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H&M CEO calls Q2 trading "unsatisfactory", sales improve 2 percent

Sales including VAT increased by 2 percent to 60,463 million Swedish krona (6,738.6 million dollars) in the second quarter. Sales including VAT in the six-month period amounted to 114,017 million Swedish krona (12,707 million dollars) against 113,907 million Swedish krona (12,695 million dollars). In local currencies the H&M said that the group’s sales including VAT were unchanged both in the second quarter and in the six-month period. Sales excluding VAT amounted to 51,984 million Swedish krona (5,794 million dollars) in the second quarter and 98,165 million Swedish krona (10,941 million dollars) in the six-month period.

Commenting on the trading, Karl-Johan Persson, H&M’s CEO said in a statement: “The rapid transformation of the fashion retail sector continues, and we are in a transitional period that is both exciting and challenging. As we signalled previously, it was going to be a tough first half-year. Overall, total sales for the quarter were not satisfactory, which meant that inventory levels were still too high at the end of the period.”

Review of H&M’s Q2 and H1 performance

Online sales for the quarter increased by approximately 17 percent compared with the second quarter last year. Total sales for the new brands (new business) increased by approximately 14 percent in the quarter compared to the corresponding period the previous year.

Gross profit amounted to 29,164 million Swedish krona (3,250.6 million dollars) against 29,345 million Swedish krona (3,270.7 million dollars) in the second quarter, corresponding to a gross margin of 56.1 percent compared to 57.1 percent last year. For the six-month period, gross profit amounted to 52,204 million Swedish krona (5,818.6 million dollars) compared to 53,811 million Swedish krona (5,995.6 million dollars), corresponding to a gross margin of 53.2 percent against 54.7 percent last year.

“Transitions during the second quarter in some of our major sales markets negatively impacted sales in the USA, France, Italy and Belgium, as well as online sales in the Nordic region. Yet in a number of markets sales developed positively; in Sweden, Norway, Denmark and Eastern Europe we grew considerably faster than the market,” added Persson.

H&M continues to expand online and offline presence

In spring 2018, the company’s online expansion continued into a further three markets: India, which opened in March, and via franchise to Saudi Arabia and the United Arab Emirates, which opened in May. The company said, new H&M store markets in 2018 will be Uruguay and Ukraine, which will open in the second half of the year. For 2019 Bosnia-Herzegovina is planned to become a new H&M store market and Mexico a new H&M online market.

For full-year 2018 the H&M group plans to open around 390 stores and close 150, resulting in a net addition of around 240 new stores for the year. Most of the H&M store openings will be in emerging markets, while the closures will take place in established markets. The number of planned store closures has been adjusted from 170 to 150 as a result of considerably improved lease terms. Most of the new stores in 2018 will be H&M stores, with around 40 having an H&M Home shop-in-shop, while approximately 90 stores will be for the brands COS, & Other Stories, Monki, Weekday, Arket and Afound. In 2018 eight standalone H&M Home stores are planned to open.

In the first half-year, excluding franchise, the group opened 105 stores and closed 65 stores, i.e. a net increase of 40 new stores compared to 131 last year. Via franchise partners 22 stores were opened. The group had 4,801 stores as of May 31, 2018 compared to 4,498 stores last year, of which 241 were operated by franchise partners.

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