Hennes & Mauritz : H & M Hennes & Mauritz AB Full-year report

H & M Hennes & Mauritz AB Full-year report

Full-year (1 December 2018 - 30 November 2019)

  · The H&M group continued to grow globally in 2019 in an ever-changing fashion
industry. The group's net sales increased by 11 percent to SEK 232,755 m
(210,400) in the 2019 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.
  · Gross profit increased to SEK 122,453 m (110,887). This corresponds to a
gross margin of 52.6 percent (52.7).
  · Profit after financial items increased by 11 percent to SEK 17,391 m
(15,639).
  · The group's profit after tax increased to SEK 13,443 m (12,652),
corresponding to SEK 8.12 (7.64) per share. Profit after tax in the previous
year was positively affected by one-off tax income of SEK 425 m as a result of
the US tax reform (Tax Cuts & Jobs Act).
  · The year's increase in profit means that SEK 86 m has been allocated to the
H&M Incentive Program (HIP), which is for all employees.

Fourth quarter (1 September 2019 - 30 November 2019)

  · The H&M group's net sales increased by 9 percent to SEK 61,694 m (56,414) in
the fourth quarter. In local currencies, net sales increased by 5 percent
compared with the corresponding quarter the previous year.
  · Gross profit increased by 9 percent to SEK 33,287 m (30,592). This
corresponds to a gross margin of 54.0 percent (54.2).
  · Profit after financial items increased by 24 percent to SEK 5,403 m (4,352).
Before the allocation to HIP, profit for the quarter increased by 26 percent.
  · The group's profit after tax increased to SEK 4,212 m (3,543), corresponding
to SEK 2.54 (2.14) per share.
  · The composition and level of the stock-in-trade continue to improve.
Currency adjusted the stock-in-trade decreased by 6 percent. The book value of
the stock-in-trade in SEK was 16.3 percent (17.9) of sales.


  · The board of directors proposes an unchanged dividend of SEK 9.75 per share
for the 2018/2019 financial year, to be paid out on two occasions in 2020. The
board's reasoning for the dividend proposal is that the business is showing
gradual improvements, investments (capex) will reduce in 2020, the stock-in
-trade situation has improved and the company remains in a strong financial
position taking into consideration the capital structure target.
  · Net sales in the period 1 December 2019 to 28 January 2020 increased by 5
percent in local currencies compared to the corresponding period the previous
year.
  · The cost of markdowns in relation to sales is estimated to decrease by
around 0.5 - 1 percentage point in the first quarter of 2020 compared with
corresponding quarter last year.
  · Online and physical stores are being increasingly integrated with continued
optimisation of the store portfolio. Around 200 new stores are planned to open
in 2020, mainly in growth markets, while at the same time consolidation will
continue with around 175 planned store closures, mainly in established markets.
The net addition of new stores for full-year 2020 is expected to be around 25.
  · Australia is scheduled to become a new H&M online market in the second half
of 2020.
  · H&M will be launched on the ecommerce platform SSG.COM in South Korea in
2020.
  · An agreement has been signed with a new franchise partner in Central
America. The first H&M store is planned to open in Panama at the end of 2020.
  · The H&M group's industry-leading sustainability work has been recognised in
various ways; H&M was named by Corporate Knights as one of the World's Most
Sustainable Companies, while in the CDP (Carbon Disclosure Project) the H&M
group is the first retail company to be included in the CDP A List.

Comments by Karl-Johan Persson, CEO
'The H&M group's transformation work continues to bear fruit. Increased full
-price sales and decreased markdowns contributed to an improvement in profit for
the full year and in the fourth quarter, when we achieved a 25 percent increase
in operating profit while maintaining a high level of activity in our
transformation work. It is clear from our well-received collections and
increased market share that customers appreciate the initiatives we have taken.
The composition and level of the stock-in-trade continue to improve, and we
expect a decrease in markdowns again in the first quarter - for the sixth
successive quarter.

Sales growth was good in many markets in the fourth quarter. In India sales
increased by 33 percent in local currency, in Poland by 21 percent, in Mexico by
18 percent and in Russia by 12 percent. In Sweden sales increased by 7 percent,
while sales in the US and UK increased by 6 and 3 percent respectively.

For the full year, the group's sales increased by 11 percent in SEK and by 6
percent in local currencies. The sales growth was driven by both in-store and
online sales, with a strong increase in online sales of 24 percent in SEK and 18
percent in local currencies.

This positive performance shows that we are on the right track. I would like to
thank all employees of the H&M group for their fantastic work and commitment
over the past year. It is pleasing to note that the increase in full-year
profits means we can contribute a further SEK 86 million to the H&M Incentive
Program, which is for all employees of the H&M group.

In view of the ongoing transformation of fashion retail, we have been making
significant and necessary investments for several years to secure the H&M
group's position and long-term development. Among other things, we have invested
in digitalisation, a more efficient supply chain - including new logistics
centres and logistics systems, and in tech infrastructure, advanced analytics
and AI. We are now seeing multiple positive effects of these initiatives,
providing resources and support for our continued transformation work. One
example of the changes that are under way is the creation of our new Business
Tech function, which will gradually replace the previously separate functions of
IT, Advanced Analytics & AI and Business Development, and where agile teams will
work cross-functionally to increase our flexibility, speed and efficiency.

Our highest priority is to ensure the best customer offering for all our brands
and we will continue to invest going forward in order to offer the best
combination of fashion, quality, price and sustainability. The customer
experience in store and online is constantly being improved and we are also
testing various new services to help our customers achieve a sustainable
lifestyle. Our digital and physical channels are becoming increasingly
integrated and to ensure a relevant presence in each market we are accelerating
our optimisation of the store portfolio, including renegotiations, closures and
rebuilds. For 2020 we plan to open around 200 new stores, while around 175
stores will be closed. Most of the store openings will be in South America,
Russia, Eastern Europe and Asia (excluding China), while the closures will take
place mainly in Europe, the US and China.

The H&M group recently entered into an agreement with a new franchise partner in
Central America, where the first H&M store is expected to open in Panama at the
end of 2020. At the same time, our digital expansion continues. During the year
we look forward to opening H&M online in Australia and also to launching H&M on
the ecommerce platform SSG.COM in South Korea.

We take a long-term view of our business and continue to develop new concepts
and business models aimed at adding profitable growth and contributing to
sustainable development. We believe that more collaboration, shared knowledge
and increased transparency is the way forward for solving the environmental
challenges faced by the industry. We are very proud that organisations such as
CDP have named us as one of the world's leading companies in the work to counter
climate change. The H&M group has been included in CDP's A List for our work to
reduce emissions, mitigate climate risk and contribute to the transition to a
fossil-free economy.

Looking ahead, we remain humbled considering the challenges brought by the shift
in fashion retail in the form of new consumer behaviours and a fast-changing
competitive landscape. The H&M group's transformation work is therefore
continuing at a fast pace in all parts of the company. Performance over the past
year shows that we are taking steps in the right direction. Combined with our
long-term investments and our ambitious sustainability agenda, we are therefore
optimistic about the future and the opportunities for the H&M group to develop
positively for many years to come.'


Strategic focus areas
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 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 new customer apps and technologies.

Adding growth
Digital expansion into new markets.
Physical stores - continued expansion with a focus on growth markets.
Develop new concepts and business models.
Read more about our initiatives and our sustainability work on the next page and
at hmgroup.com (https://hmgroup.com/investors.html).


Contact

Nils Vinge, Head of IR         [phone]
Karl-Johan Persson, CEO        [phone] (switchboard)
Jyrki Tervonen, CFO            [phone] (switchboard)


H & M Hennes & Mauritz AB (publ)
SE-106 38 Stockholm
Phone: [phone], fax: [phone], e-mail: [e-mail]
Registered office: Stockholm, Reg. No. 556042-7220

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


Information in this full-year 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 (CET) on 30 January 2020. This full-year 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 51 online markets and more than 5,000 stores in 74
markets including franchise markets. In 2019, net sales were SEK 233 billion.
The number of employees amounts to approximately 179,000. For further
information, visit hmgroup.com.

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