H & M Hennes & Mauritz AB (publ)

Welcome to the H&M conference call three month report for 2023. For the first part of this call all participants will be in a listen only mode during the speaker presentation and afterwards there will be a question and answer session. If you wish to ask a question you will need to register via the link on your confirmation email and then dial in to press star 1 on your telephone keypad and wait for your name to be announced. Please be advised that today's conference is being recorded. Today I am pleased to present Nils Wink, Head of Investor Relations and I will now hand you over to our speakers so please begin when you are ready.

Hi, everyone, and thank you all for joining us today. Welcome to this telephone conference in connection with H&M Group's first quarter results 2023. With me today is our CEO, Helena Helmichon, and our CFO, Adam Karlsson. We will start with a short summary of the first quarter. After that, we will be happy to answer your questions. And you'll find the report at hmgroup.com investor relations. Now I'll hand over to you, Helena.

Thank you, Nils. Although the challenging situation in the outside world remains, our financial year has started in the right direction. Net sales in Swedish crowns increased by 12% in the first quarter. In local currencies, the increase was 3%. Excluding Russia, Belarus and Ukraine, the increase was 16% in Swedish crowns and 7% in local currencies. Sales in physical stores increased despite 7% less number of stores. The external factors that affect purchasing costs continue to improve. Our work on the cost and efficiency program is ongoing at full speed, while many of the changes we have been working on in recent years are starting to have an effect. At the same time, spring collections have been well received by customers where spring has arrived. 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 more important than ever to continue offering customers the best value for money. We make progress in all of our three growth areas. the H&M brand, portfolio brands and new growth and ventures. To start with the H&M brand, we are continuing to strengthen and develop the offering with additional services and products, including categories like sport, beauty and home. Customers are getting access to an even broader and more relevant range that is further adapted to regions, stores and online. This is most clearly visible in H&M women's wear which attracts more and more customers. We are looking forward to our next designer collaboration with the House of Mugler that will be available in selected stores and online on May 11th. We will see outstanding fashion pieces at great prices for women and men along with accessories. Our initiatives and investments within tech, AI and supply chain have led to an improved precision and faster response times. As a result, we see continued improvements of the inventory situation supporting our cash flow and in line also with our sustainability ambition. We are also continuing with our efforts to enhance the customer experience with increased inspiration and seamless shopping in our physical stores and digital channels. Our second area, portfolio brands, Koss, Monkey, Weekday and other stores and Arket continues to grow. Sales for portfolio brands in the first quarter increased by 19% in Swedish crowns and by 11% in local currencies. Each of these brands adds new customers to the group and has a great potential for continued growth. Koss has carried out an extensive upgrade of the range and also strengthened its positioning in the premium segment. Arket continues to grow rapidly and has tripled sales since 2019. The third area, new growth and ventures, includes new business models, partnerships, and investments in startups. 10 years ago, we started investing in Selfie. They have, in a short time, become one of Europe's largest platforms for secondhand. This is a good example of how we work on developing new circular business models and how investments in sustainability provide H&M Group with long-term business opportunities. We are now consolidating SELPI into H&M Group, which visualizes the value and generates a positive revaluation effect of approximately 1 billion Swedish crowns in the quarter. We have over 25 more promising companies in the portfolio, such as, for example, RenuCell, Tree2Textile and Smartex. We are today publishing our annual and sustainability report for 2022. Among other things, it shows that we have made progress towards reaching our long-term climate goals. In a recent report by environmental and climate organization, Stand Earth, H&M was the highest ranked brand out of 43 global fashion brands for our climate actions. To conclude, we are naturally humbled by the continued challenges in the world around us. But at the same time, we feel confident that we have the ability to adapt to new conditions that will strengthen our competitive advantages further. We have a well-positioned customer offering and are fully focused on meeting customers' ever-increasing expectations of good value and sustainable fashion. The H&M Group stands strong with a robust financial position, healthy cash flow and well-balanced inventory. Our increased investment level in all three growth areas provide good prerequisites for gradually improved growth and higher profitability. The start of the year confirms that we are taking further steps towards our goal of a double-digit operating margin already next year. Thank you very much for listening and we are now happy to take your questions.