H & M Hennes & Mauritz AB Nine-month report

Nine months (December 1, 2017 – August 31, 2018)

  • The H&M group’s sales including VAT increased by 3 % to SEK 178,817 m (173,290) during the first nine months of the financial year. Sales excluding VAT amounted to SEK 153986 million (SEK 149597), an increase of 3 %. In local currencies, sales including VAT increased by 1 %.
  • Profit after financial items amounted to SEK 11287 million (SEK 15936 million). The group’s profit after tax amounted to SEK 9109 million (SEK 12191 million), corresponding to SEK 5.50 (SEK 7.37) per share.

Third quarter (June 1, 2018 — August 31, 2018)

  • The group’s sales including VAT increased by 9 % to SEK 64,800 m (SEK 59383) during the third quarter. Sales excluding VAT amounted to SEK 55821 million (SEK 51229 million), an increase of 9 %. In local currencies, sales including VAT increased by 4 %. The ongoing transition has contributed to gradually improved sales and increased market share in most markets.
  • The group’s online sales increased by 32 %.
  • Gross profit amounted to SEK 28091 million (SEK 26350 million). This corresponds to a gross margin of 50.3 % (51.4 %)
  • Profit after financial items amounted to SEK 4012 million (SEK 5016 million). The group’s profit after tax amounted to SEK 3099 million (SEK 3837 million), corresponding to SEK 1.87 (SEK 2.32) per share.
  • The problems that arose during the implementation of new logistics systems in the US, France, Italy and Belgium during the spring led to extraordinary costs of around SEK 400 million in the third quarter. Sales in these markets decreased by 8 % overall, while overall sales for the other 66 markets increased by 8 % in local currencies during the quarter.
  • Successful launch of the new brand, Afound, both in stores and online in Sweden.
  • H&M very well received in Ukraine.
  • Online and physical stores are being increasingly integrated, while in parallel the rollout of online to all existing store markets as well as to other markets continues at full speed.
  • COS to open online in China and on Tmall in autumn 2018.
  • Uruguay will become a new H&M store market in autumn 2018.

Comments by Karl-Johan Persson, CEO: “The rapid changes in the fashion industry are continuing and the H&M group is in an exciting transitional period. Our transformation work has contributed to a gradual improvement in sales development with increased market share in most markets during the third quarter, particularly in Germany, Sweden, Eastern Europe, Russia and China.

In the US, France, Italy and Belgium, however, store sales were negatively impacted by the problems that arose when we introduced new logistics systems in these markets. Intensive work to correct the problems – which have now largely been resolved – resulted in extraordinary costs of around SEK 400 million in the quarter. The new logistics systems are an essential part of our work to make our supply chain faster, more flexible and more efficient, and to continue the integration of stores and online.

The group’s online sales increased by more than 30 % in the third quarter. Today H&M online is in 47 markets and we are continuing at full speed to roll out online globally to all our existing store markets as well as to other markets.

The most important aspect of our improvement work is to develop the assortment in line with customers’ increased expectations and to offer the best combination of fashion, quality and price in a sustainable way. On top of that, we are also working to enhance the customer experience. We are getting a positive response from customers to the changes that we are making both online and in stores – including in those H&M stores, where we are trying out various adjustments to our assortment, product display and shop fittings. We are therefore now scaling up this to more stores and markets. Our improvement work is benefiting from our investments in advanced data analytics and AI in areas such as quantification, allocation, pricing and trend forecasting.

We are continuing to optimise the store portfolio in order to accommodate customers’ changed shopping patterns in the ongoing shift online. In the year to date this has meant a lower net addition of new stores within the group. We are also seeing that the shift provides opportunities to achieve even better lease terms for both new and existing stores.

As always, we have a long-term perspective. Our improvement work is continuing and although many challenges remain, there are more and more indications that we are on the right track. We are therefore positive towards the future and the opportunities that exist for the H&M group.”

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, H&M HOME and ARKET as well as Afound. The H&M group has 47 online markets and more than 4800 stores in 70 markets including franchise markets. In 2017, sales including VAT were SEK 232 billion. The number of employees amounts to more than 171000.

www.hm.com