H & M Hennes & Mauritz AB (publ)

Good morning and warm welcome everyone. Today we present the second quarter results for 2025 for the H&M Group. I'm Josef Ahlberg and I'm Head of Investor Relations. Before I hand over to our CEO, Daniel Revere, I'd like to share this morning's setup. Daniel will give you an overview of the results, followed by a more detailed financial presentation from our CFO, Adam Karlsson. And then Daniel will give you a key highlights from the quarter and an outlook going forward. As usual, we'll close with a Q&A session where Daniel, Adam and I are available to answer your questions.

So please welcome Daniel. Thank you, Josef. And good morning to all of you. Warm welcome to those of you who join us here in the room and then also you joining us online. To start off today, we see that our plan with focus on an elevating product offering, an upgraded store experience and a strengthened brand is generating and creating important progress across our business. Our sales in the second quarter increased by 1% in local currencies. That should be seen in the context of that by the end of the quarter we had 4% fewer stores than last year and excluding those closures the sales increased by 3% in the quarter. Sales for the full month of June is expected to increase 3% as well. When it comes to profit, our operating profit amounted to SEK 5.9 billion compared to SEK 7.1 billion in the same quarter last year. And that corresponds to an operating margin of 10.4%. The result in the quarter was affected by unfavorable currency translation effects due to the strengthening Swedish crown, as well as the gross margin development that we spoke about in Q1. I will now hand over to you, Adam, to take us through a more depth view of the financial results, and then I will come back and present more about our strategic plan and where we're heading moving forward. So with that said, I hand over to you, Adam.

Thank you very much, Daniel. And good morning, everyone. We will start with the net sales for the second quarter. In Q2, net sales in local currencies increased by 1% and translated to Swedish crowns, net sales decreased by 5%, which is then, as Daniel said, a consequence of the rapid strengthening of the Swedish crown during the spring. For the six month period, net sales increased by 1% in local currency and translated to SEK sales amounted to 112 billion Swedish crowns, which is a decrease of 1% compared to the first six months of 2024. As Daniel said, the quarter was affected by currency effects, but also our continuous work to optimize our store portfolio with fewer stores at the end of the second quarter this year compared to second quarter 2024. For portfolio brands, net sales in the quarter increased by 3% in local currencies and decreased by 2% in Swedish crowns. Sales growth was driven by Koss, and on the other hand, Monkey, where we are now into the last six months of our consolidation journey, decreased selling, where Monkey has closed half of their stores since end of Q2 last year. If we move over to gross profit, gross profit for the quarter decreased by 6% to 31.4 billion, corresponding to a gross margin of 55.4%. And despite the gross margin being significantly lower than last year, it's still a clear and significant sequential improvement from Q1, where the gross margin was down by 240 basis points. As you know, there are a lot of factors affecting the gross margin, both internal and external. And the gross margin for the quarter was negatively affected by a strong US dollar during the end of the autumn last year and also high freight costs. Investments in the customer offer also had an impact on the gross margin, but was partly offset by the improvement work we do throughout the supply chain. For the third quarter, we expect external factors to be somewhat positive compared to the same period last year and also positive for the second half as a whole. The cost of markdowns in the second quarter was in line with the corresponding quarter previous year. This despite that we've seen a cautious customer who has responded well on our commercial activations. But we have via strong management of the stock levels been able to keep markdown levels neutral compared to last year. When looking into third quarter, we expect cost of markdowns as a percentage of sales to increase somewhat compared to the same quarter last year, with a competitive landscape that is reacting on a slow end of spring selling in many parts of particularly Europe. Moving over to selling and administrative costs as a result of our continuous focused on cost, we managed to maintain a relatively modest increase of our cost base costs in local currencies increased by two percent. This is done despite of the inflationary pressure we have throughout the cost base. These expenses for Q2 were also impacted by long-term investments in marketing throughout the quarter. Costs will be a continued high focus for us and we work systematically with removing costs to support our profitable sales development. For the six months, selling and administrative costs amounted to 51.4 billion. And in local currencies, these expenses increased by 1% compared with the same period last year. If we then go over to operating profit, in the second quarter of operating profit was 5.9 billion, corresponding to an operating margin of 10.4%. And based on the sequential improvement of the gross margin, we also see an improvement of the operating profit development compared to first quarter. The currency translation effects had a negative impact on the operating margin, as explained that the part of the cost base denominated in SEC is bigger than the share of revenue denominated in SEC. For the six months, operating profit was 7.1 billion, corresponding to an operating margin of 6.4%. Inventory during the quarter, inventory developed in a positive direction with a significantly lower growth rate than during the first quarter. Inventory grew by 1% out of the second quarter compared to 11% out of the first quarter. At the end of the second quarter, the volume of goods was also lower than last year. We will continue to work on the inventory productivity to take us closer to a long-term target of 12% to 14% as share of sales. The stock in trade levels are still impacted by extended transportation lead times associated with the situation in the Red Sea. But these effects are now, however, on a year-over-year basis to be seen as neutral. The composition of the stock is good, which is reflected in the positive trend in the book value of the inventory whilst maintaining the positive sales trend. finally gross margin and stock in trade development if you look at the graphs combining the long-term gross margin development the dark gray line and the stock to sales in light gray we see that we're now back on a upward trend on the gross margin and the long-term trend of coming down in terms of stock to sales These ratios, as you know, have some natural fluctuations of the year, but we are committed to continue to take further steps towards a neutralized gross margin for 2025 and normalized gross margin for 2025 and continue to work towards our long term stock to sales targets. So to summarize, positive direction when it comes to gross margin, positive direction when it comes to development of stock and stock to sales levels. Cost controls continues to be a high priority for us and these factors combined enable us to continue to focus on delivering on our plan. Thank you, and back over to you, Daniel.