H & M Hennes & Mauritz AB (publ)

Good morning and welcome everyone to H&M Group's conference call, three-month report for 2025. For the first part of this call, all participants will be in a listen-only mode. The speaker presentation and afterwards there will be a question and answer session. If you wish to ask a question, please register via the link in the confirmation email and then dial in and press star 1 on your telephone keypad. Please be advised that today's conference call is being recorded. Today I'm pleased to present Joseph Alberg, Head of Investor Relations. I'll now hand over to our speakers. Please begin.

Good morning and warm welcome, everyone. Today, we present the first quarter results for 2025 for the H&M Group. I am Josef Ahlberg, and I'm head of investor relations. Before I hand over to our CEO, Daniel Riviere, I'd like to share this morning's setup. Daniel will share a short summary of our results. give you a run-through of selected highlights from the quarter as well as a brief outlook. We then continue with a Q&A session where Daniel, our CFO Adam Karlsson and myself are available to answer your questions. So, here is his summary of H&M Group's first quarter. Please welcome Daniel.

Thank you Jose, and good morning everyone. It's great to get the chance to speak to you again. During the first quarter, we have had full focus on implementing our plan for long-term profitable and sustainable growth. Our main strategic priority is to drive organic growth by focusing on the H&M brand. To achieve this, we have set three key areas where we continue to raise the bar. First, an elevated price offering. Secondly, a more inspiring shopping experience. And thirdly, a strengthened brand. We see positive effects in the areas where we have put our focus, particularly in women's wear and online. This progress indicates that we are moving in the right direction. With this said, even if we have taken important steps, we are not satisfied with our result in the first quarter. So, to summarize our key results. Sales grew with 3% in Swedish krona and 2% in local currencies. We saw good sales development in Western, Southern, and Eastern Europe, where Germany and Poland progressed particularly well. However, in Northern Europe, including Nordics and the UK, as well as the US, we were slightly weaker during the period. We continued our long-term efforts to optimize our store portfolio by net closing stores, something that affected sales in the quarter. We started off with almost 120 fewer stores compared to the same time last year, and we net closed 40 stores during the period. Our portfolio brands, facing high comparison figures from last year, increased net sales in the first quarter by 2% in Swedish krona and leveled with last year in local currencies. Our second-hand platform, Selfie, showed very strong sales in the quarter. Sales for the month of March are expected to increase by 1% in local currencies. Operating profit for the first quarter amounted to 1.2 billion Swedish kronor, with the gross profit development being weaker compared to last year. The gross margin of 49.1% was affected by several factors. During Q1, we saw negative external factors as well as increased markdowns and investments into our customer offer affecting the gross margin. We estimate that the negative effect of these factors combined will be significantly smaller already in the second quarter compared to the first. At present, we see conditions for the effect from external factors, markdowns and continuing investments in our customer offering combined with an even closer collaboration with our strategic suppliers to have a positive effect on the second half of the year. Inventory increased by 9% in Swedish krona compared to the previous year. Higher purchasing costs reflected in the weekly gross margin in the first quarter explained the majority of the increase in stock in trade. In addition, extended transport lead times connected to the situation in the Red Sea continued to affect inventory. That said, we assess that the composition of the inventory is good, and we are well set up for transitioning into the spring and summer season. Our cost control remains strong during the quarter, primarily by reduced administrative costs and good operational cost control. As said, the positive progress in the areas where we are putting most of our focus continues during the quarter, indicating a strong potential in our plans. Firstly, the positive customer reception of H&M Women's Wear remained strong in the quarter. Secondly, our digital store continued to perform very well. And thirdly, our sportswear range, H&M Move, also continued its positive performance. With this in mind, we stand steadfast in our focus on our long-term plan on what makes the biggest difference for our customers. We have maintained a high pace in executing on our plans during the quarter. So let's start with our first priority, our product offering. We continue to see improvements in Women's Wear. For example, an improved trend responsiveness for a more relevant assortment and a simplified organization for faster decision making. We have now also started to implement these improvements further in the organization for all of our concepts. Our priority number two is an elevated shopping experience. Here we are very pleased with the continued positive development of our online stores with a more inspiring experience driving both engagement and sales. Upgrading the customer experience is also a high priority for our physical stores. In 2025, our priority is to upgrade a significant share of our store portfolio. This means, for example, layout improvements, added tech functionality, an improved product availability, and an improved assortment mix. We do this along with a continued focus on updating our presence in our most important cities across the globe.