H & M Hennes & Mauritz AB (publ)

Welcome to the H&M conference call, nine months report for 2023. Please be advised that today's conference is being recorded. For the first part of the call, all participants will be in listen-only mode during the speaker presentation and afterwards there will be a Q&A session. If you would like to ask a question during the Q&A session, please register via the link in the confirmation email. Today I am pleased to present Joseph Alberg, Head of Investor Relations. I will now hand you over to our speakers, so please begin when you are ready.

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

Thank you so much, Josef. Sales in the third quarter started strongly with a pent-up demand for summer garments following a cold May in most of our major markets. The effect then gradually decreased during the summer and at the end of the quarter we were up against sales that included the temporary reopening in Warsaw in August last year. Having now moved into September we can see that the start of the autumn season has been delayed as to date September has been marked by unusually hot weather in many of our European markets. During the third quarter, we've had focus on profitability and inventory efficiency. This means we've made some proactive decisions that resulted in both strong cash flow and good profit development in the quarter. Inventory was down by around 21% currency adjusted compared with the previous year, and we are taking further steps towards our goals and creating good conditions for profitable growth over time. In times of high inflation, where household living costs are rising significantly, it is more important than ever to offer customers the best price and unbeatable value for money. Our highest priority continues to be the customer offering, where work is ongoing to improve the product assortment and the customer experience so that customers can access an even broader and more relevant assortment. Thanks to our initiatives and investments in areas such as AI, tech, and the supply chain, we are improving flexibility and precision and have faster response times. Our efforts continue to enhance the customer experience with increased inspiration and seamless shopping in our further integrated sales channels. The store portfolio has reached a level where we see that fewer stores will be closed going forward while we at the same time are opening new stores. Our stores are an important part of building our brand and we accelerate the pace with upgrading our stores to further elevate the customer experience. We are also creating new conditions for growth. The expansion in Latin America is developing well and is continuing in the region. As recently announced, we are planning to open the first H&M stores and online in Brazil during 2025. With a population of over 210 million and a strong appreciation for fashion, there is considerable potential in the market. We look forward to bringing H&M's concept of fashion, quality and sustainability at the best price to many customers in the country. During September, we have successfully launched an H&M flagship store on JD.com, one of China's biggest marketplaces for e-commerce with more than 300 million active users. This autumn, we have many exciting fashion news. One of them is the very appreciated H&M Studio Collection that celebrates 10 years. The Studio Autumn Winter Collection is full of worthy wardrobe investments with a lot of glamorous and feminine details and was very well received at Paris Fashion Week recently. The limited edition will be launched tomorrow in selected stores and online. Since we temporarily closed our stores in Ukraine in February 2022, we've maintained a close dialogue with different stakeholders. We are now planning to gradually reopen the majority of our stores in the country from November onwards. The safety of colleagues and customers will always be our first and foremost priority. We take a long-term approach and are working to develop the business all the time. A number of further important steps have been taken towards our goals and we are seeing better and better conditions for both increased growth and profitability. The external factors that affect our purchasing costs continue to improve. Work on the cost and efficiency program is proceeding at full speed And at the same time, many of the changes that we have made in recent years are paying off. We have a well-positioned customer offering and are fully focused on meeting customers' ever-increasing expectations of good value and sustainable fashion. With a strong customer focus, improved cash flow and increased inventory efficiency, we Our profitability goal to have an operating margin of 10% in 2024 remains in place. Thank you very much for listening and now we're happy to take your questions.