H & M Hennes & Mauritz AB (publ)

Welcome to the H&M conference call, nine-month report for 2022. For the first part of the call, all participants are in listen-only mode during the speaker's presentation. And afterwards, there will be a question and answer session. If you wish to ask a question, you will need to press star on your telephone and wait for your name to be announced. Please be advised that today's conference is being recorded. Today, I am pleased to present Niels Vignier, Head of Investor Relations. I will now hand you over to our speakers. Please begin.

Thank you. Hi, everyone, and thank you all for joining us today. Welcome to this telephone conference about the H&M Group's nine-month results, 2022. With me today is our CEO, Helena Hellmarsson, and our CFO, Aldan Coulson. We will now start with a short summary of the third quarter, and after that, we will be happy to answer your questions. you'll find a nine-month report on hmgroup.com investor relations. Now I'll hand it over to you, Helena.

Thank you, Nils. Sales and profitability in the third quarter was largely impacted by the effects of our decision to pause sales and then wind down the business in Russia. This explains half of the decrease in profits compared with the third quarter last year. In common with the rest of the industry, sales were weak in many of our major markets at the start of the period, but picked up gradually despite a heat wave in several European countries and some remaining delays in the supply chain. The quarter was also impacted by several other external headwinds, such as increased raw materials and freight prices, as well as stronger U.S. dollars. This resulted in substantial cost increases for purchases of goods. We have chosen not to fully compensate for these costs, which is reflected in the gross margin. Overall, the external factors had a substantial negative impact on profit for the quarter. With our long-term approach, we are continuously developing all parts of the company with a focus on meeting customers' ever-increasing expectations of affordable and sustainable fashion. It's now more important than ever to continue offering customers the best value for money. Customers should always be confident that all the group's brands provide the best combination of fashion, price, quality, and sustainability. We are continuing the integration of our sales channels to offer customers a smooth and inspiring experience in all our touchpoints. At the same time, we continue with the investments in tech and the digitalization of the supply chain. Efficiency, speed, and flexibility have never been more important. In parallel, a program to reduce costs and further improve efficiency is being initiated. From the second half of 2023 onwards, this is expected to free up 2 billion Swedish crowns per year. With loyal customers all over the world, engaged colleagues and sound finances in combination with a long-term perspective, we see good opportunities to strengthen our position despite the situation in the world around us. The autumn collections have been well received and sales from the 1st to the 27th of September are up with 7% compared to last year. This is an important proof that we can grow also when customers' purchasing power is decreasing. Thank you very much for listening, and we're now happy to take your questions.