H & M Hennes & Mauritz AB Full-year report

Full-year (1 December 2013 — 30 November 2014)

• Well-received collections for all brands in the H&M Group resulted in good sales and increased market share. The H&M Group’s sales including VAT increased in local currencies by 14 percent during the financial year. Converted into SEK, sales excluding VAT amounted to SEK 151,419 m (128,562), an increase of 18 percent.
• Gross profit increased by 17 percent to SEK 89,052 m (76,025), which corresponds to a gross margin of 58.8 percent (59.1).
• Profit after financial items increased by more than SEK 3.4 billion to SEK 25,895 m (22,448), an increase of 15 percent.
• The Group’s profit after tax increased to SEK 19,976 m (17,093), corresponding to SEK 12.07 (10.33) per share, an increase of 17 percent.
• The strong result for 2014 has led to SEK 303 m being allocated to the H&M Incentive Program (HIP). The allocation to HIP in 2013 amounted to SEK 31 m. HIP is for all employees regardless of role, salary and whether they work part-time or full-time. The allocation to HIP was expensed in the fourth quarter. The significant difference in HIP allocations between 2014 and 2013 make it an item affecting comparability both in the full-year results for 2014 and in the fourth quarter of 2014.
• Strong expansion during the year with a total net addition of 379 (356) new stores. The largest expansion markets were China and the US. At the end of the financial year the number of stores amounted to 3,511 stores in 55 markets.
• More than 16,000 (12,000) new jobs were created in the H&M Group in 2014. The number of employees amounted to more than 132,000 (116,000) at the end of the year.

Fourth quarter (1 September 2014 — 30 November 2014)

• The H&M Group’s sales including VAT increased in local currencies by 11 percent in the fourth quarter. Converted into SEK, sales excluding VAT amounted to SEK 42,644 m (36,495), an increase of 17 percent.
• Gross profit amounted to SEK 25,774 m (22,181), an increase of 16 percent. This corresponds to a gross margin of 60.4 percent (60.8).
• Profit after financial items increased to SEK 7,799 (7,259), an increase of 7 percent. Before the allocation to HIP was expensed, profit after financial items increased by 11 percent.
• The Group’s profit after tax increased to SEK 6,222 m (5,549), i.e. an improvement of 12 percent, corresponding to SEK 3.76 (3.35) per share. Before the allocation to HIP was expensed, profit after tax increased by approximately SEK 900 m, i.e. an increase of 16 percent.
• H&M’s first stores in Manila, the Philippines, have been very well received since opening in October.

• The Board of Directors proposes a dividend of SEK 9.75 (9.50) per share for the financial year 2013/2014.
• Sales in December 2014 increased by 15 percent in local currencies compared to the corresponding month the previous year.
• Sales in January 2015 are expected to increase by 14 percent in local currencies compared to the same month last year.
• The H&M Group plans a net addition of around 400 new stores for the financial year 2014/2015. Most of the expansion will take place on existing markets. Taiwan, Peru, Macau, South Africa and India will become new H&M markets in 2015.
• COS and & Other Stories will open more new stores in 2015 compared with 2014.
• Belgium, Bulgaria, the Czech Republic, Hungary, Poland, Romania, Slovakia and Switzerland will become new H&M online markets in 2015.
• H&M Beauty – a new concept with a broad range of make-up, body care and hair care products – will initially be launched in around 900 H&M stores and online in autumn 2015.

  
Comments by Karl-Johan Persson, CEO

“2014 has been a very good year for H&M. Over the full year we increased our sales by 14 percent in local currencies and by 18 percent in Swedish kronor, to SEK 176.6 billion including VAT. Profit for the year after tax, before the allocation to HIP, increased by 18 percent to over SEK 20 billion. Well-received collections for all our brands and continued strong expansion both in stores and online have helped increase our market share and have further strengthened our position in the market.

We created 16,000 new jobs within the H&M Group in 2014 and now have more than 132,000 employees. Our employees and the H&M spirit – our shared values – are the key to our success, and the good financial results for the year mean that SEK 303 m has been allocated into the H&M Incentive Program (HIP). HIP is for all employees in the H&M Group and aims to acknowledge the employees’ daily and long-term commitment.

As always, we worked on continuous improvements during the year in order to be a leader in everything we do and the preferred choice for our customers. We have made many long-term investments in IT, online sales, new brands and in broadening the product range. Additionally, our extensive sustainability work is a further example of how we give customers added value. Our customers should always know that when they shop with us, the product has been produced with the greatest possible consideration for people and the environment.

While we are continuing our long-term investments, at the same time we can see our investments in areas such as online starting to bear fruit. This year we opened our online store in four new large markets: France, Italy, Spain and China. These openings, combined with further improvements in our online store, have naturally contributed to the year’s good sales development. We will therefore be rolling out H&M’s online store to nine new markets in 2015: Belgium, Bulgaria, the Czech Republic, Hungary, Poland, Portugal, Romania, Slovakia and Switzerland.

In 2014 we opened a net addition of 379 new stores – which is more than one store a day. And in 2015 we will be opening even more stores; in total, we plan a net addition of around 400 new stores. New markets planned for 2015 are Taiwan, Peru, Macau, South Africa and India. The greatest expansion will take place in existing markets where there is still great potential to grow further. The most new stores will open in China and the US, but also in other large markets such as Poland and Germany. COS and & Other Stories plan to open even more stores this year than in 2014.

Early in 2014 we successfully launched H&M Sport, and in the autumn our expanded shoe range was gradually launched in selected H&M stores and online. As a further step in broadening H&M’s product range, in autumn 2015 we will start the launch of H&M Beauty – a new and broad concept for make-up, body care and hair care with high quality value-for-money products in a specially produced design that we have great belief in. H&M Beauty, which will replace our current own-brand cosmetics, will be launched already this year in approximately 900 H&M stores in around 40 markets as well as in our online markets.

We have another exciting year ahead of us, with new opportunities and challenges. 2015 has got off to a good start, with strong sales in both December and January. Although the increasingly expensive US dollar will affect our sourcing costs, we will make sure that we always have the best customer offering in each individual market in terms of fashion, quality, price and sustainability, which form the basis of our business idea.”

  
The information in this full-year report is that which H & M Hennes & Mauritz AB (publ) is required to disclose under Sweden’s Securities Market Act. It will be released for publication at 8.00 (CET) on 28 January 2015. This full-year report, and other information about H&M, is available at www.hm.com

  
Contact persons

Nils Vinge, IR                       +46-8-796 52 50
Karl-Johan Persson, CEO     +46-8-796 55 00 (switchboard)
Jyrki Tervonen, CFO             +46-8-796 55 00 (switchboard)    

H & M Hennes & Mauritz AB (publ)
SE-106 38 Stockholm
Phone: +46-8-796 55 00, Fax: +46-8-24 80 78, E-mail: info@hm.com
Registered office: Stockholm, Reg. No. 556042-7220

H & M Hennes & Mauritz AB (publ) was founded in Sweden in 1947 and is quoted on NASDAQ OMX Stockholm. The company’s business concept is to offer fashion and quality at the best price. In addition to H&M, the group includes the brands COS, Monki, Weekday, Cheap Monday, & Other Stories as well as H&M Home. The H&M Group has more than 3,500 stores in 55 markets including franchise markets. In 2014, sales including VAT amounted to more than SEK 176.6 billion and the number of employees was more than 132,000. For further information, visit www.hm.com.

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