H & M Hennes & Mauritz AB Nine-month report

Nine months (1 December 2015 — 31 August 2016)

• The H&M group’s sales including VAT increased by 7 percent in local currencies during the first nine months of the financial year. Converted into SEK, sales including VAT increased by 5 percent to SEK 161,767 m (153,444). Sales excluding VAT amounted to SEK 139,547 m (132,167).
• Profit after financial items amounted to SEK 16,630 m (20,094). The group’s profit after tax amounted to SEK 12,722 m (15,372), corresponding to SEK 7.69 (9.29) per share.

Third quarter (1 June 2016 — 31 August 2016)

• The H&M group’s sales including VAT increased by 8 percent in local currencies during the third quarter. Converted into SEK, sales including VAT increased by 6 percent to SEK 56,802 m (53,420). Sales excluding VAT amounted to SEK 48,982 m (46,024).
• Gross profit amounted to SEK 26,471 m (25,712). This corresponds to a gross margin of 54.0 percent (55.9).
• Profit after financial items amounted to SEK 6,301 m (6,936). The group’s profit after tax amounted to SEK 4,820 m (5,306), corresponding to SEK 2.91 (3.21) per share. Profits in the third quarter were negatively affected mostly by increased mark-downs but also due to higher purchasing costs from the strengthened US dollar.

• 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 35 markets by the end of the year.
• The H&M group’s sales including VAT in September 2016 are expected to increase by 1 percent in local currencies compared to the same month last year. The exceptionally warm weather in September delayed the start of the autumn season.
• The H&M group plans a net addition of around 425 new stores and three new markets for the 2015/2016 financial year. In addition to Puerto Rico which opened this June, and Cyprus, which opened in September, New Zealand will open its first H&M store in October.
• In 2017, H&M plans to open stores in four to five new markets including Colombia, Iceland and Kazakhstan.
• A continued fast roll-out of new H&M online markets is planned for 2017.
• The H&M group plans to launch one or two new brands in 2017.

Comments by Karl-Johan Persson, CEO
“Sales including VAT in the third quarter increased by 8 percent in local currencies. Converted into SEK, sales increased by 6 percent to around SEK 57 billion. Sales were good in most of the markets up until mid-August. Thereafter sales were negatively affected by unseasonably hot weather which continued into September, resulting in a challenging start to the autumn season.

The sales performance in the third quarter and increased mark-downs due to a higher opening stock than planned had a negative impact on profit development. In addition, profits continued to be negatively affected by the strong US dollar effect on purchasing costs.

We have made considerable investments in recent years, including within IT and the development of new brands – for example, we will launch one or two new brands next year. These big investments, which have burdened our profits for a long time, have been necessary since they have created a good and solid base for sustainable and profitable growth. Building on this base, we can now continue to develop and strengthen the shopping experience within a number of different areas such as continued integration of stores and online, expanded and faster delivery options and mobile payment solutions. In addition, we are working on various initiatives within advanced data analytics and RFID. In parallel with this, we have also identified several things within our customer offering where there is potential for improvement. All this – combined with the fact that the fast pace of investment is to some extent gradually starting to subside – gives us a positive view of our opportunities for 2017 and going forward, both in terms of sales and profitability.

So far this year we have opened nine new online markets and 211 stores net, and we have a very busy autumn ahead of us with many store openings and the opening of a further two new online markets, Canada and South Korea. We plan to open 214 new stores net now in the fourth quarter. We opened our first H&M store in Nicosia in Cyprus some days ago and shortly, in October, we will be opening our first H&M store in Auckland in New Zealand. By the end of the year our presence will include stores in 64 markets – and 35 of these will offer H&M shop online.”

Contact
As previously communicated, press and telephone conferences will no longer be held in conjunction with the releases of the Q1 and Q3 reports. In order to avoid any phone queues when the reports are published, it will be possible for the financial market and media to call Nils Vinge, Head of Investor Relations, and ask questions during an open call between 09.00 - 10.00 CET on these report dates.

For log in details to the call on 30 September, please register at hm.com, investor relations, the calendar, nine-month report 2016. This phone conversation will be held in English.  

After 10.00 CET Nils Vinge will be available on +46 (8) 796 52 50 or via email:
nils.vinge@hm.com 

To book an interview please contact Kristina Stenvinkel, Head of Communications 
+46 (8) 796 39 08   stenvinkel@hm.com 

Information in this interim report is that which H & M Hennes & Mauritz AB (publ) is required to disclose under Sweden’s Securities Market Act and the EU Market Abuse Regulation (596/2014/EU). The information was submitted for publication by the abovementioned persons at 8.00 (CET) on 30 September 2016. This interim report and other information about H&M, is available at www.hm.com

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