H & M Hennes & Mauritz AB Full-year report

 

Full-year (1 December 2016 – 30 November 2017)

• The H&M group continued to grow globally in 2017. Sales including VAT increased by 4 percent to SEK 231,771 m (222,865) in the financial year. Sales increased by 3 percent in local currencies. Sales excluding VAT amounted to SEK 200,004 m (192,267).
• Gross profit increased to SEK 108,090 m (106,177). This corresponds to a gross margin of 54.0 percent (55.2).
• Profit after financial items amounted to SEK 20,809 m (24,039). The group’s profit after tax amounted to SEK 16,184 m (18,636), corresponding to SEK 9.78 (11.26) per share.
• A total of 479 (497) stores were opened and 91 (70) stores were closed, resulting in a total net addition of 388 (427) new stores.
• During the year eight new H&M online markets and five new H&M store markets were opened.
  At the end of the financial year the H&M group had 69 sales markets of which 43 with online.

Fourth quarter (1 September 2017 – 30 November 2017) 

• The H&M group’s sales including VAT amounted to SEK 58,481 m (61,098), a decrease of 4 percent. In local currencies, the decrease was 2 percent. Sales excluding VAT amounted to SEK 50,407 m (52,720).
• Gross profit amounted to SEK 27,929 m (30,027), corresponding to a gross margin of 55.4 percent (57.0).
• Profit after financial items amounted to SEK 4,873 m (7,409). The group’s profit after tax amounted to SEK 3,993 m (5,914), corresponding to SEK 2.41 (3.57) per share. The weak sales development within the H&M brand’s physical stores lead to increased markdowns and handling costs which had a negative impact on the result in the quarter.

• The board of directors proposes an unchanged dividend of SEK 9.75 (9.75) per share for the 2016/2017 financial year, to be paid out on two occasions in 2018. In view of continued high investments in areas such as digitalisation, the board of directors is to investigate the possibility of offering all shareholders an opportunity to reinvest the dividend received in newly-issued H&M shares.
• Sales including VAT in the period 1 December 2017 to 31 January 2018 are expected to increase by 1 percent in local currencies compared to the corresponding period the previous year.
• A continued roll-out of H&M’s online store is planned to another four markets during the financial year 2017/2018: India, and via franchise to Saudi Arabia and the United Arab Emirates. Kuwait was opened in December 2017 via franchise.
• In 2018 the H&M group plans to open approximately 390 new stores and approximately 170 store closures are planned, resulting in a net addition of approximately 220 stores. New planned H&M store markets are Uruguay and Ukraine.
• Afound – new brand in 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. It will be launched in Sweden, with a first store in Stockholm opening in parallel with a digital marketplace in Sweden. 
• H&M and H&M Home will open on Tmall, the world’s largest e-commerce platform, in March 2018

Comments by Karl-Johan Persson, CEO

Accelerating our transformation in a rapidly changing industry
The fashion industry is changing fast. At the heart of the transformation is digitalization and it is driving the need to transform and re-think faster and faster. This is presenting many challenges but we believe we are well-placed to adjust to the new dynamics and take advantage of the opportunities in front of us.

Part of this opportunity is to do with the size of the market. While the H&M group is a big player, our market share is still relatively small. It is also a growing market. So, while the H&M group has come a long way, we are most excited by the distance we still have to go and our fitness for the opportunities ahead.

Our performance during 2017 was mixed, with progress in some areas but also difficulties in others. We delivered growth of 3 percent in 2017 which is clearly below our expectations. In the fourth quarter our sales overall decreased by 2 percent in local currencies. Our online sales and our newer brands performed well but the weakness was in H&M’s physical stores where the changes in customer behaviour are being felt most strongly and footfall has reduced with more sales online. In addition, some imbalances in certain aspects of the H&M brand’s assortment and composition also contributed to this weaker result.

But our performance does need to be seen in the wider context of the transformation that the industry is going through. Underneath the disappointing recent performance, we see reasons for optimism and good learnings but we need to accelerate the transformation even more.

We have three main action areas:

Be restless around the core

• We must always have the best across product assortment and mix, look, value for money and sustainability. The best customer offering always wins.
• Our physical stores must offer a more inspiring and convenient customer experience, and be more customized to local needs.
• The digital store is a process that should never settle. The offering needs to be constantly improved and broadened to ensure it maximizes engagement and sales.
• We are integrating our physical and digital stores to offer our customers a great shopping experience with services ranging from Click and Collect to Scan and Buy and online returns in store.

Invest in the enablers – new technology and ways of working

• The efficiency of our supply chain has always been a strength but it must mirror our customers’ fast-changing needs. We are investing further to get even faster, more flexible and more responsive.
• We will invest even more in analytics and intelligence. We see huge potential across the board from assortment planning to supply chain and sales.
• We will continue to invest in our tech foundation. This includes: building scalable, robust platforms; faster development of consumer-facing apps; and broadening our use of technologies like Cloud, RFID and 3D.

Drive growth – both traditional and new

• The H&M group is developing new brands for new needs and new segments – we now have eight brands that are all scalable – and we will soon launch our ninth brand, Afound.
• Our expansion across digital will accelerate. We will be broadening our assortments, rolling out digital to new markets and linking to new platforms, like Tmall for mainland China.
• We will continue to open new stores – there is still significant growth capacity in physical stores in many regions and countries.
• We will constantly optimize and refine our physical store portfolio. There is still potential for strong growth in some regions whereas in others we can get a better balance by reducing store space.
• We constantly work on new ideas and innovations that will drive us forward – and there are many in our pipeline for 2018 and the years to come.

All in all, we feel 2017 was a year where we made more steps forward and did more groundwork for the future, but we have also made some mistakes that have slowed us down. The industry changes are challenging everyone and this will continue in 2018. The new fashion landscape requires skills and resources to adapt and seize the new opportunities. In particular the ability to take a long-term view and to navigate through some inevitable turbulence. By long-term investments, we have built a solid platform for many years of continued growth.

On our Capital Markets Day February 14, 2018, we will tell you more about our transformation and what we see going forward for the H&M group and our continued growth.

Invitation to press and telephone conference in conjunction with the full-year report is available on about.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 full-year 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 31 January 2018. This full-year 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 44 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.