#Retail & Brands

2020-10-01

H & M Hennes & Mauritz AB Nine-month report

“Through much-appreciated collections and rapid, decisive actions, we returned to profit already in the third quarter. Our employees have made amazing efforts to achieve our fast recovery. Although the challenges are far from over, we believe that the worst is behind us and we are well placed to come out of the crisis stronger. Demand for good value, sustainable products is expected to grow in the wake of the pandemic and our customer offering is well positioned for this. We are now accelerating our transformation work so that we continue to add value for our customers,” says Helena Helmersson, CEO.

Nine months (1 December 2019 – 31 August 2020)

The H&M group’s net sales amounted to SEK 134,482 m (171,061) in the first nine months of the financial year. Sales development was significantly negatively affected by the Covid-19 situation, particularly in the second quarter when stores were temporarily closed in most markets; at the most, approximately 80 percent of the group’s stores were closed.

Profit after financial items amounted to SEK –1,613 m. The group’s profit after tax amounted to SEK –1,242 m, corresponding to SEK –0:75 per share. Excluding IFRS 16, profit after financial items amounted to SEK –1,847 m (11,988).

Third quarter (1 June 2020 – 31 August 2020)

The H&M group’s net sales amounted to SEK 50,870 m (62,572) in the third quarter. In local currencies, net sales decreased by 16 percent. Sales were affected by the Covid-19 situation. At the beginning of the quarter approximately 900 of the group’s more than 5,000 stores were temporarily closed. At the end of the quarter just over 200 stores were temporarily closed.

Gross profit amounted to SEK 24,851 m (31,815) which corresponds to a gross margin of 48.9 percent (50.8).

Profit after financial items amounted to SEK 2,365 m. Excluding IFRS 16, profit after financial items amounted to SEK 2,267 m (5,011).

The group’s profit after tax amounted to SEK 1,821 m, corresponding to SEK 1.10 per share. Excluding IFRS 16, profit after tax amounted to SEK 1,746 m (3,859).

The H&M group’s liquidity remains good. As at 31 August 2020, cash and cash equivalents amounted to SEK 12,138 m (13,064). Cash and cash equivalents plus undrawn credit facilities totalled SEK 41,413 m (25,641).

The H&M group has taken rapid and decisive action to manage the Covid-19 situation. This crisis work has covered all parts of the business, including product purchasing, investments, rents, staffing and financing. Combined with much-appreciated collections and strict cost control, this has led to a rapid recovery in results.

The H&M group’s omnichannel model, which combines strong and profitable online growth with optimisation of the store portfolio, is gradually leading to increased value creation.
Sales in September 2020 decreased by 5 percent in local currencies compared with the same period last year. Currently 166 stores, representing 3 percent of the total number of stores, are still closed. A large number of stores still have local restrictions and limited opening hours.
The rapid changes in customer behaviour have been accelerated by Covid-19. The H&M group is therefore now stepping up the pace of its transformation work further, with digital investments, optimisation of the store portfolio and increasingly integrated channels.
Around a quarter of the H&M group’s stores have a contractual right to renegotiate or exit their leases each year. For 2021 a net decrease of around 250 stores is planned.

Comments by Helena Helmersson, CEO

“As a result of much-appreciated collections together with rapid and decisive actions, our recovery is going better than expected. We have strong, profitable online growth, and more and more stores have been able to open again. With more full-price sales than expected and strict cost control, we returned to profit already in the third quarter. Our teams around the world have done an amazing job. Although the challenges are far from over, our assessment is that the worst is behind us and we are well placed to come out of the crisis stronger.

More and more customers started shopping online during the pandemic, and they are making it clear that they value a convenient and inspiring experience in which stores and online interact and strengthen each other. The substantial investments made in recent years have been very important for our recovery and we are now accelerating our transformation work further to meet customers’ expectations. We are increasing digital investments, accelerating store consolidation and making the channels further integrated. To ensure that our offerings are relevant to customers and improve availability in all channels, speed and flexibility will be even more important in the future, particularly in the supply chain.

Covid-19 has also highlighted the importance of sustainability. Demand for good value, sustainable products is expected to grow in the wake of the pandemic and our customer offering is well positioned for this. Through our work to become circular and climate positive we are increasing the share of sustainable and renewable materials and we are developing new revenue streams. Together with our accelerated transformation work, this will strenghten resilience and contribute to long-term profitable growth for the H&M group.”