H & M Hennes & Mauritz AB (publ)

Good day and thank you for standing by. Welcome to the H&M three-month report 2026 webcast and conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Josef Ahlberg, Head of Investor Relations. Please go ahead.

Good morning and a warm welcome, everyone. Today, we present the first quarter results for 2026 for the H&M Group. My name is Josef Ahlberg, and I'm Head of Investor Relations. Before I hand over to our CEO, Daniel Hervear, I'd like to share this morning's setup. Daniel will share a short summary of our results, walk you through selected highlights from the quarter, and provide a brief outlook. We will then open up for a Q&A session where Daniel, our CFO, Adam Karlsson, and I will be available to answer your questions.

So with that, please welcome Daniel. Good morning, everyone, and thank you so much for joining us today. In the first quarter, we continue to make important progress. in a quarter marked by a cautious consumer and large currency translation effects. Overall, our profitability continues to improve. The rolling 12-month operating margin increased to 8.4% up from 7.0% last year. Looking at sales, sales decreased with 1% in local currencies during the quarter. This was mainly driven by weaker demand in December following strong Black Friday sales in November, combined with around 4% fewer stores and a continued cautious consumption in several of our key markets. In addition, sales in SEK were negatively impacted by a currency translation effect of 9 percentage points. As the quarter progressed, we have seen a positive reception of our spring collections so far, contributing to improved sales development in February and in March. For March, we expect the group sales to increase by 1% in local currencies compared to the same month previous year. Turning back to profitability, we continue to see improvements. Gross margin increased to 50.7% and operating margin improved to 3.0% from 2.2% last year. We continue to see positive effects on gross margin from supply chain improvements and reduced markdowns as a result of increased precision in inventory planning. And combined with good cost control, this supports overall profitability. So overall, this reflects a disciplined execution across several areas of our business. All in all, we are on the right path and continue to build a strong foundation. As said, we focus on strengthening our customer offering through product, experience, and brand while we maintain good cost control. At the same time, we continue to remove layers, shorten decision-making paths, and move decisions closer to the customer. Initiatives that both increase speed, but also relevance in how we operate. Starting often with our focus on product. Shorter decision-making paths, together with closer supplier collaboration, allows us to increase the share of in-season buying. Something that also helps us to respond more quickly to customer demand and market trends and to create a more relevant assortment. Combined with improved demand planning, this has contributed to higher inventory productivity at the highest level in 10 years in relation to sales and reduced working capital during the quarter. As we now move into the spring, we see that the inventory composition is good. Moving on to our focus on the customer experience, we continue to optimize our store portfolio and roll out store updates. As one milestone, we will reopen our iconic flagship store on Hamngatan here in Stockholm on April 10th. At the same time, we also continue to expand, for example, in Latin America, where we will open in Rio de Janeiro in April and later on this year in Paraguay. On the digital side, we continue to develop our digital store, improving search, ranking, and checkout to make it easier for our customers to find what they want and what they are looking for. We are also making progress within AI, increasing the speed of code production and automating how we interpret and integrate data. Altogether, this enables faster, smoother, and a more personalized customer experience across our digital channels. Turning then to our third focus, brand and marketing, we continue to strengthen relevance through strategic initiatives and collaborations. Examples that we have seen in this quarter includes H&M Red Stage, the collaboration with Stella McCartney, and the custom H&M design worn by Ji-Hon Kim at the Academy Awards. And just yesterday, we saw a fantastic fashion show from COS in Seoul. In parallel with these branding initiatives, we continue to increase the position of our marketing investments. And now, before we move on, I would like to share some of the highlights from the quarter. Please enjoy. Let me also touch on our sustainability work. Today, we are publishing our annual sustainability report. And as we mentioned in the last quarter, we continue to make steady progress towards our targets. Our absolute scope three emissions decreased by 34.6% in 2025, keeping us on track towards our 2030 targets. This is supported by an increased use of lower impact materials and strong long-term supplier partnerships. The share of recycled materials increased to 32% and 91% of the materials are now from recycled or sustainably sourced sources. Moving on to a brief recap of our financial outlook. The financial outlook for the year remains, and we would like to highlight that for the second quarter we estimate the overall effects of external factors on the gross margin to remain somewhat positive compared with last year. Although current geopolitical instability in the Middle East could, if extended, result in slightly additional cost pressure. We do not intend to continuously push gross margins beyond the normalized levels of 54% to 55%, which we are now approaching. We will reinvest where it makes the biggest difference, for example, in quality improvements, in in-season buying, and in competitive pricing to stay really competitive and relevant for our customers. We expect the cost of price reductions of the percentage of sales in the quarter to be somewhat higher than the same period last year. And we see that the improved inventory productivity and good inventory composition enable us to lower end of season sale. We also, at the same time, see a more cautious and selective consumer, and their behavior triggers us to increase the need for using temporary activations and deals. On SG&A, and as previously communicated, we have the ambition to grow SG&A at the low single digit in local currencies for the full year 2026. Here with the implementation of new tech infrastructure that will result in a somewhat increased cost pressure throughout the year, while our focus remains on enabling good cost control through efficiency measures, including a continued work on the store portfolio optimization, implementation of a more efficient organization, warehouse network optimization, and a disciplined allocation of resources to the areas of the highest business impact. So to summarize the outlook, we continue to take important steps in the right direction. We make selective investments in product, brand, infrastructure, and store portfolio while we maintain good cost control and always with the customer in focus so that we can offer relevant and current fashion at the best value for money. With our global footprint, a solid balance sheet, and a diversified supplier base, we have the resilience to adapt quickly to changing conditions. And we continue to build the foundation for long-term profitable and sustainable growth. Thank you for listening, and I will now hand you back to Joseph for the Q&A. Thank you, Daniel. We will now start the Q&A.