H & M Hennes & Mauritz nine-month report Q3 2021

H & M Hennes & Mauritz AB

Nine-month report

Nine months (1 December 2020 ? 31 August 2021)

? The H&M group's net sales in local currencies increased by 13 percent in the first nine months of the financial year compared with the corresponding period last year. Converted into SEK the group's net sales amounted to SEK 142,154 m (134,482). The pandemic led to reduced footfall as a result of continued restrictions and store closures. At the most, around 1,800 stores were temporarily closed.

? Profit after financial items increased to SEK 8,297 m (-1,613). The group's profit after tax amounted to SEK 6,389 m (-1,242), corresponding to SEK 3.86 (-0.75) per share.

? Cash flow from operating activities increased to SEK 37,210 m (15,995). ? Financial net cash increased to SEK 24,874 m (-5,853). Cash and cash equivalents plus

undrawn credit facilities amounted to SEK 55,408 m (41,413).

Third quarter (1 June 2021 ? 31 August 2021)

? The H&M group's net sales in local currencies increased by 14 percent in the third quarter 2021 compared with the corresponding period last year. Converted into SEK net sales increased to SEK 55,585 m (50,870). At the start of the quarter around 180 stores were temporarily closed and at the end around 100 stores remained closed.

? Online sales increased by 22 percent in local currencies and 17 percent in SEK. Store sales have started to recover as restrictions have been eased in many markets.

? Gross profit increased by 19 percent to SEK 29,559 m (24,851). This corresponds to a gross margin of 53.2 percent (48.9).

? Profit after financial items increased by 158 percent to SEK 6,093 m (2,365). ? The operating margin was 11.3 percent (5.3). ? Profit after tax increased to SEK 4,692 m (1,821), corresponding to SEK 2.83 (1.10) per

share. ? The stock-in-trade decreased to SEK 36,867 m (42,076).

? The board of directors is proposing that a cash dividend of SEK 6.50 per share is paid in November 2021. This is based on significantly improved profitability, a strong financial position with financial net cash of SEK 24,874 m, more stable market conditions and a good outlook. There has been no resolution on a dividend since spring 2019. A dividend proposal in January 2020 was withdrawn in March 2020 due to the pandemic.

? The new autumn collections have been well received. Sales in September 2021 were slightly higher than in the corresponding month the previous year in local currencies, even though demand was not able to be fully met because of disruption and delays in product flow. Currently around 50 stores are temporarily closed.

? H&M online will launch in Chile in autumn 2021 and in Peru, Colombia and Uruguay in the first half of 2022.

? Five new H&M markets will launch in 2022. Ecuador, North Macedonia and Kosovo, and via franchise in Costa Rica and Cambodia.

"The H&M group's increase in profit for the quarter is mainly a result of well-received collections with more full-price sales, lower markdowns and good cost control. With our continued transformation and our well-positioned customer offering we are optimistic that we will see long-term, profitable and sustainable growth for the H&M group," says Helena Helmersson, CEO.

Q3

Financial net cash

SEK 24,874 m

31 August 2021 Cash flow from operating activities

SEK 37,210 m

Nine months 2021 Profit after financial items

SEK 6,093 m

Third quarter 2021

Comments by Helena Helmersson, CEO

Nine-month report 2021 (1 Dec 2020 ? 31 Aug 2021)

"The H&M group's increase in profit shows that the strong recovery is continuing ? despite sales being partly affected by restrictions and delays associated with the pandemic. The results are explained by much-appreciated collections, lower markdowns and good cost control combined with the initiatives implemented in areas such as tech and the supply chain. As restrictions have been eased in many markets store sales have started to pick up again, all while online sales have continued to grow.

To further strengthen our competitiveness the group continues to work to constantly improve both the customer offering and the customer experience in response to customers' increased expectations, such as being able to shop in a smooth and convenient way ? when, where and how they choose.

Our customer offering makes it possible for many to access sustainable fashion and express their own personal style. Our financial strength and long-term approach give us the ability to invest in innovations within tech development, materials and sustainable initiatives, with an ambition to lead the change in the fashion industry towards becoming circular and renewable. This was recognised recently when the H&M group was named as the only retail company in the world to live up to the UN Global Compact sustainability principles.

The pandemic and its consequences are not yet over and we are humbled by the many challenges in the world around us that affect our business, which call for a high level of flexibility and drive. We have quickly adapted by prioritising cash flow, cost control and flexibility. With our continued transformation and our well-positioned customer offering ? to meet customers' ever increasing expectations of good value and sustainable fashion ? we are optimistic that we will see long-term, profitable and sustainable growth for the H&M group."

Read more about our initiatives in the section Initiatives for an improved customer experience on page 12.

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Sales

SEK m

150,000 125,000 100,000 75,000 50,000 25,000

0

+ 9% 50,870 55,585

Q3

+ 6% 134,482 142,154

Nine months

Nine-month report 2021 (1 Dec 2020 ? 31 Aug 2021)

2020 2021

The H&M group's net sales in local currencies increased by 14 percent in the third quarter 2021 compared with the corresponding period last year. Converted into SEK net sales increased by 9 percent in the third quarter to SEK 55,585 m (50,870).

Sales development in the quarter continued to be affected by the ongoing pandemic, with considerable variation between markets. Lockdowns and restrictions have continued to hamper development, particularly in Asia. Delays have also affected sales to some extent. Excluding Asia and Oceania, sales in local currencies were back at the same level as before the pandemic.

Net sales in the nine-month period increased by 13 percent in local currencies compared with the corresponding period last year. Converted into SEK net sales amounted to SEK 142,154 m (134,482) in the nine-month period.

The H&M group's online sales continue to develop very well, even as the stores have gradually been allowed to reopen. Online sales increased by 22 percent in local currencies and by 17 percent in SEK in the third quarter. Online sales increased by 39 percent in local currencies in the nine-month period and by 32 percent in SEK, and represented 33 percent of the group's total sales.

Sales for Portfolio Brands increased in the third quarter by 20 percent in local currencies and by 17 percent in SEK.

Sales and stores per segment, third quarter

Europe and Africa Asia and Oceania North and South America Total

Q3 - 2021 SEK m 39,021 5,813 10,751

55,585

Q3 - 2020 SEK m

36,768 6,976 7,126

50,870

Change in %

SEK

LCY

6

11

-17

-16

51

57

9

14

31 Aug - 21 No. of stores

2,920 1,182 754 4,856

Stores

New Closed

5

44

5

24

8

7

18

75

Sales in top ten markets, third quarter

Germany USA UK France Sweden Russia Italy Netherlands Poland Spain

Q3 - 2021 SEK m 8,486 7,359 4,133 2,905 2,302 2,277 1,757 1,626 1,615 1,554

Q3 - 2020 SEK m 8,033 5,197 3,051 2,909 2,115 2,074 1,738 1,557 1,642 1,594

Change in %

SEK LCY

6

10

42

51

35

34

0

3

9

9

10

25

1

4

4

9

-2

5

-3

1

Others Total

21,571 55,585

20,960 50,870

3

7

9

14

31 Aug - 21 Number of

444 549 272 219 155 161 170 122 191 154

2,419

4,856

Stores

New Closed

6

3

6

3

9

1

5

5

1 4 1 2

11

36

18

75

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Nine-month report 2021 (1 Dec 2020 ? 31 Aug 2021)

Gross profit and gross margin

Gross profit and gross margin are a result of many factors, internal as well as external, and are mostly affected by the decisions that the H&M group takes in line with its strategy to always have the best customer offering in each individual market ? based on the combination of fashion, quality, price and sustainability.

SEK m

75,000 60,000

49.2% 66,169

51.8% 73,665

45,000 30,000 15,000

48.9% 53.2% 29,559

24,851

2020 2021

0 Q3

Nine months

Gross profit increased by 19 percent to SEK 29,559 m (24,851) in the third quarter, corresponding to a gross margin of 53.2 percent (48.9). For the nine-month period, gross profit increased to SEK 73,665 m (66,169), corresponding to a gross margin of 51.8 percent (49.2).

Costs for markdowns in relation to sales decreased by around 2,5 percentage points in the third quarter of 2021 compared with the same quarter the previous year. This is a result of a combination of much-appreciated collections and successful transformation, as well as other initiatives ? particularly within tech and the supply chain.

Despite substantially higher shipping and raw materials prices, for the third quarter the market situation as regards external factors that influence purchasing costs was slightly positive overall compared with the same purchasing period the previous year. Increased prices for shipping and raw materials were offset by a more advantageous US dollar exchange rate.

As the positive US dollar effect subsides and the high shipping and raw materials prices remain, the overall market situation for purchasing costs in the fourth quarter will gradually become less positive.

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Selling and administrative expenses

SEK m

75,000 60,000 45,000

66,967

- 3% 64,669

30,000 15,000

22,151

+ 5% 23,287

0 Q3

Nine months

Nine-month report 2021 (1 Dec 2020 ? 31 Aug 2021)

2020 2021

Continued good cost control. Selling and administrative expenses increased by 7 percent in local currencies. Converted into SEK, these expenses increased by 5 percent to SEK 23,287 m (22,151).

Government support associated with the pandemic has decreased selling and administrative expenses by a total of around SEK 150 m (400) in the third quarter. As the situation in many markets has gradually improved, government assistance has decreased. In Sweden, for example, no government assistance has been received for the period since 31 March 2021.

For the nine-month period, selling and administrative expenses decreased by 3 percent in SEK compared with the same period last year. In local currencies these expenses increased by 2 percent.

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