H & M Hennes & Mauritz six-months report ending May 31, 2016
Swedish clothier Hennes & Mauritz reports on fiscal first semester
H & M Hennes & Mauritz AB Six-month report
First half-year (1 December 2015 — 31 May 2016)
• The H&M group’s sales including VAT increased by 7 % in local currencies during the first six months of the financial year. Converted into SEK, sales including VAT increased by 5 % to SEK 104,965 m (100,024). Sales excluding VAT amounted to SEK 90,565 m (86,143).
• Profit after financial items amounted to SEK 10,329 m (13,158). The group’s profit after tax amounted to SEK 7,902 m (10,066), corresponding to SEK 4.77 (6.08) per share.
Second quarter (1 March 2016 — 31 May 2016)
• The H&M group’s sales including VAT increased by 5 % in local currencies during the second quarter. Converted into SEK, sales including VAT increased by 2 % to SEK 54,341 m (53,233). Sales excluding VAT amounted to SEK 46,874 m (45,867).
• Gross profit amounted to SEK 26,980 m (27,245). This corresponds to a gross margin of 57.6 % (59.4).
• Profit after financial items amounted to SEK 7,002 m (8,435). The group’s profit after tax amounted to SEK 5,357 m (6,453), corresponding to SEK 3.24 (3.90) per share. Profits in the second quarter were negatively affected mostly by higher purchasing costs due to the strengthened US dollar and by increased markdowns.
• Continued very satisfactory development for H&M’s e-commerce. Successful launch of H&M’s e-commerce in nine countries during the quarter: in Slovenia, Croatia, Estonia, Latvia, Lithuania, Luxembourg, Ireland, Japan and Greece.
• H&M’s e-commerce will be launched in Canada and South Korea during autumn 2016. A total of 11 new H&M online markets will thus be added in 2016 which means that H&M will offer e-commerce in 34 markets by the end of the year.
• A continued fast roll-out of new H&M online markets is planned for 2017.
• The H&M group’s sales including VAT in the period 1 – 21 June 2016 increased by 7 % in local currencies compared to the same period last year.
• The H&M group plans a net addition of around 425 new stores for the 2015/2016 financial year. New markets for 2016 are Puerto Rico, which has opened this June, and New Zealand and Cyprus which will open during the autumn.
• In 2017, H&M plans to open stores in four to five new markets of which Colombia will be one.
Comments by CEO Karl-Johan Persson
“Sales including VAT in the second quarter amounted to SEK 54 billion and profit before tax to SEK 7 billion. In local currencies, sales increased by 5 %. The sales increase in March and April was significantly below our plan. These two months were negatively affected by cold spring weather in many of our markets. In May, sales were much better with an increase of 9 %, or 11 % when adjusted for calendar effects.
Profits in the second quarter have been affected by a continued negative US dollar effect, but also by increased markdowns and the costs of our long-term investments. The fact that the sales increase in the quarter was below plan, naturally also had an impact on profits.
It has been a challenging half-year for fashion retail in many markets, but we have great confidence going forward and are continuing to develop our offering further within all our brands.
The combination of strong brands, a large body of retail stores in good locations and a successful e-commerce business puts us in a unique market position for future growth. Although e-commerce is growing fast, there is still great potential for the H&M group to continue to expand through physical stores – so for us, our continued focus is to grow both through physical stores and online, as well as to integrate these two sales channels. Our stores and online business complement each other well, and the key to the future is to continue to integrate these channels even further to make it as convenient and easy as possible for our customers.
So far this year we have opened nine new online markets, which means that we now offer H&M’s e-commerce in 32 markets including Japan and Greece, where we recently successfully launched our e-commerce. A further two new online markets will open during the autumn: Canada and South Korea. And in 2017 we will continue the rapid roll-out of H&M’s online shop to further markets.
Today we have more than 4000 stores in strong retail locations in a total of 62 markets. We are signing very favourable store leases and this year we plan a net addition of approximately 425 stores. New markets this year are Puerto Rico, where we had a successful opening in San Juan in June, and also New Zealand and Cyprus, where we will open in the autumn. Next year we plan to open four or five new H&M markets, of which Colombia will be one.
H&M’s work on sustainability is an important part of our offering. For six years in a row H&M has been named by Ethisphere as one of the most ethical companies in the world. We have now climbed to 20th place in the ranking of the world’s most sustainable companies, and according to the Global 100 index we are the No. 1 company in our sector. H&M is also included in the Dow Jones Sustainability Index of the most sustainable companies in Europe and the world.”