Release Date: September 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sales in September are estimated to increase by 11%, showing a strong recovery after a weak start to the quarter.
- The company has made significant long-term investments in the third quarter to strengthen the product offering, shopping experience, and the H&M brand.
- The first autumn collections have been well received by customers, with high engagement in social media and positive feedback.
- Upgraded physical stores in key cities like London, New York, and Paris have been well received, with long queues on opening days.
- The digital store and app have been given an elevated look, which has been positively received and will continue to roll out in more markets next year.
Negative Points
- Increased costs from external factors, particularly currency translation effects, have negatively impacted operating profit.
- The company has decided to discontinue Afound within its portfolio brands, incurring winding-down costs.
- Consumers are still facing lower purchasing power, impacting sales revenues and purchasing costs more negatively than expected.
- The operating margin for the year is estimated to be lower than 10%, below the company's long-term target.
- Elevated material prices and freight costs continue to pose challenges, affecting the company's cost structure.
Q & A Highlights
Q: Can you clarify the impact of different factors on operating expenses in the quarter, particularly the SEK550 million related to winding-down costs of Afound and elevated marketing costs?
A: Yes, the majority of the SEK550 million comes from marketing costs. The currency effect was slightly above SEK500 million, impacting the translation FX. (Adam Karlsson, CFO)
Q: Considering the FX impact, do you foresee any changes in Q4?
A: The basket of external factors has moved slightly more favorably, but elevated material and freight prices will still affect us in the coming quarters. (Adam Karlsson, CFO)
Q: Will the increased marketing costs seen in Q3 continue into the coming quarters?
A: Yes, marketing investments will be roughly at the same level in Q4 as in Q3. We use markdowns to activate cautious customers, which is why we are guiding for a slight increase in markdowns. (Daniel Erver, Managing Director)
Q: How are you assessing the return on investment for the stepped-up marketing efforts?
A: The marketing efforts are focused on long-term brand strengthening, including campaigns, store experiences, and influencer marketing. We will monitor the effects and evaluate the impact on sales and bottom line. (Daniel Erver, Managing Director)
Q: Are there any plans to replace the SEK2 billion structural program with another cost control initiative?
A: We are focusing on shifting costs from nonproductive efforts to those that strengthen the customer offer. We will continue strict cost control and reinvest savings into customer offerings. (Daniel Erver, Managing Director)
Q: How are you managing supply chain disruptions, particularly with longer shipping times?
A: We are becoming more flexible in our supply chain, but short-term incidents are difficult to offset completely. We believe the long-term trend will mitigate these disruptions. (Adam Karlsson, CFO)
Q: How comfortable are you with your relative pricing in major markets?
A: We continuously monitor each market to ensure a competitive offer. We have made investments in price positioning and quality, and we believe we have made the major corrections needed. (Daniel Erver, Managing Director)
Q: Can you provide more details on the performance of new ranges and the impact of weather on sales?
A: The fall collection has been well received, with high sell-through rates and positive customer engagement. While weather has had an impact, the positive reception of our updated strategy is evident. (Daniel Erver, Managing Director)
Q: How much old inventory do you still have, and how does this relate to increased markdowns in Q4?
A: We have adjusted our inventory to support strong selling throughout the autumn. We are happy with the stock composition and are accelerating improvements in the assortment. (Adam Karlsson, CFO)
Q: Are you able to replenish best-selling lines more quickly and efficiently now?
A: Yes, we have better capabilities to replenish through different freight methods and near-shoring. The speed of reaction depends on the product category. (Daniel Erver, Managing Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
