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.

Thank you, Adam. Thank you for taking us through the financial summary. I will now take the opportunity to share some of the main takeaways from the quarter and the outlook looking forward. Our main takeaway from the quarter is that our plan continues to show progress in the key areas of the business, especially where we have come furthest in our work to improve our customer offer. And executing on that plan remains an ongoing effort and the main priority for our entire organization. We continue with full focus to raise the bar for all our customer groups and all our sales channels. As I mentioned earlier, we see a consistent and strong performance within our key target group, Women's Wear. Our collections are more current, they are more on trend, more fashionable and the customer reception has been strong throughout this quarter as well as throughout the first half year. So I wanted to take the opportunity to show you some of the elevated spring, summer season looks and collections from Women's Wear in this short video. Furthermore, we see that our sportswear concept, H&M Move, as well as our brand Koss, both of them shown here on the screens behind me, continue to perform well over time. Talking about Koss, I'm really proud to share that Koss was recently named as one of the hottest brands on the renowned Lyst Index, which you can see here. and that's an index that ranks the the most popular luxury fashion brands based on consumer data and we're really proud that cost made it to the sixth position on this very sought after ranking one of our key priorities for 2025 remains to elevate the shopping experience both in the physical store as well as online and our upgraded digital experience is now live worldwide after a swift and really successful rollout We are excited to invite our customers to explore more inspirational shopping experiences, showcasing really the best of our fashion and the elevated collections. We keep improving the digital experience by really listening to our customers and then adding new relevant functionalities along the way. And on the screen on the left side, you can see fashion inspiration, a combination of our own produced content, but also created content mixed on our own site and user generated content. And on your right, you can see how we navigate our way through the new updated digital experience. Then moving to physical store with the global store portfolio, we're putting a lot of effort to enhance the physical store experience as well as the digital experience. In the second half of 2025, we will make a push to upgrade a significant amount of stores in our portfolio, improving both the look and feel, but also further developing our omnichannel features. And those features makes it easier for our customers to both buy online and pick up their parcels and their garments in stores, as well as returning their online purchases in the physical store. But we also roll out, for example, RFID enabled self checkouts to improve the customer experience in physical store. By doing this, we are building on the combined strength of connecting the physical store with the digital experience and combining both the experience as well as the stock, we help the customer to improve the product availability as well as improve the service that we can give to our customers when we leverage both of the channels, both when it comes to experience and services as well as the stock and the availability for the customer. Moving on to how we expand the portfolio, we are really excited to continue expansion, especially into growing markets such as Latin America. And during the second half of this year, we will open online as well as four physical stores in Brazil. We are really excited and we're really tremendously looking forward to bring our best combination of fashion quality and sustainability at the best price to a growing market with more than 200 million inhabitants and a really vibrant fashion scene. And on the screen here, you can see a preview of the launch campaign that we will have for the opening. It was just shot in Sao Paulo with local Brazilian talents and it will be the opening campaign for when we launch Brazil. Moving on to sustainability. Sustainability continues to be a key priority for us to build long-term competitive advantages. Therefore, we are continuing to deeply integrate sustainability into the core of our business and our daily operations. And we can see that this is delivering good results and we are making progress towards our very ambitious sustainability targets. And as an example, we were just recently ranked as number one out of 42 fashion companies by the organization Stand Earth in what is seen as one of the toughest rankings of the industry measuring climate progress. And we're really happy to be mentioned as number one. So that wraps up our conclusions for the quarter and then take a few words about the outlook and where we're heading from here. We see that in time of high uncertainty, consumers are particularly price sensitive. We are, all of us, closely following the macroeconomical as well as the geopolitical developments. And we assess different scenarios to allow us to be flexible and adapt both our customer offer to stay relevant, but as well as how we operate and run the business at large. with that we continue to really strengthen our customer offer by elevating our products and the shopping experience continuously both online as well as in the physical stores we have a clear plan we have clear set priorities we have a strong financial position to lean back on we continue as adam shared to focus on a structured cost control And we have a fantastic group of engaged and motivated colleagues in this organization. So with this, we are building a solid foundation for long-term profitable and sustainable growth for the H&M Group. With that said, thank you so much for listening and thank you for joining us today. I will now hand over to Josef who will take us through the Q&A. So Josef, please.

Thank you so much, Daniel. And thank you for listening. Now it's time for Q&A. So please present yourself and ask one question at a time so we can answer them one by one. And please limit yourself to two questions per person. And we'll start with questions from this room and then we'll hand over to the participants over phone. And please hand over the microphone here to Niklas.

Thank you very much. Niklas Ekman here from D&B Carnegie. First question is on the US trade war. What kind of implications are you expecting from what was essentially a blockade on imports from China and the current US tariffs? Is that something that you foresee having a sustainable impact on your sales and profitability towards the US market?

It's been a very turbulent situation with a lot of changes going back and forth and we've been following closely the changes that are still ongoing. We don't know exactly how they will play out for the rest of the year and that we're monitoring closely and making different scenarios but also acting. For us it's important that we always stay competitive. So we're closely following the competitive landscape and development of pricing in the US to make sure that we have a relevant and competitive customer offer. uh with that we are of course also following how how the consumer sentiment is developing and how we need to adapt but it's very early to try to make those those predictions now i can just say we're following closely and we're prepared to adapt both on the customer offer side but also how we how we operate the business but have you managed to raise prices in the u.s market already We are in all markets looking into how do we stay competitive and how do we have a relevant price position. With this situation we are very closely monitoring and seeing different developments and we're starting to see some competitors increasing prices and that's of course something that we look into to make sure that we stay competitive on our position.

But just the fact that you don't mention this in the results, you did mention this in the presentation, It's not on a group level. You don't see it as a major hurdle for H2. Is that correct?

For the group? U.S. is an important market for us and will continue to be. But we believe that both on the sourcing side, we have good flexibility to mitigate, depending on, as Daniel said, how this will play out. sort of more directed towards one sourcing market for a time and then it became more of a general question now it's more towards one of our sourcing markets again so we believe that with the flexibility we have in the supply chain we can maneuver uh equally good or even better than some of our competitors to protect what daniel said our competitive position and so We feel that it's a big question that we have spent a lot of time modeling around, but we feel right now that we have it as far as we know today then, given the 90-day tariff holiday, that we are in good shape.

Well, I think that's the key as far as we know today. And now we're very sort of open-minded that the situation might change quickly as well.

Very good. Thank you.

Fredrik Iverson, ABG. I want to talk a bit about the markdown and particularly maybe the markdown guidance for Q3. So the effect was neutral in Q2, and then you see downside to the inventory levels, as I interpret it, for Q3, Q4. And sales is picking up a little bit, but still you guide for higher markdowns in Q3. What was the rationale for that guidance, please?

So I'll start and then please. As Ada mentioned, we see that we've been able to work well with how we optimized the activities and the discounts during the second quarter to be able to lower the stock towards our desired state without significantly increasing markdowns. And that's a good work by the operational teams to optimize the efficiency of the markdowns. But we also see that given the uncertainty, the customer is very price sensitive. We see that we are acting in a market with a high activity pressure, a lot of discounts. We see that some of our competitors are increasing the stock to sales ratio. So we want to be open minded and foresee that we might need to activate the customer to continue a positive sales momentum throughout the third quarter. That's where we're guiding for slightly higher discount levels because we see there is a high markdown pressure in the market.

Okay, thanks. Makes sense. And then I want to talk about all the events and experiences you're investing in or have invested in during the last year or so. What kind of feedback are you getting? Can you share any tangible things with us, please?

When we speak to especially the target audience, which is fashion interested women, where we decided to focus the most, we get a lot of feedback that H&M feels more relevant again and feels more exciting and you find more relevant and you're more inspired when you come to H&M. We get that both from external data points and consumer surveys but we also see it in how they act in our channels so I think we are raising the excitement around H&M again then it's a long-term journey to build back that before we will see substantial financial results we are monitoring closely what makes the biggest difference and when we test and you try out a lot you learn that some things are working really well then we put more emphasis and accelerate those and then you learn some things are not having the effect that we expected and then we change and adapt the way that we act. So we are in an intense learning period of finding the way to create heat around the brand again.

Thank you. Daniel Schmidt, Danske Bank. On that topic, you've mentioned now for a long time that women's wear is doing better. And there's still sort of work to be done when it comes to men's and kids' wear. Do you see any sort of shift to the performance gap in Q2 versus the two sort of segments of your product?

When we look at the second quarter, as we mentioned, we still see what sticks out positively is a significant improvement in women's work year over year. It's H&M Move, the athletics offer, also performing really well. And then at large, Digital Channel is performing strong. So we are taking a lot of the learnings. We are raising the bar and we're working intensely with men's and kids' work. But ahead of us, we have a lot of hard work to get those customer offers on par with where we are with women's work.

But no real change to the gap, basically, as of now between Women's Wear and... Sustained a very strong performance in Women's Wear, but we need to make sure that the other ones catch up. Okay. And second question, just looking at operating expenses for the second half. You're annualizing now when it comes to marketing spend being elevated now for a year as we get into Q3. And you also had, if I remember correctly, more strategic price investments in place a year ago, basically maybe started now or slightly earlier. How do you see that? How does that square versus more aggressive refurbishment? And I don't know how much of that is going to be on the P&L or not, but How should we view those three factors looking into the second half of this year? What are you planning?

What we are doubling down on is product. Product is priority number one, two and three. So everything we do when it comes to marketing, creating brand excitement, upgrading the experience is dependent on having a very competitive product. So the main focus for us is to make sure product is competitive. During this year, with the investments learned or not, where it pays off or not, we feel confident that we have a good plan for how to, as we mentioned, sort of capture positive external shifts during the fall by still being able to raise the bar on product. So that's the main focus. With the learnings we made in marketing, we believe that we can optimize the marketing spend to make sure that we don't see a year-over-year deviation for the second half year. I don't know if you want to... No, it's correct.

I mean, it's a learning experience. And so we look for how to optimize the output rather than right now, as it looks, increase the spend on marketing, for example. So it's a year-over-year effect that will neutralize towards the second half year.

And I'm getting you right that the strategic price investments, will they still be up? year over year as we go into the second half, or are they sort of flattening out as you see it?

Also here, it's much more about optimizing where we see that investments have paid off or not. So it will be a work of optimizing, not increasing. Thank you.

It's in Q4 when we start to lap the effect of the raised bar on the product side. So that's when we sequentially will see a bit more easier compays, so to speak, on the gross margin.

Stefan Stjernholm, Handelsbanken. Can you quantify the step up in marketing spend in the second quarter?

It is slightly below what we quantified for the end of the autumn. So it's in that range, but not quite as much as we guided for in the autumn. So the spring corresponding is slightly below that level.

Any more questions from the room before we hand over to the operator? No, then we hand over to the operator from questions from the participants on the phone.

Thank you. If you wish to ask a question, please register via the link in the confirmation email, then dial in and press star one. First question is from Warwick O'Kings from BNP Paribas. Please go ahead.

Thank you. Morning, everyone. Two questions, please. I'll do them one by one. The first is, could you give us an overall view of where you think average selling prices will land in the second half of the year? I'm still struck by your sort of elevation, but at the same time wanting to do more promotions.

Overall, we see that the elevated product and offering that we have been working longest with on ladies is performing really, really well. So here we believe that the customer is appreciating the value we can put into our offering and hence shop at the wider price range than previously, which means that we can have a higher share on mid and high prices, which is then an upward elevation of the overall price. Then, as Daniel mentioned, we've had other customer groups with higher competitive pressure and a little bit less well performing, and that's where we see the additional need to activate the customer to ensure that as we are updating the offer, that they are seeing us as the relevant place to come to shop. So it's slightly different between the customer groups here. And as Daniel mentioned, we are leading with the elevation on ladies and other parts of our offering may need some more injection into the customer sentiment to ensure that we are the number one choice.

And a sort of net effect to that, Adam?

It will be slightly up during the year that we predict that we will have an average price that it's above last year.

Thank you. And the second question is just whether you could give us a bit more detail on your self-checkout plans, roughly how many stores might you have it in so far and what might be ambition for the end of the year?

thank you so with self-checkout we see that it's really really appreciated by the customers we see that we have a majority of customers where we have well-working self-checkouts are actually using that option which is great for customer service but also for how we operate our stores we have a number of different solutions for self-checkout that we have worked with and implemented and What we mentioned today is especially the RFID enabled checkout, where we believe it's the biggest, which is the best solution to really service our customers in the most efficient way. And that's what we'll scale roll up on. But we are not sharing specifically how many stores it will be rolled out to. But it will start to hit the more significant part of the portfolio than it's been so far. Thank you.

Thank you. Our next question comes from Vandita Sudha, Citigroup. Please go ahead.

Morning. Thanks for taking the question. Firstly, it was just you called out you had 4% fewer stores, and then you said that the impact on sales was roughly 2%. So just digging into this, is the difference just because you're targeting less productive stores, or is there anything going on with the size of the stores as well? And then just following on from that, When you think about impact of these closures on your operating cost base, do you see some benefit because you're closing more of your cost base, but you're not losing as much in sales? And also, is this dynamic something we should expect for the rest of this year?

So it's correct that we are closing stores that have a lower average turnover per store. So the delta between the amount of stores and the actual quantified effect is due to the fact that the stores that we are closing are smaller than the average store. Of course, we are closing stores where we don't see that we have a customer demand that can sustain a good performing store, which means that those stores also have a weaker profit and loss situation than the stores that we keep open. So it's a way for us to also improve our cost structure by closing small stores that are not performing top line so they can sustain the cost base. It also helps us to optimize our operating costs. We are exploring opportunities as we mentioned into how to also expand the store portfolio. We're opening 80 stores this year. Those stores are stores with a higher turnover. We are really excited to open some really strong stores in Brazil, for example, and in other markets in Latin America. So the portfolio optimization is an ongoing work where we try to remove the tail of non-productive small selling stores and add new strong locations. And that's an ongoing work. Then when it comes to your question of it's a shift in the portfolio setup, we are exploring how to run different size of stores in the best way with all the new opportunities we have in making sure that each store get the right offering and the right products, we believe we can stretch the size of the stores so it's not a direction where they will go very small or very large. We look at the best optimal solution for each individual location.

Perfect, thank you. And then just one more. On your portfolio brands, they're outperforming the H&M brand and can I just understand all the marketing investments you're making, these are not towards the portfolio brand, right? That's just organic growth in the portfolio brand.

There are two parts to it. One is that the marketing efforts we speak about generally is directed to the H&M brand because each brand is individual in that sense and has their own target customer and their own unique brand identity. So marketing is on brand level and what we're speaking mainly about is connected to the H&M brand. If we look at the sales development for the portfolio brands, they are on another journey. They still have a lot of untapped potential in many of the markets where we can say that they're established H&M brand markets. So that is why they also can deliver and we expect them to deliver a higher relative growth number. And happy to say, and Daniel showed it, that, for example, COS, which is then an established brand and not the news, is also performing really well, both in terms of sales improvement, but also how the brand has been strengthening its position over the year. So we are pleased to see the performance on COS.

The result of seeing Kos on the list list is due to also very good marketing efforts. Being a permanent resident in New York Fashion Week, for example, for Kos, or the fashion show we did outside of Athens this spring, or to example, where Kos has done really well on positioning them as a strong and relevant brand in their part of the industry.

Thank you. Our next question is from Adam Cochran at Deutsche Bank. Please go ahead.

Hi, good morning guys. I've got some questions on the sales development. In terms of the June number, it was a bit weaker maybe than some people and myself included were looking for given the basis of comparison from last year. Can you just describe a little bit about what's happened in June? Is there anything specific that you can call out? And then as the comparison base gets tougher for the rest of the quarter, what... What have you got to do about it? How are you going to manage this relatively slow exit run rate versus a tougher basis of comparison for the rest of the quarter? And then the second part, which is related to my answer together, is you've got the gross margin benefits coming through in the second half. Could it be necessary that you have to invest more of those gross margin benefits to help get that top line moving?

I'll start and then please fill in. So with June, it's a short period of time. It's a bit more than three weeks. And three weeks always need to be sort of looked in the light of external factors and what's happening around us. We see when we look at June, there was also a calendar effect from last year. So June this year started on a Sunday. Last year, it started on a Saturday, which is, of course, a calendar effect that we believe And we had a few of the late Easter effects coming into June with Corpus Christi being in June this year versus being in May last year. So we estimate there is roughly one percentage point of calendar effect hitting June. Then we can see that June is a month where we move into summer sale. And as we mentioned before, there has been a high activity pressure in the market. So we see customers are reacting very positively to markdowns. And that's sort of a bit of the dynamic in June where we have seen that as we have started in different market sales, we see that sales is picking up. When we look at June holistically, we don't see that that's a significant deviation from the current sales trend, the sales trend where we have seen sort of a positive sales development since the first quarter 2024 in low single digits. We believe June is fairly in line with that development on the gross margin.

I think on the markdown that I think you answered really well before that we rather than waiting we call out here that there might be a need of adding slightly more markdowns to Q3 than compared to last year and it's because of this dynamic that Daniel is speaking about that the We see that the consumer is price sensitive at this moment and we see the sort of effects of the summer sale kicking in here. So we open up for maybe using that tool during the third quarter.

Thanks. The next question is from Sridhar Mahamkali from UBS. Please go ahead.

Hi, good morning. Thank you for taking my questions. A couple, please, then. Just maybe, you referred to a higher share of near-shoring, more purchasing in season, and opportunities to improve working capital stock in the second half of the year. Can you talk a little bit more about it and what sort of knock-on impacts it might have on gross margin? So how much more are you able to purchase in season? Can you give us some numbers to help us sort of contextualize that.

The work to shorten the lead times especially for the parts of the assortment that is very fashion and trend sensitive that we continue with full force and we do it in several different ways where nearshoring is one important component on that work of shorting our lead time so that that continues we don't share any specific shares of how much is on nearshoring or not And the key for us is to use that as one of the tools in the toolbox to lower the overall lead times for us to be much quicker and react. And in the forecast we do, and when we look at gross margin, we take in the additional costs of producing closer to our sales markets or other things that might potentially help the speed that's built into our long-term direction for the gross margin, as well as our sustainability investments.

Should that drive a structural improvement in stock in the coming quarters? Should we see that?

It's one key lever to support our journey towards the 12-14% stock-to-sales ratio that we're aiming for.

Okay, thank you. Second question is on the US again. Can you talk perhaps about where you are with respect to price investments, where you are in the cycle, and clearly that market probably inflates quickly. So how are you thinking about your relative pricing levels?

As Adam mentioned, the US is a very important market for us, and we're staying very close to the market. It's hard to talk about cycles currently, given that there's so much change happening in the market. There's so many changes with the tariffs and the situation at large affecting the US consumers. So we are really following closely where we are and adapting the position accordingly and that can mean both price investments into certain categories as well as then as we spoke about the price increases depending on how the the competitive landscape changes so right now it's a very fast moving situation which we are staying close to and more than anything are really doubling down on making sure that we have a very very competitive customer offer offering the best combination of fashion quality sustainability and price

So maybe, I don't know if you are able to just, within that America segment, are you able to talk a little bit about how the US is trended in the period? Because you give us North and South America segment as a whole. Anything you can call out?

U.S. has been developing neutrally during the end of the second quarter here. So we come out of a period in previous years where we called out U.S. as a drainer. Now they are more neutral compared to group overall sales.

Thank you very much. Next question is from James Grisnick from Jefferies. Please go ahead.

Yes, thank you. Good morning all. Just one really. Could you please explain more on your comments of a start of pricing being adjusted up in the U.S.? Is it really related essentially only to the Chinese platforms? Are you seeing that behavior becoming more widespread across the industry in the U.S.? ? And I guess one quick follow-up just for purpose of forecasting. The 2% negative impact from space, what do you think will become in half to this year and perhaps into next year as we become more front-footed on opening stores again?

I can start with the US. Of course we follow the general market situation and monitor the wide set of competitors in the US markets and we can see that from those numbers that we start to see an impact on price from the tariffs. It's a delayed impact but of course we see an impact on pricing. So different competitors acting in different ways, some more aggressively, some more cautiously, but that's the situation that we are following where we start to see some impact from the tariffs affecting the pricing position in the US. We will know more later on in July. Things might change again. So it's really being on our toes and monitoring day by day, week by week, how the situation develops.

And then on the space expansion, maybe you want to... We continue to reiterate our sort of message around that the net space effect will become gradually less negative. And as we also showed here, we have a... very exciting new opening in Brazil for example and Brazil will not sort of change that whole whole equation but of course opening strong locations in in in Brazil whilst closing weaker monkey stores is is of course generating a potentially a store number closure but a less negative effect on on the sort of sales and turnover component connected to space. So it's fair to say that we will see a gradual decrease of the negative effect throughout the end of this year. And then we will come back regarding next year later.

Thank you. Next question is from Georgina Johanan from JP Morgan. Please go ahead.

Oh, hi. Thanks for taking my question. I had two, please. The first one was just in terms of your comments on the consumer uncertainty and so on. Maybe you could just give a little bit more colour on that, please, and any differences you're seeing by market. I'll ask them one by one.

As all of us see, we see that the current uncertainties in the world is also creating uncertainty with the consumer. That is absolutely not always translated into how they act. So we see, even if consumer sentiment is going down, we see really positive development in several markets where also the consumer confidence has gone down. So it's a balancing act. We more recognize that our consumers navigate a turbulent world and then it's more important than ever for us to really offer outstanding value for money to the consumer.

want to share anything more joseph um well looking back at for instance this month june um to take a recent example it started off fairly uh slowly and then when we invited our customers to to sail there was a really strong reaction this came also in connection to the weather being more favorable so more need for getting the the summer product for the for the summer needs and outfits so i i think this you know in first half of june uh that i think is also can be a reflection of a consumer which is sort of um prioritizing really getting good value for money

Thank you. And then my second question was just in terms of sort of the sourcing environment more broadly and very much appreciate that it, of course, remains highly uncertain. But just if you could speak to anything that you're seeing sort of on the ground in sourcing markets in terms of, you know, whether suppliers in some markets are much more open to negotiation than previously or vice versa in some other markets. Any color on that would be helpful, please.

uh of course for our suppliers it's also a very turbulent world with a lot of changes happening and then for a long for this last so 18 months we have worked on building long-term strategic partnerships with the strongest suppliers and of course having that long-term relationship is really beneficial when times are turbulent because then we can partner up on how we solve difficult challenges and we have had really really good conversations and discussions with our suppliers to make sure that we can navigate this turbulent world in the best possible way together with them for the best interest of our company and of their companies in the long term. So we're having very productive discussions with our suppliers that we built a long-term relationship with coming into this period of uncertainty.

Thank you.

Thank you. As a reminder, to ask a question, please register via the link in the confirmation email, then dial in and press star 1. The next question is from Matthew Clements at Barclays. Please go ahead.

Hello, everyone. I hope you can hear me. Really, just to go back to a couple of questions from earlier, if I can start with kind of your Women's Wear, H&M Move, and digital channel outperformance. I mean, I think investors are really looking for a data point to have some conviction in the response to the strategic initiatives. Can you provide a data point on any of those particular areas? Maybe I'll ask the questions in order.

No, we will not share any further data points unless you want to sort of give a further light on that.

I think what we can say is that it has been a consistent, stronger performance among these areas that you mentioned, across geographies and also over the quarters, the past quarters. So I think it's a consistent trend. That's what we have.

And it aligns to the customer feedback that we get, which is sort of the collections that have been most appreciated, the campaigns most appreciated, that aligns, I think we can see it in a higher stock to sales productivity in those parts of the business as well. So it's a holistic picture, but no specific further data points.

Okay. All right. Thank you. The second question on these long-term marketing investments, I think you've already been asked on this, but just to clarify, I think you said it's going to be neutral year on year in the second half. My impression was they were kind of extraordinary kind of brand building, re-engaging with the brand kind of investments. Is there a sense that this is now just the normal level of marketing expense going forward?

It will be a continued focus through the product, but also, of course, make sure that the customer becomes aware and start to see the heat of the brand. So we will have a continued high ambition when it comes to marketing, but connected to the spend, we try to disconnect this because we are also, as Daniel said, learning what creates the biggest bang for the buck, so to say. So that's why we We sort of guide for a neutral effect on the spend side, but the ambition remains to elevate the brand through well-perceived marketing.

Okay. All right. Thank you for your time. Thank you. Our next question is from Richard Chamberlain at RBC. Please go ahead.

Thank you. Two from me, please, if that's okay. First one is on Eastern Europe. I wonder if you could just talk about what drove the softer performance there in Q2 and whether that's carried on into Q3. Thank you.

There were, I would say, two regions which were sort of, if you look at the local currency selling, that were on the weaker side this second quarter. And it was up in Northern Europe and it was towards Eastern Europe. And the common denominator from this was that May was a... dreadful month for starting to sell summer products. So we did have an, we don't want to call out weather, but there was a temporary mismatch between what we offered and we offered a strong summer assortment and the consumer was looking for umbrellas and coats. So that is a significant part of the softening of the trend in Eastern Europe.

Okay, that's helpful. Thank you. The other one is, just to clarify, it sounds like June sales have been somewhat impacted by competitor discount activity, sale activity. But has H&M's own calendar shifted in terms of the time it's done sales? Because it has shifted a little bit in recent years. And so last year, have you started just sort of summer sale activity more generally a little bit earlier this year? Yeah.

we continuously look at the right timing for when to activate based on of course the stock situation but also the customer mindset the demand the timing in the market and the calendar at large and that leads to that we do in different market changes all the time ongoing to optimize sometimes we do it a little bit earlier sometimes a little bit later i think if you look at the whole we are more or less on par with last year when we started sale we have a A few markets where we went in a little bit earlier, a few markets where we started later, but as a net effect, it's the same as last year.

Already the same, yeah. Okay, okay. Very clear. Thank you.

Next question comes from Sarah Kent from the business of fashion. Please go ahead.

Morning. Thank you. Two questions. The first one, I just wanted to pick up on the point you had made about building long-term relationships with suppliers to ensure stability in turbulent times. I wondered if you could unpack a little bit more how you're balancing that with flexibility and sourcing, which you mentioned was equally important in terms of navigating tariff uncertainty. It seems a little bit contradictory.

so we have over the last year year and a half consolidated the the supplier base so we work with fewer but more strategic suppliers and instead of just working transactionally on each individual order we work on building long-term partnerships and that helps us to your question with sort of doing both by also navigating the flexibility that that we have a long-term partnership with our suppliers that help them to help us to be flexible It also means, secondly, we have never full capacity at any supplier, which also helps in a long-term partnership. Not full capacity helps us to be flexible in the partnership with them when we want to be able to act quickly up or down. So that's... That's my view.

One additional point maybe is also to clarify that suppliers is different from production units. So a supplier is also having multiple locations helps us to expand into new markets and expand with new capabilities. So that is also an added benefit of this partnership. It's not a supplier, it's a factory. A supplier is many factories, many locations that helps us to stay flexible also and expand with their products. expertise in the respective geography.

Thank you. And then the other question was around the point you made on sustainability as a long-term competitive advantage. I wondered how you're looking at the rollback of regulations, particularly in Europe, which could level the playing field with competitors who perhaps are not looking at this so closely Is this affecting how competitive you see the company's sustainability initiatives and how is H&M engaging with Brussels on this?

So for us, as I mentioned before, sustainability, we integrate sustainability into our business and we prioritize it because we are convinced that it would build a long term competitive advantage for us. And that's one of the benefits of having a long term committed owner to this company that we can invest for the long term competitiveness because we know and we are convinced that our industry will need to go through a transformation and change. And we are keen on being part of that transformation. We believe that there should be fair and equal playing spaces for competition and playing fields. So we believe it's good and positive when regulations happen in the sense that we have a fair competition landscape, meaning that we can compete on equal terms. We are positive to that kind of legislation, that it's really important how it's being shaped to make sure it actually is a level playing field and it's in the benefit of sustainability progression and beneficial for the consumer. So we're positive to legislation that levels the playing field and makes everyone compete on equal terms. And then on a personal note, and for us, I believe we think it's unfortunate if there is less focus on sustainability because we believe that's a tremendously important question for our industry at large that will need to be top of our mind for many years to come.

Do we have any final questions from the phone participants?

Yes, we have a question from Anne Critchlow at Barenburg. Please go ahead.

Thank you. Good morning. I've got two questions, please. I'll ask them one by one. So, first of all, on the store refurbishment, I think I understand that you're stepping up that activity, but I'm just wondering, is that going to have a stepped-up impact on stores in terms of store closures, or is it quite light touch?

It is more of what you describe as a light touch, meaning that the optimization of the portfolio continues, as we spoke about before, closing smaller stores and then opening in new, larger, attractive locations. And that optimization continues, then touching the stores of increasing the customer experience in the store is optimizing layouts adding omni features giving you tech improvements that helps the customer to find what they're looking for improving product presentation those though that package is what we will take out to a larger share of the portfolio during 2025. and and those type of like refurbishments doesn't mean that we need to close the store right exactly yes done while running the store and serving our customers good point

Thank you. And then I've got a question on the markdown impact guidance. So just wondering whether you've got increased levels of aged stock that you want to sell through as part of the sale or whether you're actually just actively investing in price, say for lower priced products?

So as we mentioned, our stock has developed in a positive direction in the second quarter and we believe the composition is good. So here it's more about using markdowns and activities to activate the customer and drive top line than solving old stock.

Thank you very much.

Thank you. We have one final question on the line from Frederick Anderson at Handles Watch. Please go ahead.

Hi, thank you. I just have some questions about the Norwegian market. You opened Arket here in Oslo and in Bergen in May. How have the Arket stores in Norway been doing so far?

We're really excited and happy how the Arket concept has been received by the Norwegian consumer and the market. We had good hopes going in because we saw good development digitally and now we're really happy that we're also physically present in Norway. So we're really satisfied with the expansion to Norway.

And can you say something of how much you have been sold during this first time, and has the performance been better or worse than expected?

It's performed better than we expected, actually.

Can you say something more about that?

No. We are really satisfied.

Perfect. Thank you.

Good. Thank you for all the questions. We have room for one final question from the room as well. Please go ahead, Daniel, here at the front.

Thank you, Daniel, from Dansk again. I think I just want clarification maybe. maybe specifically to Adam. When you talk about store closures, you mentioned a less negative impact going into the second half. I think you actually said before that you should see a net positive impact in the second half of this year before in terms of sales, despite the fact that you are closing stores because you're opening bigger stores and closing smaller and so on. Is this a slight shift in communication or am I getting it wrong?

I think you're getting it right, and we worded it as, I think, 190 closure. Now it's just about 200. So there's a nuance there that's sort of reflected in my comment here with, I mean, a timing effect. So that's the right interpretation.

Then we thank you all for coming today and asking many good questions. We wish you a great summer ahead for those of you who are based in the Northern Hemisphere.

Thank you so much. Thank you for joining.