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H&M Full2011

H&M Full2011

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Published by: Kerttu Vali on Jan 26, 2012
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 FULL-YEAR REPORT 2011
H & M HENNES & MAURITZ ABFULL-YEAR REPORT
1 December 2010
 –
30 November 2011FULL-YEAR
 
 The
H&M Group’s sales in
cluding VAT increased in local currencies by 8 percent during the financial year.Sales in comparable units decreased by 1 percent. Sales in SEK were strongly negatively affected bycurrency translation effects. Converted into SEK, sales excluding VAT amounted to SEK 109,999 m(108,483).
 Gross profit amounted to SEK 66,147 m (68,269), corresponding to a gross margin of 60.1 percent (62.9).
 Profit after financial items amounted to SEK 20,942 m (25,008). Of
this year’s
profit decrease compared tothe previous year, approximately SEK 1.5 billion in total is due to negative currency translation effects andthe item affecting comparability relating to the H&M Incentive Program.
 Group profit after tax was SEK 15,821 m (18,681), corresponding to SEK 9.56 (11.29) per share.
 Strong expansion during the year. The Group opened 266 (218) new stores net. China, the US, the UKand Germany were the largest expansion markets.
THE FOURTH QUARTER
 The H
&M Group’s sales
including VAT increased by 6 percent in local currencies in the fourth quarter.Sales in comparable units decreased by 3 percent. Converted into SEK, sales excluding VAT amounted toSEK 30,952 m (29,711).
 Gross profit amounted to SEK 19,150 m (18,792), corresponding to a gross margin of 61.9 percent (63.2).
 Profit after financial items amounted to SEK 6,802 m (7,178). Group profit after tax amounted toSEK 5,357 m (5,487), corresponding to SEK 3.24 (3.32) per share.------------------------------------------------------------------------------------------------------------------------------------------
 The Board of Directors proposes a dividend of SEK 9.50 (9.50) per share for the financial year 2010/2011.
 Sales in December 2011 increased by 13 percent in local currencies compared to the same month theprevious year. Sales in comparable units increased by 4 percent.
 
 Sales in the period 1
 –
24 January 2012 increased by 12 percent in local currencies compared to the sameperiod last year.
 
 H&M plans a net addition of around 275 stores for the financial year 2011/2012.
 Bulgaria, Latvia, Malaysia and Thailand will become new H&M markets in 2012. In addition to thesecountries, H&M plans to expand into Mexico in autumn 2012.
 The first COS stores in Hong Kong, Italy, Finland and Kuwait are planned to open in 2012.
Comments on the full-year by Karl-Johan Persson, CEO
H&M stands strong in a challenging market. We increased sales by 8 percent in local currencies and continued to gain market shareduring what was one of the toughest years for a long time for the fashion retail industry in many countries. The fact that we havegained market share, proves that our customers appreciate our collections, which offer a wide range of inspiring fashion for everyone.The situation in the sourcing markets has also been challenging. Cost inflation has been high resulting in increased purchasing costsfor the fashion retail industry. Despite increased purchasing costs, we chose a strategy of strengthening our customer offering andmarket position even further relative to competitors. The investments have varied over time and have involved everything from evenbetter prices to even higher quality and more sustainable materials. We are convinced that this will gradually become more evident tocustomers and will
strengthen H&M’s already strong market position even further.
 Our strong expansion continued during the year. We opened 266 new stores net, five new markets were added and we createdaround 7,000 new jobs. Today we have a strong global presence with around 2,500 stores in 43 markets and more than 94,000employees.We are also planning for a strong expansion in 2012 with approximately 275 new stores net. The countries in which we will open themost stores during the year are China, the US and the UK. Bulgaria, Latvia, Malaysia and Thailand will become new H&M markets.We also plan to open in Mexico during the autumn 2012, it will be our first store in Latin America. This will make a total of 10 new H&Mmarkets over a period of two years. Expansion will also continue within our other brands such as COS and Monki, including theopening of the first COS stores in Hong Kong, Italy, Finland and Kuwait.The new year has started well, with strong sales development in both December and so far in January. Most indicators suggest thatthe macro-economic climate in many of our markets will continue to be tough during 2012, but we have a strong belief in our offeringand are convinced that H&M will continue to maintain its strong position as the year goes on. We are looking forward to an excitingyear full of opportunities
.”
 
 
FULL-YEAR REPORT 2011
2
Sales and store openings
Sales including VAT increased by 8 percent in local currencies for the financial year. Salesin comparable units decreased by 1 percent. Converted into SEK, sales increased toSEK 128,810 m (126,966). Sales excluding VAT increased to SEK 109,999 (108,483).The strengthening of the Swedish krona during the year has meant that most of the sales
countries’ currencies have d
epreciated against the Swedish krona compared to theprevious year. For H&M, this fact has had significant negative effects when translatingsales in local currencies in
to the company’s
reporting currency of SEK. As a result,although sales increased by 8 percent in local currencies, the increase in Swedish kronawas only 1 percent.Sales including VAT for the fourth quarter increased by 6 percent in local currencies. Salesin comparable units decreased by 3 percent. Converted into SEK, sales increased by4 percent to SEK 36,191 m (34,792). Sales excluding VAT increased to SEK 30,952 m(29,711).The Group opened 296 (243) stores and closed 30 (25) stores during the financial year,i.e. a net addition of 266 new stores. In the fourth quarter, 160 (138) stores opened and13 (10) stores closed. The total number of stores in the Group as per 30 November 2011thus amounted to 2,472 (2,206), of which 70 franchise stores, 45 COS stores, 52 Monkistores, 19 Weekday stores and 4 Cheap Monday stores.
Results for the financial year
Gross profit for the Group for the financial year amounted to SEK 66,147 m (68,269), adecrease of 3 percent. This corresponds to a gross margin of 60.1 percent (62.9).The operating profit amounted to SEK 20,379 m (24,659). This corresponds to anoperating margin of 18.5 percent (22.7).Operating profit for the financial year has been charged with depreciation amounting toSEK 3,262 m (3,061).Consolidated net interest income was SEK 563 m (349).Profit after financial items amounted to SEK 20,942 m (25,008).
The Group’s profit for the financial year after applying
a tax rate of 24.5 percent (25.3) wasSEK 15,821 m (18,681), which represents earnings per share of SEK 9.56 (11.29), adecrease of 15 percent.Return on sha
reholders’ equity
was 35.8 percent (44.1) and return on capital employedwas 47.1 percent (58.7).
FULL-YEAR2011FULL-YEAR2010Q42011Q42010(SEK m)Net sales 109,999 108,483 30,952 29,711Gross profit 66,147 68,269 19,150 18,792
gross margin, % 60.1 62.9 61.9 63.2 
Operating profit 20,379 24,659 6,665 7,060
operating margin, % 18.5 22.7 21.5 23.8 
Net financial items 563 349 137 118Profit after financial items 20,942 25,008 6,802 7,178Tax -5,121 -6,327 -1,445 -1,691Profit for the period 15,821 18,681 5,357 5,487Earnings per share, SEK 9.56 11.29 3.24 3.32
 
FULL-YEAR REPORT 2011
3
Comments on the full year
H&M has continued to gain market share in a year that has been very challenging for thefashion retail industry in many countries. Economic uncertainty in a number of markets hashad a negative effect on consumption resulting in fiercer competition for consumerspending. For fashion retailers, this has resulted in multiple price activities and markdownswhich were intensified during the second half-year.In these circumstances
, sales have been good showing that H&M’s strong offering has
been well received by customers. The fact that sales in comparable units decreased by1 percent for the full-year should also be
viewed in the light of last year’s strong
comparables of a 5 percent increase in comparable units. Sales development has beenvery positive in countries such as the US, China, Russia and the UK.The G
roup’s other brands C
OS, Monki, Weekday and Cheap Monday have also had apositive sales development during the year. It has been a very good year for COS inparticular,
which has developed beyond the company’s high
expectations both regardingsales and profits. There are now nearly 50 COS stores in nine countries and the expansioncontinues.It has also been a challenging year in the sourcing markets, where high cost inflation,mainly as a result of very high cotton prices, has led to increased purchasing costs.To maintain a long-term perspective and always be able to offer customers the bestcombination of fashion and quality at the best price in each market, H&M has deliberatelyinvested to further strengthen its customer offering and thereby its position in the market.The investments have varied over time and have involved everything from even betterprices to even higher quality and more sustainable materials.A total of 266 new stores net were opened in 2011, which was more than the originallyplanned 250 stores. The fact that more stores than planned were added was mainly due togreater expansion opportunities in China and the very positive reception in
H&M’s new
markets of Romania and Croatia. China, the US, the UK and Germany were the largestexpansion markets during the year.The reception in
H&M’s new
market of Singapore in South East Asia has been very good.The new franchise markets Jordan and Morocco, which opened at the end of November,have also made a good start.E-commerce is becoming increasingly important for the fashion retail industry as well as for H&M.The new H&M Shop Online, which was launched at the
 
beginning of 2011, offers an inspiring,innovative and interactive shopping experience.
H&M’s
website including the new H&M ShopOnline
is today one of the world’s most visited
websites in the fashion retail industry. The newlylaunched shop online for COS and Monki in 18 markets have been well received.During the year H&M increased its investments within marketing, IT and online andcatalogue sales. The purpose of these investments is to further strengthen H&
M’s market
position in the long term and to secure future expansion. The company has also introduceda long-term incentive programme for all employees, the H&M Incentive Program, whichaims to encourage long-term commitment and support future recruitment. Even if theseinvestments have led to cost increases, the cost control remains good. Costs incomparable stores have decreased compared to the previous year.The profit decrease compared to the previous year is mainly related to the increasedpurchasing costs combined with the fact that H&M chose a strategy of furtherstrengthening its customer offering and its market position relative to competitors. Inaddition, more than SEK 1.2 billion of the decrease in profit after financial items comparedto the previous year is related to negative currency translation effects, as most of the sales
countries’ currencies have depreciated
relative to the Swedish krona during the year. Theitem affecting comparability, SEK 248 m to the H&M Incentive Program, has also affectedthe
year’s profits.
 

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