H & M Hennes & Mauritz AB (publ)

Good morning, and a warm welcome, everyone. Today, we present the first quarter results for 2026 for the H&M Group.

My name is Joseph Ahlberg, and I'm Head of Investor Relations. Before I hand over to our CEO, Daniel Erver, 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 continued 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 off then with our focus on product. Shorter decision-making paths together with closer supply 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 10. 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 core production and automating how we interpret and integrate data.

All together, 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 REDSTAGE, the collaboration with Stella McCartney and the custom H&M design worn by Jihoon 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 precision of our marketing investments.

And now before we move on, I would like to share some of the highlights from the quarter. Please enjoy.

[Presentation]

So 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 3 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 improvement, in in-season bearing and in competitive pricing to stay really competitive and relevant for our customers.

We expect the cost of price reductions as a 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 a customer in focus so that we can offer a 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.

[Operator Instructions] Over to the operator, please facilitate the questions.

Daniel, Adam and Joseph, hope you can hear me.

Yes.

Maybe just -- I think you surprised everyone a little bit both on the gross margin and then the OpEx and the cost control there. You did say in the Q4 report and you reiterated that today that you expect OpEx in local currencies to grow low single digits and sort of that, of course, related partly to the platform rollout that's going to be gradual throughout the year.

Have you so far been able to neutralize that effect? Or hasn't it come yet through lower handling costs given the inventory level?

Or what's the reason for OpEx being down also in this quarter?

Adam here. Yes, I mean, you're right.

We see the inventory productivity, of course, supporting operational cost and particularly within the logistics side. So that is supporting us.

But to your first question, then we don't see the effects of these platform investments to show up yet, but rather as we spoke last time towards the second half of the year. So positive effects of good inventory productivity, particularly within the supply chain.

And then the full year guidance is somewhat then half year too heavy connected to the platform investments.

Okay. And that productivity, could that be something that could play out also in Q2?

And then as we get into the second half of this year, that's going to be neutralized by the tech investments. Is that how to view it?

Yes, exactly. I mean we see one of the benefits of, of course, the work that we've done throughout the supply chain with higher precision is that we also not only over time, will reduce stock levels, but it also affects productivity.

And we see that it has during the first quarter, and we estimate that it will continue to do so coming quarter.

Okay. And then my second question is on the Middle East.

I know your exposure is very small. I think it's 3% of your store network and maybe even less of sales.

But still has that been sort of something that has been rocking the boat a bit when it comes to March trading?

So this is Daniel. First, it's important for us to recognize the severity of the situation, and we are being working closely with our partners, of course, to protect the safety of customers and colleagues in the region.

As you mentioned, our exposure with that said, is fairly small. You're right, 3% of the number of stores in the region.

We also have a low share of air freight in our full supply chain. So that has also had a minor impact so far.

On a global scale, we don't see any significant impact on the consumer behavior at this point in time, although we are very aware of that the consumer has been under high inflationary pressure for a long period of time and increasing energy prices will have a spillover effect, and we see that, that could have -- if the conflict is sustained, a significant impact on the consumer behavior. But we are not in a situation where we can make predictions about that at this time.

But for the current trading of March, we don't see any major impact apart from the effect in the affected region.

Maybe first a follow-up on the last question on demand, but more maybe pinpointing the U.S. market and current trading, whether -- I guess I'm curious to hear whether you've seen any signs of market demand weakening during the last few weeks as a result of all the geopolitical events and inflation worries and et cetera, et cetera.

No, we don't see any short-term effects that are worth to point out. We do see that there has been a surprisingly strong demand in the U.S.

for the full of 2025, and that has also continued into 2026, where we had a prudent planning going into the this year as of the leaving April and the tariff situation. So we have not been supplying fully to the demand that we could see in the U.S.

We worked on making that sort of increasing the supply to meet the customer demand, but we've also been through a period of sale and end of season clearance so we also had a low supply in the U.S. So -- but we have seen -- that's more things that are within our hands.

We have seen a solid consumer demand in the U.S. that has been stronger than we estimated in the middle of 2025.

Okay. Good.

And second one on the Q1 gross margin. Approximately how much of the 1.6 percentage point expansion was due to external tailwinds and how much was more, I guess, related to supply chain work and all that?

Majority was based on our work within the supply chain and the sourcing excellence approach that we have with consolidating suppliers and creating a stronger partnership with the top suppliers. But then, of course, we have other effects then going against us, such as the duty now fully in there, and then we have currency starting to trickle in as positive.

But the majority is based on our own work within the supply chain.

Okay. And a short follow-up, if I may, on that.

And I heard what you said before, but I guess, how should we think about the ongoing gross margin progression as we look into the rest of the year, I guess, given that you guide for negative markdowns in Q2 despite the low inventory situation. And I guess, external tailwinds are becoming less positive as well.

I think as Daniel said in the outlook, we are sort of targeting the interval, and we believe that the sourcing excellence efforts give us a good shot at reaching that target interval, and we intend then to reinvest any sort of further upsides that may come from currencies and other external factors. And then, of course, need to balance it in the other way with the increased uncertainty regarding freight prices and energy prices.

So looking ahead, we call out then that the net effect of these external factors will continue to be somewhat positive for Q2. So a fairly similar outlook compared to Q1 with the extended uncertainty, of course, of how the world around us evolves, particularly connected to transportation.

Can I ask a little bit about current trading and more specifically about your still the biggest German market, where as far as I can see, we've had 6 months of very weak statistics that have recently turned surprisingly positive in the last 3, 4 weeks. Is that something that you have seen in your sales as well?

And any just granularity on differences in different markets? Are you seeing any markets that are improving more than others at the moment or vice versa?

We agree with your view on the last 6 months of the German market that has been a tough market situation and tough consumer conditions. We see and assess that we have gained market share during this period of time in Germany, but of course, it's still a challenging market.

Then -- on the short-term fluctuations, we also saw a stronger beginning of March. We have -- weather plays a big role during these months where you can have short-term fluctuations.

We also see this year that Ramadan is 10 days earlier than it was last year. So that falls in the beginning of March.

It comes towards the end of March this year. So there are some factors that make the single month difficult to comment on.

But for the large scale, it's been a muted demand, and we see that we have gained market share for Germany. Otherwise, the call out, we see Southern Europe has been strong for us.

We are happy with the development in Southern Europe, and we also see India as another example, doing well. We're also happy with sort of the performance of South America.

So there are some call-outs of positive developments.

Very clear and thanks for the granularity there. On input costs, your -- or external factors, your comment about expecting a slightly positive effect in Q2, is there any way you can put that in relation to the effects you've seen in the last 3 quarters?

Are you expecting more or less? And do you think there's a chance that some of this could linger into H2 as well even when comparisons start to get more difficult?

I mean if we try to decompose it somewhat and just look at where we are today, we see that currencies with the U.S. dollar weakened relative to euro will continue, but that will sort of start to fade out when second half starts.

We see fairly as of yet, neutral material prices, but that's also, of course, connected to how input costs may vary with the energy prices. So that we sort of see as fairly neutral.

And then the last piece is the shipping and the transportation questions that we see a big hike in air transport costs right now. But as we have a fairly low share of that, we feel that we are not particularly hard hit on it.

And then we just need to wait and see how the situation unfolds. So the net effect of all of these is a slightly positive, and it's mainly driven by the currency effect that will then over the second half of the year slightly taper off as comps get tougher.

First one is maybe just on your inventory position, which has obviously improved quite significantly. Do you have a target of sort of inventory days that you want to achieve over time?

Yes. So we aim to continue to progress, although the pace that we have had over the last quarters is maybe not what we see moving forward.

It needs to be built on structural improvements to our supply chain to improve the tech infrastructure and so on to make sure that we really improve the productivity while maintaining good availability and makes it easy for the customers to find what they're looking for. So that's the job that will continue.

Long term, we aim to be in the span of 12% to 14% as a share of sales, and that we see is something that continues to be an important target for us to continue to move on. But the pace of progress would need to be matched with the capability building of increasing proximity sourcing, taking data decisions, increasing precision in the supply chains through a stronger tech infrastructure, but also a stronger supply chain network.

Great. That's clear.

And then maybe just on your -- if you can give us some color on your performance by category because I think you previously said womenswear has been doing well, but menswear was a bit lagging behind. Is there any update to that?

So looking at the quarter, we are not satisfied with the top line performance. We had higher expectations and had higher plans, and that goes for -- across the board for all the customer groups, including womenswear we had a higher expectation for this quarter.

The improvements that we made around how we develop, how we really create an attractive competitive assortment, all of that work started within womenswear, and we are taking that work to the other customer groups as well, and we see first good indications of getting traction also in the other customer groups. But as the quarter is weaker than our own plans, that also goes for womenswear.

Okay. That's helpful.

And then just finally, on agentic AI, how do you see H&M's position in the sort of agentic commerce world?

It's a very interesting topic, which we are spending a lot of time on. We will have to learn and see how the world develops.

It's still very early days. We have been active on sort of integrating with the big large language models for transaction as well.

And we can see that there is a consumer interest, but it's a very, very early stage and a very, very minor part of the organic traffic that comes that way today. But we are exploring it.

We believe that there is -- we know that our customer and all customers find fashion not always easy and that you need guidance, you need clarity, you need help to pick what's right for you to express your personal style and the way you want to look. And there, agentic AI can be a fantastic help.

And we are exploring it how it can support our own experience in our own channels, how we can, with agentic AI help you to dress in the way you want to express yourself in the way you want to find the pieces that are good for you, but also how we will interact with agentic players that are brand agnostic and how we show up there. And there we believe the most important thing is that we provide an outstanding value for money so that we become the #1 choice for more customers than only the ones who are in our ecosystem today.

Just one for me, please, but it's a slightly longer question. When I look at the dollar move, I see that the FX tailwind should actually be a very significant tailwind in the upcoming quarter and peaking in that quarter.

But you only say that external factors should be slightly positive. So just wondering what else are you building in that is like offsetting this?

Is it tariffs still -- are you planning to do some price investments and that's also built in sort of your net expectation? This is going back to your comment on pricing.

You said earlier that you don't sort of intend to indefinitely keep growing the gross margin. So yes, just trying to understand what the offsetting factors are because I think FX should be quite a big tailwind.

Thank you for the question, Vandita. This is Joseph.

So when we look at our guidance for the second quarter for external factors, we guide for a somewhat net positive effect for the second quarter. This is a similar guidance as the outcome that we have seen in the first quarter and also in last quarter in Q4 of 2025.

The main negative factor affecting us in Q1 is the cost for tariffs, which is the main year-over-year drainer. This is now expected to be at more or less a full impact, but also when looking towards Q2, a negative impact of similar magnitude.

So that is on the negative side, the main factor. Then on the positive factors, we have the transactional FX support expected to support mainly on the positive side in Q2, I'd like to point out, based on the buying that was done during -- to a large part during 2025 at attractive dollar exchange rates towards our major selling currencies.

So this is the key moving parts explaining our guidance.

Okay. And sorry, just one clarification.

So if you were planning to do any price investments, that wouldn't feature as part of your external factor commentary, right? Because that's an internal decision.

That is correct. That's one of the internal decisions, one of many which are affecting the outcome on the gross margin.

What we guide on is the external factors.

A couple of questions, please. When we're talking about your increase in promotional intensity, I just want to confirm that's really because of the customers maybe a bit uncertain looking for a bargain.

That is you having to put selective markdowns on current season product more than you anticipate rather than having to clear through old inventory. Is that correct?

Yes, that is correct.

And is there any big differences in that by region? Is there certain areas where the customer is becoming more, let's call it, price sensitive than others?

Or is this more of a sort of global thing that you're seeing?

It's linked to -- across the globe, there's been a strong inflationary pressure on the consumer for many years. But then, of course, there are certain markets where we see a higher pressure on the consumer spend and a weaker consumer market.

And then we are -- it's more towards those areas, but it's a general consumer and our customer base have had a lot of inflationary pressure for quite some time. So that is obviously the need to activate and the customer looking for making a good deal and part of the customer base really wanting to find an attractive bargain, that piece of the customer base, we see a need to activate with the temporary activations and tactical deals.

Because over the last couple of years, it feels like the H&M stores have become less inventory density in the stores, they've looked cleaner, neater, tidier. You've got a philosophy, I think, of making the store experience better.

But how are you going to try and manage that with increasing the promotional intensity in store? Because it felt like you've been trying to move towards more of a full price, more fashion-led type customer base.

But have you sort of had to balance that with a certain bit of your customer who only reacts to buying on promotion. It feels like it's quite hard to balance those 2 bits within the improving estate that you're aiming for.

It's correct. We're working very hard with -- throughout the organization to really create an outstanding value for money, and that's many pieces.

It starts with and the most important thing is the product and what kind of product we develop that that's relevant, that it works with the best suppliers, the best materials, the trims, the components to really create an attractive product, then put that in an environment that it deserves an elevated experience that really shows the customer the value for money, but also helps the customers navigate and find their piece regardless whether it's a physical store or digital. And that work is ongoing, and we see that is having a positive effect.

With that said, we have a very large portfolio. We are into very wide demographies and managing this change is equally important to always be aware about the consumer spending power and what consumer base we have in which location, and that's what we look at when we try to navigate the right level of activations.

Just a question around de minimis in the U.S. and potential learnings there for what is to come in Europe really in the coming months.

I guess it's been 7 months since the exception has been removed in the U.S. So it would be great to hear from your perspective, what do you think that's done to the U.S.

market competitively? And as you look into, I guess, more next year in EU, what is to come in a few weeks' time means from your perspective, given the lessons learned from the U.S.

So the U.S. as the market globally is very, very fragmented with no single player having a large share.

So even if there are big impact on single players. It still has -- there is still a very, very fragmented market and the total effect of the market is not significant.

We do see that we have had a strong underlying demand in the U.S., which part can be contributed to that the low-price offer is under more pressure due to the de minimis being removed. We see also that some of these competitors have shifted investments towards Europe to a large extent, which is a sign that it's probably a bit more challenging market in the U.S.

So we are monitoring it and following it and seeing it as an opportunity for us. But at this point, we don't do any forecast or quantification of that effect.

Just a few quick ones about nearshoring. Could you elaborate a little bit on how much have you moved to Europe?

And also on the same topic of your Morris, call it, strategic partners, how many of those are located in Europe?

We continue to make efforts to really shorten the lead time and that all the way from product development, fashion forecasting to the production to shipment and nearshoring is one of the important pieces of that puzzle. But the key for us is to shorten the full supply chain to take later decisions to provide a more relevant customer offer and here.

We are ramping up the efforts at a high pace. We do it mainly towards the current fashion pieces of the assortment.

We do it in womenswear and menswear. We're also exploring it for kidswear, but it's really on the most current fashion piece of the assortment where we have a high pace of progress.

Shifting to nearshoring is one piece of that, but it also comes to which suppliers we work with, which mode of transport that we use and how we shorten also the development lead times to make these decisions at a later stage to become more relevant.

But do you have any strategic partners in Europe?

This is Adam. Yes, we do.

And -- but sort of the partnership, it's a model where we then also have the benefit of having suppliers open factories and production units in multiple countries. So when we speak about partners, there are 30 of them.

They are, of course, headquartered in different parts of the world, and that reflects sort of our general sourcing pattern. But we then have the opportunity for them to -- under this partnership umbrella to expand their business together with us to ensure that we have a healthy, robust and very flexible supply chain infrastructure.

So we do have partners in Europe as well. But more importantly, it's how we, together with them, expand and collaborate both for speed, proximity and, of course, price quality and sustainability.

Cool. I have a follow-up there.

You said shortened lead times, obviously a key thing. Could you give some maybe example or some context where is it today versus, say, 3 years ago?

In 2 aspects. One is the actual lead time where we now have capability to within -- get the garment from idea to shelf in 4 to 6 weeks.

That is a capability that we built up with to a larger extent than what we have in the past. And then it's -- even more importantly, it's how we change the operating model for how we do design, product development to really make sure that we have a high level of flexibility in the decisions that we make so that we can make those decisions at a later stage and having then a vast network of strategic partners with units in areas where we can take late decisions, but also with capability to help us to shorten the lead time is tremendously important, and that work is ramping up at a high pace during end of '25 and '26.

Just a follow-up, Daniel. You talked about -- you mentioned a surprisingly strong U.S.

market, maybe on the back of what you feared sort of, I don't know, April, May last year. But at the same time, if you just look at the numbers for Q1, Americas is actually down a little bit more than the group in local currency.

Is that -- how does that stack up? Is that due to you not being able to cater to that demand?

Or is it -- what's the explanation simply?

So we went into the second half of 2025 with a very prudent plan for the U.S. given everything that was going on.

And then we could see more resilience from the consumer than we expected, which led us to have a low supply to the demand. And then Q1 is a quarter with a big impact on end-of-season sale in December and January.

And that's where we also said that we had far less end-of-season sale impact in the U.S. market given that we have had a low stock level, a low supply to the demand.

So that's the explanation for Q1.

Okay. And do you still see in that number for the entire Americas, you are seeing South America growing?

Yes, we see positive development in South America.

Yes. And the second question maybe, you mentioned increased precision in your marketing investments.

Does that also implicitly mean that you had less costs for marketing spend in the first quarter?

Yes, slightly less spend on marketing. This is 2 shifts.

One is shifting more of the investments towards media and then the way we optimize media, both between markets and between different channels and how we optimize the content per channel is where we drive the efficiency. But as a level of spend, it was slightly less than the year before.

And do you see that efficiency continue into the coming quarters?

Yes, we do. At the same time, as we evaluate cases for growth opportunity and where we want to invest, but the efficiency work we see has potential for the rest of the year.

Yes. Sorry, I had some technical issues.

So I apologize if these questions already have been asked. But firstly, it seems that depreciation cost was quite low in the quarter.

What is driving that? And how should we think about the level going forward?

Yes, Adam here. I mean there are multiple factors.

The underlying sort of core of the depreciation is attributed to investments primarily in our store portfolio. And as we've had a couple of years of lower investment levels during COVID, one could sort of assume that, that sort of core part will continue over the year.

But as it's also related then to IFRS 16 and how we then value our leases and currency effects. It's difficult to predict, and we don't want to give guidance on it.

But at the core of it is that we've had a lower investment level into our portfolio during the COVID year, and that sort of funnels through in this.

Perfect. Also, can you say whether the online business is contributing to the higher EBIT margin that you are reporting year-over-year?

Adam here. Yes, it does.

We have the benefit of having 2 profitable channels creating a stronghold, but we see that an increasing share of online is good for long-term profitability expansion.

Okay. And then just finally, can you say anything specifically on the performance in the Nordic regions and more specifically, whether you think you are gaining market share in that region in the quarter?

In the Nordics, we started to see a slight improved trend in the fourth quarter. But in the first quarter now as similar to other regions, we saw a sequentially lower demand pattern.

We saw a strong Black Friday period in many of the Nordic markets like other European core markets with a slower demand situation at the beginning of Q1. So that pattern has been consistent across several markets, including the Nordics.

Thank you so much, and thank you to everyone for attending today's telephone conference and for your continued engagement with the H&M Group. To summarize the quarter, we are making important progress.

Profitability levels are improving, supported by good cost control and improved gross margin despite this being a quarter marked by a cautious consumption and large currency translation effects. So for us, this confirms that we are on the right path.

We continue to build the foundation for profitable and sustainable growth. As we move forward, we remain laser-focused on delivering the outstanding value for money by doubling down on product experience and brand for our consumers at the same time as we continue to increase the flexibility and the precision across our operations all with the aim to really truly offer our customers relevant fashion and current fashion at the best value for money.

So once again, thank you for listening. And from here, we wish you all a wonderful day.

Thank you.