H & M Hennes & Mauritz AB (publ)

Hello and welcome to the H&M conference call for six month report for 2023. Please be advised that today's conference is being recorded. For the first part of this call, all participants will be in a listen only mode during the speaker presentation and afterwards there'll be a Q&A session. If you'd like to ask a question during the Q&A session, please register via the link in the confirmation email. Today I'm pleased to present Niels Vignier, Head of Investor Relations. I will now hand you over to our speakers, so please begin when you are ready.

Thank you, and hello and welcome, everyone. Today we're presenting our six-month report 2023. With me in the room is our CEO, Helena Helmersson, and our CFO, Adam Karlsson. After the presentation, we will answer your questions. So I'll leave over to you, Helena.

Thank you so much, Nils, and warm welcome to you all. Now that the second quarter is behind us, we can conclude that we have taken a number of further important steps towards our goals. We increased sales in many markets despite a reduced purchasing power. With June almost over, we can see that the summer collections have been well received despite unfavorable weather conditions that resulted in a late start of the season compared with last year in many markets. The external factors that influence purchasing costs continue to improve. At the same time, work on the cost and efficiency program is proceeding at full speed. Many of the changes that we have made in recent years are starting to pay off. We are also continuing our initiatives with even greater focus on the customer offering and at the same time we want to give our customers an even better experience with more inspiration and improved convenience in our physical stores and digital channels. We can clearly see that the physical store is important to our customers and in-store sales have increased in the year to date, despite 300 fewer stores. At the same time, online sales continue to develop well. Around 30% of sales are online, which is at the same level as last year. This once again shows the strength of having both physical and digital sales channels which strengthen and complement each other. We are therefore continuing our efforts to integrate the channels further to create the customer experience that is as smooth and inspiring as possible. At the same time, we are optimizing our store portfolio further to ensure that we have the right number of stores in the right locations at the right terms and with the right space. We have a well-positioned customer offering and are fully focused on meeting customers' ever-increasing expectations of affordable and sustainable fashion. Though the situation in the world around us remains tough, things are moving in the right direction in many of our areas. To reach our long-term goals for 2030, we have three main growth areas, H&M, portfolio brands and new growth and ventures. First and foremost, there is H&M, which is one of the world's biggest fashion destinations with several billion visits a year globally in-store and online. We are continuing our intensive efforts within H&M to further elevate the customer experience in-store and online in order to meet customers' ever-increasing expectations. We are improving the assortment and broadening the offering with more products as well as services for added convenience when customers shop with us. We are deepening our customer relationships and striving to give customers unbeatable value in the form of fashion products that are both affordable and more sustainable. One example of this is that we are gradually increasing the proportion of sustainable and recycled materials in our products. In 2022, 84% of all materials were either recycled or made in a more sustainable way. This figure includes a 23% share of recycled materials, taking the company closer to its goal of 30% recycled materials by 2025. The third quarter has started well with increased sales in June. In the period of 1-27 June, sales increased by 10% in local currencies compared with last year. One of the main drivers was women's wear at H&M. The latest summer collections from H&M women's wear in our stores right now offers dresses and caftans as well as summer blazers in light neutral shades. Linen is still big and can be seen in most type of garments with the summer look further enhanced by high summer knitwear. In May, we were once again able to offer our customers a new and inspiring designer collaboration. And this time it was together with the House of Mygle. The collection showcased well-priced exceptional fashion garments and accessories for both women and men and was extremely well received. Over the past year, we have made several investments in H&M's lifestyle brands. For example, we have continued to develop H&M Beauty, which offers a wide range of own and external brands and is developing strongly both in stores and online. Among other things, we have developed a new store concept and an updated range in the premium segment. The first flagship store that opened in Oslo recently received a fantastic reception. Our expansion is taking place with a focus on increasing sales in all our channels. For a number of years, we've been making major long-term investments with an emphasis on the digital. The physical stores are still incredibly important. Customers appreciate having stores available where they can try on clothes and be inspired. The role of the physical stores has also been developed to become an important part of the supply chain, particularly as part of last mile solutions. Our second growth area, portfolio brands, which is cost. Arket, Weekday, Monkey and another stories increased sales by 17% in Swedish crowns and 12% in local currencies in the second quarter. During the quarter, we saw, for example, continued strong sales development for Koss and Arket. Koss has carried out an extensive upgrade of its assortment and strengthened its position in the premium segment. Our third business area, new growth and ventures, covers new business models and investments in startups. We are continuing to invest in companies and to support these companies, for example, with knowledge and capital. Through a range of exciting and innovative partnerships and circular business models, we are working with entrepreneurs to create further value. Among other things, we are continuing to invest in startups that enable a more circular fashion industry that is in line with our focus on leading our industry towards a more sustainable future. We currently have more than 25 holdings and we recently led an investment round in Kintra Fibers, which has developed a biobased polyester that is compostable and has the potential to be biodegradable too. Kintra's fiber is designed to address the environmental impact of traditional polyester at every stage, from production to end of life. The H&M Group's ambition is to lead the change towards achieving a circular fashion industry. We use our size and knowledge to drive positive change. In addition to investments in our own business, we therefore provide financial support to projects that contribute to reducing emissions throughout the value chain. This is part of our goal to halve greenhouse gas emissions by 2030. As part of this, we are working to purchase 100% renewable energy in our own operations, reduce the use of fossil fuels and instead increase the use of renewable energy among our partners and suppliers. We recently invested in two solar facilities in Sweden and the UK that take us one step closer to reaching our ambitious climate goals. Looking ahead, we can state in conclusion that despite the tough situation in the world around us, the H&M Group stands strong with a robust financial position stable cash flow and a well-balanced inventory. Although the world around us remains challenging, we are seeing several areas where developments are going in the right direction. Combined with our investments and efficiency improvements, there are good prerequisites for continued growth and improved profitability. Our goal of achieving an operating margin of 10% in 2024 remains in place. Thank you so much everyone for listening and we will now be happy to take your questions.