H & M Hennes & Mauritz AB Nine-month report

Nine months (1 December 2018 – 31 August 2019)

• The H&M group’s net sales increased by 11 percent to SEK 171,061 m (153,986) during the first nine months of the financial year. In local currencies, net sales increased by 6 percent. The ongoing transformation work has contributed to continued positive sales development with more full-price sales, lower markdowns and increased market share.

• Profit after financial items increased by 6 percent to SEK 11,988 m (11,287). The group’s profit after tax increased to SEK 9,231 m (9,109), corresponding to SEK 5.58 (5.50) per share. Profit after tax in the previous year was positively affected by one-off tax income of SEK 418 m as a result of the US tax reform (Tax Cuts & Jobs Act).

Third quarter (1 June 2019 – 31 August 2019)

• With well-received summer collections, the H&M group’s net sales increased by 12 percent to SEK 62,572 m (55,821) in the third quarter. In local currencies, net sales increased by 8 percent compared with the corresponding quarter the previous year.

• Online sales in the third quarter increased by 30 percent in SEK and by 25 percent in local currencies.

• Gross profit increased by 13 percent to SEK 31,815 m (28,091). This corresponds to a gross margin of 50.8 percent (50.3).

• Profit after financial items increased by 25 percent to SEK 5,011 m (4,012). The group’s profit after tax increased to SEK 3,859 m (3,099), corresponding to SEK 2.33 (1.87) per share.

• The stock-in-trade continues to improve. As a proportion of sales, the book value of the stock-in-trade in SEK was lower than at the same point in time the previous year. Adjusted for currency effects the stock-in-trade decreased somewhat.

• H&M was successfully launched on India's leading ecommerce platform Myntra in August. The reception has exceeded the company’s high expectations. 

• Sales in local currencies in September 2019 increased by 8 percent compared to September the previous year.

• The H&M group is ranked as one of the world’s best retailers for sustainability in the Dow Jones Sustainability World Index.

• The integration of the online and physical stores continues at full speed.

• The H&M group continues to actively optimise the store portfolio through increased consolidation in established markets while continuing its expansion in growth markets. The net addition of new stores for full-year 2019 will be around 120, somewhat fewer than previously communicated.

  
”Well-received summer collections and increased market share show that we are on the right track with our transformation work to meet customers’ ever-increasing expectations. The continued development of more full-price sales and reduced markdowns contributed to a 26 percent increase in operating profit in the third quarter, all while maintaining a high level of activity in our transformation work.”

Karl-Johan Persson, CEO
 

Comments by Karl-Johan Persson, CEO
“Well-received summer collections and increased market share show that we are on the right track with our transformation work to meet customers’ ever-increasing expectations. Continued increases in full-price sales and decreases in markdowns contributed to a 26 percent increase in operating profit in the third quarter, all while maintaining a high level of activity in our transformation work.

Growth was good in many markets, including the US where sales in local currencies rose by 19 percent, Poland by 20 percent, Italy by 15 percent, Russia by 12 percent and India by 29 percent. Sales also developed strongly in South America – in Chile, for example, where we grew by 32 percent. However, things were a bit tougher in some of our franchise markets due to challenging macro factors.

Total sales in the group increased by 12 percent in SEK and 8 percent in local currencies in the third quarter. The sales growth was driven by both stores and online, with a very strong increase in online sales of 30 percent in SEK and 25 percent in local currencies.
 
Customer focus is our highest priority. We are therefore continuing to invest in the best combination of fashion, quality, price and sustainability. And to make the customer experience even more inspiring and easy, we are integrating our digital and physical channels more and more – including through the continued rollout of Click & Collect and online returns in store, along with improved search functions, more flexible payment options and faster deliveries. We are also developing innovative new features, including services aimed at sustainability and reuse.

In parallel with the integration of stores and online shopping we keep optimising the store portfolio, including more consolidation in established markets and expansion in growth markets. We are also expanding via new channels. At the end of the quarter H&M launched on Myntra, India’s leading ecommerce platform, while & Other Stories opened on Tmall in China and H&M online was launched in Indonesia, followed by Thailand in September. H&M also opened its first store in Belarus, bringing us to a total of 73 markets. All the launches and openings got a good reception. Through our continued investments in tech and the supply chain we also plan later this year to offer our customers the chance to shop online from COS, Weekday, Monki, & Other Stories and ARKET in up to 70 or so new markets.

Our ongoing transformation work to meet customers’ ever-increasing expectations is bearing fruit. The new season has got off to a promising start, with a positive reception for our early autumn collections. Looking ahead, we remain humble considering the challenges brought by the rapid shift in fashion retail. Our transformation work is therefore continuing at a fast pace in all parts of the company. We are convinced that this will contribute to positive development for the H&M group for many years to come.”
 

Strategic focus areas
The rapid shift in fashion retail continues. We are driving our transformation work based on our strategic focus areas in order to meet customers’ ever-increasing expectations and to future-proof the H&M group.

Create the best customer offering
Product assortment – secure the best combination of fashion, quality, price and sustainability for all the brands.
Physical stores – continued development of new concepts and optimisation of the store portfolio.
Online stores – improvements such as faster and more flexible delivery and payment options.
Continued integration of our physical stores and online stores to enhance the customer experience.

Fast, efficient and flexible product flow
Make the supply chain even faster, more flexible and more efficient.
Initiatives within advanced data analytics and AI.

Investments in infrastructure – our tech foundation
Continued investments in our tech infrastructure including robust scalable platforms that enable faster development of various customer apps and new technologies.

Adding growt
Digital expansion into new markets.
Physical stores – continued expansion with a focus on growth markets.
Develop new concepts and business models.

 
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

For more information about the H&M Group visit hmgroup.com.
 

Information in this nine-month report is that which H & M Hennes & Mauritz AB (publ) is required to disclose under the EU Market Abuse Regulation (596/2014/EU). The information was submitted for publication by the abovementioned persons at 08:00 (CEST) on 3 October 2019. This nine-month report and other information about the H&M group, is available at hmgroup.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 COS, Monki, Weekday, & Other Stories, H&M HOME and ARKET as well as Afound. The H&M group has 50 online markets and more than 4,900 stores in 73 markets including franchise markets. In 2018, net sales were SEK 210 billion. The number of employees amounts to approximately 177,000. For further information, visit hmgroup.com.