First half-year (1 December 2018 – 31 May 2019)
● The H&M group’s net sales increased by 11 percent to SEK 108,489 m (98,165) in the first half-year. In local currencies, net sales increased by 5 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 amounted to SEK 6,977 m (7,275). The group’s profit after tax amounted to SEK 5,372 m (6,010), corresponding to SEK 3.25 (3.63) per share. Profit after tax in the previous year was positively affected by one-off tax income of SEK 408 m as a result of the US tax reform (Tax Cuts & Jobs Act).
Second quarter (1 March 2019 – 31 May 2019)
● The H&M group’s net sales increased by 11 percent to SEK 57,474 m (51,984) in the second quarter. In local currencies, net sales increased by 6 percent compared with the corresponding quarter last year.
● Gross profit amounted to SEK 31,825 m (29,164). This corresponds to a gross margin of 55.4 percent (56.1).
● Profit after financial items amounted to SEK 5,934 m (6,012). The group’s profit after tax amounted to SEK 4,569 m (4,638), corresponding to SEK 2.76 (2.80) per share. As customer satisfaction and sales increase, the group has intensified its transformation work even further, which had a dampening effect on earnings development.
● In April H&M became the first big fashion brand in the world to provide detailed information concerning the factory and material for individual garments to help customers make more sustainable choices.
● Successful launch of H&M’s online store in Mexico during the quarter.
● Sales of the summer collections got off to a very good start. Net sales in the month of June is estimated to increase by 12 percent in local currencies compared with the corresponding month the previous year.
● The composition of the stock-in-trade continues to improve.
● The company assesses that the costs of markdowns in relation to sales will decrease by around 1.5 percentage points in Q3 2019 compared with Q3 2018. This would be the fourth successive quarter with a reduction in markdowns.
● The company is accelerating its adaptation to customers’ changed shopping patterns and has therefore revised the number of new stores downwards in favour of even more digital investments. The net addition of new stores for full-year 2019 will therefore be around 130, which is 45 fewer than previously communicated.
● Thailand, Indonesia and Egypt will become new H&M online markets via franchise during the second half of 2019.
Comments by Karl-Johan Persson, CEO
“The H&M group continues to increase full-price sales, reduce markdowns and increase market share, showing that customers appreciate our collections and the improvements we are making to the product assortment and the customer experience.
Sales developed well in most markets. We had strongest growth in countries such as the US where we grew sales by 17 percent, in Mexico by 25 percent, in India by 39 percent, in Russia by 19 percent and in Poland by 11 percent in local currencies. We also grew in the UK and Sweden where we took market share despite challenging market conditions.
Total sales in the group increased by 11 percent in SEK and with 6 percent in local currencies in the second quarter. Online sales continued to develop strongly, increasing by 27 percent in SEK and 20 percent in local currencies.
By continuing to integrate our physical and digital channels we are making the shopping experience inspiring, easy and convenient for customers wherever we meet them. This and other extensive investments are driving costs in the short term. For example, our new online platform and our new logistics systems have not yet achieved full efficiency, but for customers have resulted in improvements such as faster and more flexible deliveries and a more seamless shopping experience. We have also increased the value for our customers through further investments in the customer offering so that we offer the best combination of fashion, quality, price and sustainability. In April H&M became the first big fashion brand in the world to provide detailed information concerning the factory and material for individual garments to help customers make more sustainable choices. We have continued to develop our new digital features and during the spring we also substantially expanded H&M’s customer loyalty programme, which now has more than 43 million members.
The transformation work is having an effect and will continue at a fast pace within our strategic focus areas:
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 options and payments.
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 foundation including robust scalable platforms that enable faster development of various customer apps and new technologies.
Digital expansion into new markets. In April H&M opened online in Mexico, and this autumn H&M will launch online via franchise in Thailand, Indonesia and Egypt. In addition, partnerships with various external platforms are making the H&M group’s brands available to more and more customers globally. In autumn 2019 H&M will launch on India’s largest ecommerce platform Myntra and in China & Other Stories will open on Tmall.
Physical stores – continued expansion with focus on growth markets. The planned net addition for the full-year is around 130 stores.
Develop new concepts and business models.
Our transformation work in response to the rapid shift in fashion retail is continuing at full speed. While the costs of this have held back profitability in the short term, we remain convinced that our focus on meeting customers’ increased expectations will contribute to a gradual increase in profitability and to long-term positive development for the H&M group. ”