H&M Q1 Profit Down, Sales Rise

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The FINANCIAL — The H&M group’s sales including VAT amounted to SEK 54,369 m (50,624), an increase of 7 percent. Sales excluding VAT amounted to SEK 46,985 m (43,691), an increase of 8 percent.

Sales in local currencies increased by 4 percent in the first quarter.

Continued strong and profitable online growth for all the brands within the group.

COS, & Other Stories, Monki, Weekday and H&M Home continued to develop very well.

Gross profit increased to SEK 24,466 m (22,699). This corresponds to a gross margin of 52.1 percent (52.0).

Profit after financial items amounted to SEK 3,212 m (3,327). The group’s profit after tax amounted to SEK 2,457 m (2,545), corresponding to SEK 1.48 (1.54) per share. Profits in the quarter were negatively affected by lower sales growth than planned as well as higher mark-downs, according to the H&M group.

The H&M group’s sales including VAT in the period 1 March to 28 March 2017 increased by 7 percent in local currencies compared to the same period the previous year. Total sales in March, April and May should viewed together, since Easter and weather effects during this period affect the comparability of an individual month.

Five new physical store markets will open during the year: Kazakhstan, Colombia, Iceland, Vietnam and Georgia. The first H&M store in Kazakhstan opened in Almaty in mid-March.

In addition, H&M plans to continue its online roll-out into six new markets: Turkey, Taiwan, Hong Kong, Macau, Singapore and Malaysia which are planned to open during the first half of 2017.

ARKET will be launched as a new brand in early autumn 2017.

H&M Home will open its first standalone stores in 2018.

Comments by Karl-Johan Persson, CEO

“We have seven brands today – H&M, COS, & Other Stories, Monki, Weekday, Cheap Monday and H&M Home – and soon it will be time for our next exciting launch, ARKET. H&M remains our largest brand with a presence in 65 markets. This means a wide geographical spread involving a mix of both established and new markets with significant competition locally, globally and digitally. Retail is going through a challenging period of change in which customers’ shopping behaviour and expectations are changing at a fast pace as a result of growing digitalisation. This is an accelerating development which also brings great opportunities.  

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In the first quarter sales including VAT increased to just over SEK 54 billion, an increase of 7 percent, which was below our plan. For fashion retail in general, market conditions were very tough in many of our large markets in central and southern Europe and in the US, and this was reflected in our sales. In other markets, such as Sweden and the other Scandinavian countries, eastern Europe, Turkey, Russia, China and Japan our sales developed well and we continued to take market share. Sales at COS, & Other Stories, Monki, Weekday and H&M Home continued to develop very well both in stores and online, as did H&M’s online sales.

To meet the rapid change that is going on in fashion retail we need to be even faster and more flexible in our work processes, for example as regards buying and allocation of our assortment. We are therefore investing significantly in our supply chain, such as in new logistics solutions with greater levels of automation, but also in optimising our lead times. In the changes we are making, advanced analytics will provide important support for decision making.

In parallel with this intensified change work we are continuing with our omni-channel strategy, i.e. the integration of our stores with online sales in order to give customers a more seamless shopping experience. The optimisation of our store portfolio also continues, particularly in those markets that did not perform sufficiently well. Among other things, this includes closures, the addition of more store space and rebuilds. We are also in the process of developing a new and upgraded version of our H&M stores with a new visual look.

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We are making these changes at a fast pace in order to reach our desired outcome. This will gradually have an effect and thus enhance our opportunities to achieve good performance during the remainder of 2017 and going forward.

Ten years ago the first COS store opened, and since then we have added a number of new brands to the H&M group. Each with its own unique profile, our brands attract customers in various different segments. We are now looking forward to launching ARKET after the summer this year.

ARKET will offer a broad yet selected range of essentials for men, women and children, as well as a smaller, curated assortment for the home. The overall direction and focus is quality in simple, timeless and functional designs. There will be products in a broad price range, however in a slightly higher price segment than H&M with emphasis on materials, function and fit. The range will be supported by a selection of external brands. ARKET stores will also include a café where location permits. The café will be based on the New Nordic Kitchen and its vision of quality ingredients and healthy living. The first store will open in London and online in 18 European markets in early autumn 2017, followed by stores in Brussels, Copenhagen and Munich.”


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