 2020. This interim report and other information about the H&M group, is available at hmgroup.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, & Other Stories, H&M HOME and ARKET as well as Afound. The H&M group has 51 online markets and more than 5,000 stores in 74 markets including franchise markets. In 2019, net sales were SEK 233 billion. The number of employees amounts to approximately 179,000. For further information, visit hmgroup.com.