H & M Hennes & Mauritz AB Six-month report

 

First half-year (1 December 2016 – 31 May 2017)

• The H&M group’s sales including VAT increased by 9 percent to SEK 113,907 m (104,965) during the first six months of the financial year. Sales excluding VAT amounted to SEK 98,368 m (90,565). In local currencies sales increased by 5 percent.
• Profit after financial items increased by 6 percent to SEK 10,920 m (10,329). The group’s profit after tax amounted to SEK 8,354 m (7,902), corresponding to SEK 5.05 (4.77) per share.

Second quarter (1 March 2017 – 31 May 2017)  

• The H&M group’s sales including VAT increased by 10 percent to SEK 59,538 m (54,341) during the second quarter. Sales excluding VAT amounted to SEK 51,383 m (46,874). In local currencies sales increased by 5 percent.
• Gross profit increased by 9 percent to SEK 29,345 (26,980). This corresponds to a gross margin of 57.1 percent (57.6).
• Profit after financial items increased by 10 percent to SEK 7,708 m (7,002). The group’s profit after tax amounted to SEK 5,897 m (5,357), corresponding to SEK 3.56 (3.24) per share. The profit increase in the second quarter is mostly explained by continued expansion and tight cost control.
• 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. The profitability of the group’s online sales is in line with that of the physical stores.
• H&M’s online store opened in further six new markets during the spring – Turkey, Taiwan, Hong Kong, Macau, Singapore and Malaysia – and is now available in 41 markets.
• Continued very good development for COS, & Other Stories, Monki, Weekday and H&M Home.
• The H&M group’s sales including VAT for June 2017 are expected to increase by 7 percent in local currencies compared to the same month last year.
• Successful store openings in new H&M markets Kazakhstan and Colombia this spring will be followed by openings in Iceland, Vietnam and Georgia.
• 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.
• COS will reach turnover of around SEK 10 billion in 2017, with profitability in line with that of the H&M brand.
• The new brand, ARKET, will be launched in 2017 with five stores and 18 online markets.
• Continued investments with a digital focus. It is estimated that the group’s online sales will grow by at least 25 percent per year going forward.
• India will be a new H&M online market in 2018. Additional new online markets will open in 2018.
• New H&M store markets planned for 2018 are Uruguay and Ukraine.

Comments by Karl-Johan Persson, CEO
“Sales in the second quarter increased by 10 percent in SEK to more than SEK 59 billion including VAT. In local currencies, sales increased by 5 percent. Profit after financial items increased by 10 percent to SEK 7.7 billion.

Sales in the UK, Scandinavia and Eastern Europe as well as in many of our growth markets were good. However, it was more challenging in several of our major markets such as the US, China, the Netherlands and Switzerland.

H&M’s online sales developed very well and continued to increase its share of total sales. The development of COS, & Other Stories, Monki, Weekday and H&M Home remained very strong, both in stores and online.

An industry in transition
Fashion retail is going through a period of extensive change because of increased digitalisation. Customer behaviour and expectations are changing at an ever-increasing pace, with a greater and greater share of sales taking place online. This shift brings great opportunities for the H&M group. We are in a strong position, with well-known global brands suited to both physical stores and online sales, and we are financially strong and can invest at the pace required.

Continued investments and digital focus
We continue to invest and develop our business with a digital focus to give our customers the best possible shopping experience. This includes:

• Improvement, diversification and expansion of our online offering – for example more and faster delivery options, more payment alternatives, a broader range of products and more new markets.
• Integration of our physical stores with the online store – to offer a shopping experience where customers are always able to move freely between our various channels and shop in the way that suits them best. Our global store network gives us a unique proximity to our customers, which is a great asset and advantage.
• Expansion of new physical stores with a focus on growth markets – around 500 new stores with very favourable conditions are planned to open during the year.
• Optimisation and development of the store portfolio – rebuilds, relocations, additional store space. Around 100 store closures during the year. Development of H&M stores to include new forms of visual expression for a more inspiring
  in-store experience.
• Supply chain optimisation – increased speed, efficiency and flexibility.
• Advanced analytics – allows further improvements in areas such as the product range development, quantification, allocation and personalised communication.

The ability to build new brands and concepts
An important part of the H&M group’s strategy is to develop, launch and build new global brands. A good example of this is COS, which will reach revenues of around SEK 10 billion this year with profitability in line with that of the H&M brand. The value of COS today already far exceeds the amount we invested in it and this is just the beginning of the journey.

Our other brands, & Other Stories, Monki, Weekday, Cheap Monday and H&M Home, are very well-positioned to make the same journey as COS. We are expecting our newer brands to continue to grow substantially for many years to come and to account for an increasing share of the H&M group’s growth and value.

After the summer, we are looking forward to launching yet another new brand, ARKET, which received fantastic reviews at previews during the spring. The first store will open on Regent Street in London with the simultaneous launch of ARKET’s online store in 18 European markets.

Continued rapid and profitable online growth
The H&M group’s online sales have developed very well and already account for 25 to 30 percent of total sales in certain established markets. We are expecting our online sales to increase by at least 25 percent per year, with profitability in line with that of the physical stores.

Fast pace is vital
We are convinced that the investments we have made and are making will result in continued profitable growth for many years to come. A clear focus for us is to continue to develop our business with quality at a fast pace and thereby strengthen the H&M group’s position even further in a growing and rapidly changing market.”

Invitation to press and telephone conference in conjunction to the six-month 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 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 29 June 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 & Other Stories, Cheap Monday, COS, Monki and Weekday as well as H&M Home. The H&M group has 41 online markets and approximately 4,500 stores in 66 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.