H & M Hennes & Mauritz AB (publ)

Good morning, and warm welcome, everyone. Today, we present the second quarter results for 2025 for the H&M Group.

I'm 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 give you an overview of the results followed by a more detailed financial presentation from our CFO, Adam Karlsson. Then Daniel will give you a key highlights from the quarter and outlook going forward.

As usual, we'll close with a Q&A session, where Daniel, Adam and I are able to answer your questions. So please welcome, Daniel.

Thank you, Joseph, and good morning to all of you. A warm welcome to those of you who joined us here in the room and then also you joining us online.

To start off today, we see that our plan with focus on an elevating product offering and upgraded store experience and a strengthened brand is generating and creating important progress across our business. Our sales in the second quarter increased by 1% in local currencies.

That should be seen in the context of that by the end of the quarter, we had 4% fewer stores than last year. And excluding those closures, the sales increased by 3% in the quarter.

Sales for the full month of June is expected to increase 3% as well. When it comes to profit, our operating profit amounted to SEK 5.9 billion compared to SEK 7.1 billion in the same quarter last year and that corresponds to an operating margin of 10.4%.

The result in the quarter was affected by unfavorable currency translation effects due to the strengthening Swedish krone as well as the gross margin development that we spoke about in Q1. I will now hand over to you, Adam, to take us through a more depth view of the financial results, and then I will come back and present more about our strategic plan and where we're heading moving forward.

So with that said, I hand over to you, Adam.

Thank you very much, Daniel. And good morning, everyone.

We will start with the net sales for the second quarter. In Q2, net sales in local currencies increased by 1% and translated to Swedish krones, net sales decreased by 5%, which is then, as Daniel said, a consequence of the rapid strengthening of the Swedish krone during the spring.

For the 6-month period, net sales increased by 1% in local currency and translated to SEK, sales amounted to SEK 112 billion, which is a decrease of 1% compared to the first 6 months of 2024. As Daniel said, the quarter was affected by currency effects, but also our continuous work to optimize our store portfolio with fewer stores at the end of the second quarter this year compared to second quarter 2024.

For portfolio brands, net sales in the quarter increased by 3% in local currencies and decreased by 2% in Swedish krones. Sales growth was driven by cost.

And on the other hand, Monki, where we are now into the last 6 months of our consolidation journey, decreased selling, where Monki has closed half of their stores since end of Q2 last year. If we move over to gross profit.

Gross profit for the quarter decreased by 6% to SEK 31.4 billion, corresponding to a gross margin of 55.4%. And despite the gross margin being significantly lower than last year, it's still a clear and significant sequential improvement from Q1, where the gross margin was down by 240 basis points.

As you know, there are a lot of factors affecting the gross margin, both internal and external. And the gross margin for the quarter was negatively affected by a strong U.S.

dollar during the end of the autumn last year and also high freight costs. Investments in the customer offer also had an impact on the gross margin, but was partly offset by the improvement work we do throughout the supply chain.

For the third quarter, we expect external factors to be somewhat positive compared to the same period last year and also positive for the second half as a whole. The cost of markdowns in the second quarter was in line with the corresponding quarter previous year, this despite we've seen a cautious customer, who has responded well on our commercial activations, but we have the strong management of the stock levels being able to keep markdown levels neutral compared to last year.

When looking into third quarter, we expect cost of markdowns as a percentage of sales to increase somewhat compared to the same quarter last year with a competitive landscape that is reacting on a slow end of spring selling in many parts of particularly Europe. Moving over to selling and administrative costs.

As a result of our continuous focus on cost, we managed to maintain a relatively modest increase of our cost base. Costs in local currencies increased by 2%.

This is then despite of the inflationary pressure we have throughout the cost base. These expenses for Q2 were also impacted by long-term investments in marketing throughout the quarter.

Costs will be a continued high focus for us, and we work systematically with removing costs to support our profitable sales development. For the 6 months, selling and administrative costs amounted to SEK 51.4 billion.

And in local currencies, these expenses increased by 1% compared with the same period last year. If we then go over to operating profit.

In the second quarter, operating profit was SEK 5.9 billion, corresponding to an operating margin of 10.4%. And based on the sequential improvement of the gross margin, we also see an improvement of the operating profit development compared to first quarter.

The currency translation effects had a negative impact on the operating margin as part -- as explained that the part of the cost base denominated in SEK is bigger than the share of revenue denominated in SEK. For the 6 months, operating profit was SEK 7.1 billion, corresponding to an operating margin of 6.4%.

Inventory. During the quarter, inventory developed in a positive direction with a significantly lower growth rate than during the first quarter.

Inventory grew by 1% out of the second quarter compared to 11% out of the first quarter. At the end of the second quarter, the volume of goods was also lower than last year.

We will continue to work on the inventory productivity to take us closer to a long-term target of 12% to 14% as share of sales. The stock-in-trade levels are still impacted by extended transportation lead times associated with the situation in the Red Sea, but these effects are now, however, on a year-over-year basis to be seen as neutral.

The composition of the stock is good, which is reflected in the positive trend in the booked value of the inventory whilst maintaining the positive sales trend. Finally, gross margin and stock-in-trade development.

If you look at the graphs, combining the long-term gross margin development, the dark gray line and the stock to sales in light gray, we see that we're now back on an upward trend on the gross margin and the long-term trend of coming down in terms of stock to sales. These ratios, as you know, have some natural fluctuations of the year, but we are committed to continue to take further steps towards a neutralized gross margin for 2025 and normalized gross margin for 2025 and continue to work towards our long-term stock to sales targets.

So to summarize, positive direction when it comes to gross margin, a positive direction when it comes to development of stock and stock to sales levels. Cost control continues to be a high priority for us, and these factors combined enable us to continue to focus on delivering on our plan.

Thank you, and back over to you, Daniel.

Thank you, Adam. Thank you for taking us through the financial summary.

I will now take the opportunity to share some of the main takeaways from the quarter and the outlook looking forward. Our takeaway from the quarter is that our plan continues to show progress in the key areas of the business, especially where we have come furthest in our work to improve our customer offer and executing on that plan remains an ongoing effort and the main priority for our entire organization.

We continue with full focus to raise the bar for all our customer groups and all our sales channels. As I mentioned earlier, we see a consistent and strong performance within our key target group, womenswear.

Our collections are more current. They are more on trend, more fashionable and the customer reception has been strong throughout this quarter as well as throughout the first half year.

So I wanted to take the opportunity to show you some of the elevated spring/summer season looks and collections from womenswear in this short video.

Furthermore, we see that our sportswear concept H&M Move as well as our brand, COS, both of them shown here on the screens behind me, continue to perform well over time. Talking about costs, I'm really proud to share that COS was recently named as one of the hottest brands on the renowned list index, which you can see here.

And that's an index that ranks the most popular luxury fashion brands based on consumer data, and we're really proud of the COS made it to the sixth position on this very sought-after ranking. One of our key priorities for 2025 remains to elevate the shopping experience, both in the physical store as well as online and our upgraded digital experience is now live worldwide after a swift and really successful rollout.

We are excited to invite our customers to explore more inspirational shopping experiences, showcasing really the best of our fashion and the elevated collections. We keep improving the digital experience by really listening to our customers and then adding new relevant functionalities along the way.

And on the screen, on the left side, you can see fashion inspiration, a combination of our own produced content, but also create their content mix on our own site and user generated content. And on your right, you can see how we navigate our way through the new updated digital experience.

Then moving to physical store. With the global store portfolio, we're putting a lot of effort to enhance the physical store experience as well as the digital experience.

In the second half of 2025, we will make a push to upgrade a significant amount of stores in our portfolio, improving both the look and feel, but also further developing our omnichannel features. And those features makes it easier for our customers to both buy online and pick up their parcels and their garments in stores as well as returning their online purchases in the physical store.

But we also roll out, for example, RFID-enabled self-checkouts to improve the customer experience in physical store. By doing this, we are building on the combined strength of connecting the physical store with the digital experience.

And combining both the experience as well as the stock, we help the customer to improve the product availability as well as improve the service that we can give to our customers when we leverage both of the channels, both when it comes to experience and services as well as the stock and the availability for the customer. Moving on to how we expand the portfolio.

We are really excited to continue expansion, especially into growing markets such as Latin America. And during the second half of this year, we will open online as well as 4 physical stores in Brazil.

We are really excited and we're really tremendously looking forward to bring our best combination of fashion, quality and sustainability at the best price to growing market with more than 200 million inhabitants and a really vibrant fashion scene. And on the screen here, you can see a preview of the launch campaign that we will have for the opening.

It was just shot in Sao Paulo with local Brazilian talent, and it will be the opening campaign for when we launch Brazil. Moving on to sustainability.

Sustainability continues to be a key priority for us to build long-term competitive advantages. Therefore, we are continuing to deeply integrate sustainability into the core of our business and our daily operations.

And we can see that this is delivering good results, and we are making progress towards our very ambitious sustainability targets. And as an example, we were just recently ranked as #1 out of 42 fashion companies by the organization, Stand.earth, in what is seen as one of the toughest rankings of the industry measuring climate progress, and we're really happy to be mentioned as #1.

So that wraps up our conclusions for the quarter and then take a few words about the outlook and where we're heading from here. We see that in time of high uncertainty, consumers are particularly price sensitive.

We are all of us closely following the macroeconomical as well as the geopolitical developments. And we assess different scenarios to allow us to be flexible and adapt both our customer offer to stay relevant, but as well as how we operate and run the business at large.

With that, we continue to really strengthen our customer offer by elevating our products and the shopping experience continuously both online as well as in the physical stores. We have a clear plan.

We have clear set priorities. We have a strong financial position to lean back on.

We continue, as Adam shared, to focus on a structured cost control, and we have a fantastic group of engaged and motivated colleagues in this organization. So with this, we are building a solid foundation for long-term profitable and sustainable growth for the H&M Group.

With that said, thank you so much for listening, and thank you for joining us today. I will now hand over to Joseph, who will take us through the Q&A.

So Joseph, please.

Thank you so much, Daniel, and thank you for listening. Now it's time for Q&A.

[Operator Instructions] We'll start with questions from this room, and then we'll hand over to the participants over phone. And please hand over the microphone here to Niklas.

Niklas Ekman here from DNB Carnegie. First question is on the U.S.

trade war. What kind of implications are you expecting from what was essentially a blockade on imports from China and then the current U.S.

tariffs? Is that something that you foresee having a sustainable impact on your sales and profitability towards the U.S.

market?

It's been a very turbulent situation with a lot of changes going back and forth, and we've been following closely the changes that are still ongoing. We don't know exactly how they will play out for the rest of the year and that we're monitoring closely and making different scenarios, but also acting.

For us, it's important that we always stay competitive. So we're closely following the competitive landscape and the development of pricing in the U.S.

to make sure that we have a relevant and competitive customer offer. With that, we are, of course, also following how the consumer sentiment is developing and how we need to adapt, but it's very early to try to make those predictions now.

I can just say we are following closely, and we're prepared to adapt both on the customer offer side, but also how we operate the business.

But have you managed to raise prices in the U.S. market already?

We are in all markets looking into how do we stay competitive and how do we have a relevant price position. With this situation, we are very, very closely monitoring and seeing different developments, and we're starting to see some competitors increasing prices.

And that's, of course, something that we look into to make sure that we stay competitive on our position.

But just the fact that you don't mention this in the results, you did mention this in the presentation, it's not on a group level, you don't see it as a major hurdle for H2.

U.S. is an important market for us and will continue to be.

But we believe that both on the sourcing side, we have good flexibility to mitigate depending on, as Daniel said, how this will play out. It was sort of more directed towards one sourcing market for a time and then it became more of a general question.

Now it's more towards one of our sourcing markets again. So we believe that with the flexibility we have in the supply chain, we can maneuver equally good or even better than some of our competitors to protect what Daniel said, our competitive position.

And so we feel that it's a big question that we have spent a lot of time modeling around, but we feel right now that we have it as far as we know today then, given the 90-day tariff holiday that we are in good shape.

But I think that's the key as far as we know today. And that we're very sort of open-minded that the situation might change quickly as well.

Fredrik Ivarsson, ABG. I want to talk a bit about the markdown and particularly maybe the markdown guidance for Q3.

So the effect was neutral in Q2 and then you see downside to the inventory levels, as I interpret it for Q3, Q4, and sales is picking up a little bit, but still you guide for higher markdowns in Q3. What was the rationale for that guidance, please?

I'll start and then please. As Adam mentioned, we see that we've been able to work well with how we optimize the activities and the discounts during the second quarter to be able to lower the stock towards our desired state without significantly increasing markdowns, and that's a good work by the operational teams to optimize the efficiency of the markdowns.

But we also see that given the uncertainty, the customer is very price sensitive. We see that we are acting in a market with a high activity pressure, a lot of discounts.

We see that some of our competitors are increasing the stock-to-sales ratio. So we want to be open-minded and see that we -- and foresee that we might need to activate the customer to continue a positive sales momentum throughout the third quarter.

That's why we're guiding for slightly higher discount levels because we see there is a high markdown pressure in the market.

Okay. Makes sense.

And then I want to talk about all the events and experiences you're investing in or have invested in during the last year or so. What kind of feedback are you getting?

Can you share any tangible things with us, please?

We get -- when we speak to especially the target audience, which is fashion interested women where we decided to focus the most, we get a lot of feedback that H&M feels more relevant again and feels more exciting and you find more relevant and you're more inspired when you come to H&M. We get that both from external data points and consumer surveys, but we also see it in how they act in our channels.

So I think we are raising the excitement around H&M again, then it's a long-term journey to build back that before we will see substantial financial results. We're monitoring closely what makes the biggest difference.

And when we test and you try out a lot, you learn that some things are working really well, then we put more emphasis and accelerate those and then you learn some things are not having the effect that we expected and then we change and adapt the way that we act. So we are in an intense learning period of finding the way to create heat around the brand again.

Daniel Schmidt, Danske Bank. On that topic, you've mentioned now for a long time that womenswear is doing better.

And there's still sort of work to be done when it comes to men's and kids wear. Do you see any sort of shift to the performance gap in Q2 versus the 2 sort of segments of your product?

When we look at the second quarter, as we mentioned, we still see what sticks out positively is a significant improvement in womenswear year-over-year. It's H&M Move, the athletics offer also performing really well.

And then at large, digital channel is performing strong. So we are still -- we are taking a lot of the learnings.

We are raising the bar, and we're working intensely with men's and kidswear. But ahead of us, we have a lot of hard work to get those customer offers on par with where we are with womenswear.

But no real change to the gap basically as of now between womenswear and...

We sustained a very strong performance in womenswear, but we need to make sure that the other ones catch up.

Okay. And second question, just looking at operating expenses for the second half, you're annualizing now when it comes to marketing spend being elevated now for a year as we get into Q3.

And you also had, if I remember correctly, more strategic price investments in place a year ago, basically maybe started now or slightly earlier. How do you see that?

How does that square versus more aggressive refurbishment? And I don't know how much of that is going to be on the P&L or not.

But how should we view those 3 factors looking into the second half of this year? What are you planning?

What we are doubling down on is product. Product is priority #1, 2 and 3.

So everything we do when it comes to marketing, creating brand excitement, upgrading the experience is dependent on having a very competitive product. So the main focus for us is to make sure product is competitive.

We have, during this year, with the investments learned a lot where it pays off and not. So we feel confident that we have a good plan for how to, as we mentioned, sort of capture positive external shifts during the fall by still being able to raise the bar on product.

So that's the main focus. With the learnings we made in marketing, we believe that we can optimize the marketing spend to make sure that we don't see a year-over-year deviation for the second half year.

I don't know if you want to.

No, it's correct. I mean, it's a learning experience.

And so we look for how to optimize the output rather than right now as it looks to increase the spend on marketing, for example. So it's a year-over-year effect that will neutralize towards the second half year.

And am I getting you right that the price -- the strategic price investments, will they still be up year-over-year as we go into the second half? Or are they sort of flattening out as you see it?

Also here, it's much more about optimizing where we see that the investments have paid off or not, so it will be a work of optimizing, not increasing.

I can also add quickly that it's in Q4 when we start to lap the effect of the raised bar on the product side. So that's when we sequentially will see a bit more easier comp base, so to speak, on the gross margin.

Stefan Stjernholm, Handelsbanken. Can you quantify the step-up in marketing spend in the second quarter?

It is slightly below what we quantified for the end of the autumn. So it's in that range, but not quite as much as we guided for in the autumn.

So the sort of the spring corresponding is slightly below that level.

Any more questions from the room before we hand over to the operator. No.

Then we hand over to the operator for questions from the participants over the phone.

Two questions, please. I'll do them one by one.

The first is, could you give us an overall view of where you think average selling prices will land in the second half of the year? I'm still struck by your sort of elevation, but at the same time, wanting to do more promotions.

I mean, overall, we see that the elevated product and offering that we have been working longest with on ladies is performing really, really well. So here, we believe that the customer is appreciating the value we can put into our offering and, hence, shop at a wider price range than previously, which means that we can have a higher share on mid and high prices, which is then an upward elevation of the overall price.

Then as Daniel mentioned, we've had other customer groups with higher competitive pressure and a little bit less well performing, and that's where we see the additional need to activate the customer to ensure that as we are updating the offer that they are seeing us as the relevant place to come to shop. So it's slightly different between the customer groups here.

And as Daniel mentioned, we are leading with the elevation on ladies and other parts of our offering may need some more injection into the customer sentiment to ensure that we are the #1 choice.

And the sort of net-net effect to that, Adam?

It will be slightly up during the year that we predict that we will have an average price that it's above last year.

And my second question is just whether you could give us a bit more detail on your self-checkout plans, roughly how many stores might you have it in so far? And what might be the ambition for the end of the year?

So with self-checkout, we see that it is really, really appreciated by the customers. We see that we have a majority of customers where we have well-working self-checkouts are actually using that option, which is great for customer service, but also for how we operate our stores.

We have a number of different solutions for self-checkout that we have worked with and implemented. And what we mentioned today is especially the RFID-enabled checkout where we believe it's the biggest, which is the best solution to really service our customers in the most efficient way.

And that's what we'll scale roll up on, but we are not sharing specifically how many stores it will be rolled out to. But it would be -- start to hit a more significant part of the portfolio than it's been so far.

Firstly, it was just you called out you had 4% fewer stores, and then you said that the impact on sales was roughly 2%. So just digging into this, is the difference just because you're targeting less productive stores?

Or is there anything going on with the size of the stores as well? And then just following on from that, when you think about impact of these closures on your operating cost base, do you see some benefit because you're closing more of your cost base, but you're not losing as much in sales?

And also, is this dynamic something we should expect for the rest of this year?

I'll start and then you -- so we -- it's correct that we are closing stores that have a lower average turnover per store. So the delta between the amount of stores and the actual quantified effect is due to the fact that the stores that we are closing are smaller than the average store.

Of course, we are closing stores where we don't see that we have a customer demand that can sustain a good performing store, which means that those stores also have a weaker profit and loss situation than the stores that we keep open. So it's a way for us to also improve our cost structure by closing small stores that are not performing top line so they can sustain the cost base.

So it also helps us to optimize our operating costs. We are exploring opportunities, as we mentioned, into how to also expand the store portfolio.

We are opening 80 stores this year. Those stores are stores with a higher turnover.

We are opening -- we are really excited to open some really strong stores in Brazil, for example, and in other markets in Latin America. So the portfolio optimization is an ongoing work where we try to remove the tail of nonproductive small selling stores and add new strong locations.

And that's an ongoing work. Then when it comes to your question if it's a shift in the portfolio setup, we are exploring how to run different size of stores in the best way with all the new opportunities we have in making sure that each store get the right offering and the right products.

We believe we can stretch the size of the stores still. So it's not a direction whether we will go very small or very large.

We look at the best optimal solution for each individual location.

Perfect. And then just one more.

On your portfolio brands, they're outperforming the H&M brand. And can I just understand all the marketing investments you're making, these are not towards the portfolio brands, right?

That's just organic growth on the portfolio brands?

There are 2 parts to it. One is that the marketing efforts we speak about generally is directed to the H&M brand because each brand is individual in that sense and has their own target customer and their own unique brand identity.

So marketing is on brand level and what we're speaking mainly about is connected to the H&M brand. If we look at the sales development for the portfolio brands, they are on another journey.

They still have a lot of untapped potential in many of the markets where we can say that -- I mean, they're established H&M brand market. So that is why they also can deliver and we expect them to deliver a higher relative growth number.

And happy to say -- and Daniel showed it that, for example, COS, which is then an established brand and not the news, is also performing really well, both in terms of sales improvement, but also how the brand has been strengthening its position over the years. So we are pleased to see the performance on COS.

And the result of seeing COS on the list is due to also very good marketing efforts with being a permanent resident in New York Fashion Week, for example, for COS, the fashion show we did outside of Athens this spring are 2 examples where COS has done really well and positioning them as a strong and relevant brand in their part of the industry.

I've got some questions on the sales development. In terms of the June number, it was a bit weaker maybe than some people, and myself included, were looking for given the basis of comparison from last year.

Can you just describe a little bit about what's happened in June? Is there anything specific that you can call out?

And then as the comparison base gets tougher for the rest of the quarter, what have you got to do about it? How are you going to manage this relatively slow exit run rate versus a tougher basis of comparison to the rest of the quarter?

And then the second part, which is related to, might answer together is, you've got the gross margin benefits coming through in the second half. Could it be necessary that you have to invest more of those gross margin benefits to help get that top line moving?

I'll start and then please fill in. So with June, it's a short period of time.

It's a bit more than 3 weeks and also 3 weeks always need to be sort of looked in the light of external factors and what's happening around us. We see when we look at June, there was also a calendar effect from last year.

So June this year started with -- on a Sunday. Last year, it started on a Saturday, which is, of course, a calendar effect that we believe.

And we had a few of the late Easter effects coming into June with Corpus Christi being in June this year versus being in May last year. So we estimate there is roughly 1 percentage point of calendar effect hitting June.

Then we can see that June is a month where we move into summer sale. And as we mentioned before, there has been a high activity pressure in the market, so we see customers are reacting very positively to markdowns.

And that's sort of a bit of the dynamic in June where we have seen that as we have started in different market sale, we see that sales is picking up. When we look at June holistically, we don't see that that's a significant deviation from the current sales trend, the sales trend where we have seen sort of a positive sales development since the fourth quarter 2024 in low single digits.

We believe June is fairly in line with that development.

I think on the markdown, that -- I think you answered really well before that we rather than waiting, we call out here that there might be a need of adding slightly more markdowns to Q3 than compared to last year. And it's because of this dynamic that Daniel is speaking about that we see that the consumer is price sensitive at this moment, and we see the sort of effects of the summer sale kicking in here, so we open up for maybe using that tool during the third quarter.

A couple, please then. Just maybe -- I mean you referred to higher share of nearshoring and more purchasing in season and opportunities to improve working capital stock in the second half of the year.

Can you talk a little bit more about it and what sort of knock-on impacts it might have on gross margin? So how much more are you able to purchase in season?

Can you give us some numbers to help us sort of contextualize that?

The work to shorten the lead times, especially for the parts of the assortment that is very fashion and trend sensitive that we continue with full force, and we do it in several different ways where nearshoring is one important component on that work of shortening our lead times. So that continues.

We don't share any specific shares of how much is on nearshoring and not. And the key for us is to use that as one of the tools in the toolbox to lower the overall lead times for us to be much quicker and react.

And should that drive a structural improvement in stock in the coming quarters? Should we see that?

It's one key lever to support our journey towards the 12% to 14% stock-to-sales ratio that we are aiming for.

Okay. Second question is on the U.S.

again. Can you talk perhaps about where you are with respect to price investments, where you are in the cycle?

And clearly, that market probably inflated quickly, so how are you sort of thinking about your relative pricing levels?

As Adam mentioned, the U.S. is a very important market for us, and we're staying very close to the market.

It's hard to talk about cycles currently given that there's so much change happening in the market. There's so many changes with the tariffs and the situation at large affecting the U.S.

consumer. So we are really following closely where we are and adapting the position accordingly.

And that can mean both price investments into certain categories as well as then as we spoke about the price increases depending on how the competitive landscape changes. So right now, it's a very fast-moving situation, which we are staying close to and, more than anything, are really doubling down on making sure that we have a very, very competitive customer offer, offering the best combination of fashion, quality, sustainability and price.

Maybe I don't know if you are able to just -- within that Americas segment, are you able to talk a little bit about how the U.S. has trended in the period because you give us North and South America segment as a whole.

Anything you can call out?

U.S. has been developing neutrally during the end of the second quarter here, so we come out of the period in previous years where we called out U.S.

as a drainer, now they are more neutral compared to group overall sales.

Just one really. Could you please expand more on your comments of a start of pricing being adjusted up in the U.S., and is it really related essentially only to the Chinese platforms?

Are you seeing that behavior becoming more widespread across the industry in the U.S.? And I guess one quick follow-up just for purpose of forecasting.

The 2% negative impact from space, what do you think will become in half 2 this year and perhaps into next year as we become more front-footed on opening stores again?

I can start with the U.S. Of course, we follow the general market situation and monitor the wide set of competitors in the U.S.

market. And we can see that from those numbers that we start to see an impact on price from the tariffs.

It's a delayed impact, but of course, we see an impact on pricing. Different competitors are acting in different ways, some more aggressively, some more cautiously, but that's the situation that we are following, where we start to see some impact from the tariffs having sort of affecting the pricing position in the U.S.

But as I said, we'll know more later on in July, things might change again. So it's really being on our toes and monitoring day by day, week by week, how the situation develops.

And then on the space expansion, maybe you want to...

We continue to reiterate our sort of message around that the space -- the net space effect will become gradually less negative. And as we also showed here, we have a very exciting new opening in Brazil, for example, and Brazil will not sort of change that whole equation.

But of course, opening strong locations in Brazil, whilst closing weaker monkey stores is, of course, generating a potentially a store number closure, but a less negative effect on the sort of sales and turnover component connected to space. So it's fair to say that we will see a gradual decrease of the negative effect throughout the end of this year, and then we will come back regarding next year later.

I had 2, please. The first one was just in terms of your comments on the consumer uncertainty and so on, maybe you could just give a little bit more color on that, please?

And any differences you're seeing by market? And I'll ask them one by one.

As all of us see, we see that the current uncertainties in the world is also creating uncertainty with the consumer. That is absolutely not always translated into how they act.

So we see even if consumer sentiment is going down, we see really sort of positive development in several markets where also the consumer confidence has gone down, so it's a balancing act. We more recognize that our consumers navigate a turbulent world, and then it's more important than ever for us to really offer outstanding value for money to the consumer.

Do you want to share anything more, Joseph on there?

Well, looking back at, for instance, this month, June, to take a recent example, it started off fairly slowly. And then when we invited our customers to sale, there was a really strong reaction.

This came also in connection to the weather being more favorable, so more need for getting the summer product for the summer needs and outfits, so I think this -- in first half of June, that I think is also can be a reflection of a consumer, which is sort of prioritizing really getting good value for money.

And then my second question was just in terms of sort of the sourcing environment more broadly and very much appreciate that it, of course, remains highly uncertain. But just if you could speak to anything that you're seeing sort of on the ground in sourcing markets in terms of whether suppliers in some markets are much more open to negotiation than previously or vice versa in some other markets?

Any color on that would be helpful, please.

Of course, for our suppliers, it's also a very turbulent world with a lot of changes happening. And then for a long -- for the last sort of 18 months, we have worked on building long-term strategic partnerships with the stronger suppliers.

And of course, having that long-term relationship is really beneficial when times are turbulent because then we can partner up on how we solve difficult challenges. And we have had really, really good conversations and discussions with our suppliers to make sure that we can navigate this turbulent world in the best possible way together with them for the best interest of our company and of their companies in the long term.

So we're having very productive discussions with our suppliers that we built a long-term relationship with coming into this period of uncertainty.

Hope you can hear me. Really just to go back to a couple of questions from earlier.

If I can start with kind of your womenswear, H&M Move and digital channel outperformance. I mean, I think investors are really looking for a data point to have some conviction in the response to the strategic initiatives.

Can you provide a data point on any of those particular areas? Maybe I'll ask the questions in order.

No, we will not share any further data points unless you want to sort of give a further light on that.

I think what we can say is that it has been a consistent stronger performance among these areas that you mentioned across geographies and also over the quarters, the past quarters. So I think it's a consistent trend, and that's what we...

And it aligns to the customer feedback that we get, which sort of the collections that have been mostly appreciated, the campaigns mostly appreciated, that aligns. I think we can see it in a higher stock to sales productivity in those parts of the business as well.

So it's a holistic picture, but no specific further data points.

Okay. All right.

A second question on these long-term marketing investments. I think you've already been asked on this, but just to clarify, I think you said it's going to be neutral year-on-year in the second half.

My impression was they were kind of extraordinary kind of brand building, reengagement with the brand kind of investments, is there a sense that this is now just a normal level of marketing expense going forward?

It will be a continued focus through the product, but also, of course, make sure that the customer becomes aware and start to see the heat of the brand. So we will have a continued high ambition when it comes to marketing.

But connected to the spend, we try to disconnect this because we are also, as Daniel said, learning what creates the biggest bang for the buck, so to say.

Two from me, please, if that's okay. First one is on Eastern Europe.

I wonder if you could just talk about what drove the softer performance there in Q2 and whether that's carried on into Q3.

There were, I would say, 2 regions, which were sort of -- if you look at the local currency selling that were on the weaker side this -- the second quarter, and it was up in Northern Europe, and it was towards sort of Eastern Europe. And the common denominator from this was that May was a dreadful month for starting to sell summer products.

So we did have -- we don't want to call out weather, but there was a temporary mismatch between what we offered, and we offered a strong summer assortment and the consumer was looking for umbrellas and coats. So that is a significant part of the softening of the trend in Eastern Europe.

Okay. That's helpful.

The other one is just to clarify, it sounds like June sales have been somewhat impacted by competitor discount activity, sale activity. But has H&M's own calendar shifted in terms of tight [Technical Difficulty] in recent years.

And so last year, have you started the sort of summer sale activity more generally a little bit earlier this year?

We continuously look at the right timing for when to activate based on, of course, the stock situation, but also the customer mindset, the demand, the timing in the market and the calendar at large. And that leads to that we do in different market changes all the time ongoing to optimize.

Sometimes we do it a little bit earlier, sometimes a little bit later. I think if you look at the whole, we are more or less on par with last year when we started sale.

We have a few markets where we went in a little bit earlier, a few markets where we started later, but as a net effect, it's the same as last year.

Two questions. First one, I just wanted to pick up on the point you guys made about building long-term relationships with suppliers to ensure stability in turbulent times.

I wondered if you could unpack a little bit more how you're balancing that with flexibility in sourcing, which you mentioned was equally important in terms of navigating tariff uncertainty, as those 2 seem a little bit contradictory.

So we have, over the last 1, 1.5 years, consolidated the supplier base, so we work with fewer, but more strategic suppliers. And instead of just working transactionally on each individual order, we work on building long-term partnerships.

And that helps us, to your question, with sort of doing both by also navigating the flexibility that we have a long-term partnership with our suppliers that help them to help us to be flexible. It also means, secondly, we have never full capacity at any supplier, which also helps then a long-term partnership, not full capacity helps us to be flexible in the partnership with them when we want to be able to act quickly up or down.

So that's my view. I don't know if you want to add anything.

One additional point maybe is also to clarify that suppliers is different from production units. So suppliers also having multiple locations helps us to expand into new markets and expand with new capabilities.

So that is also an added benefit of this partnership. It's not a supplier is a factory, a supplier is many factories, many locations that helps us to stay flexible also and expand with their expertise in the respective geography.

Got it. And then the other question was around the point you made on sustainability as a long-term competitive advantage.

I wondered how you're looking at the rollback of regulations, particularly in Europe, which could level the playing field with competitors who perhaps are not looking at this so closely. Is this affecting how competitive you see the company's sustainability initiatives?

And how is H&M engaging with Brussels on this?

So for us, as I mentioned before, sustainability, we integrate sustainability into our business and we prioritize it because we are convinced that it would build a long-term competitive advantage for us. And that's one of the benefits of having a long-term committed owner to this company that we can invest for the long-term competitiveness because we know and we are convinced that our industry will need to go through a transformation and change, and we are keen on being part of that transformation.

We believe that there should be fair and equal playing spaces for competition and playing fields, so we believe it's good and positive when regulations happens in the sense that we have a fair competition landscape. Meaning that we can compete on equal terms.

Those -- we are positive to that kind of legislation, then it's really important how it's being shaped to make sure it actually is a level playing field, and it's in the benefit of sustainability progression and beneficial for the consumer. So we're positive to legislation that levels the playing field and makes everyone compete on equal terms.

And then on a personal note and, for us, I believe we think it's unfortunate if there is less focus on sustainability because we believe that's a tremendously important question for our industry at large that would need to be top of our mind for many years to come.

Do we have any final questions from the phone participants?

I've got 2 questions, please. I'll ask them one by one.

So first of all, on the store refurbishment, I think, I understand that you're stepping up that activity. But I'm just wondering, is that going to have a stepped-up impact on stores in terms of store closures?

Or is it quite light touch?

It is more of what you describe as a light touch, meaning that it's not about -- the optimization of the portfolio continues, as we spoke about before. Us closing smaller stores and then opening in new larger attractive locations, and that optimization continues.

Then touching the stores of increasing the customer experience in the store is optimizing layouts, adding omni features, yielding tech improvements that helps the customer to find what they're looking for, improving product presentation. Those -- that package is what we will take out to larger share of the portfolio during 2025.

And those type of light refurbishments doesn't mean that we need to close the store.

Right, exactly.

The can be done while running the store and serving our customers.

Good point.

And then I've got a question on the markdown impact guidance. So just wondering whether you've got increased levels of aged stock that you want to sell through as part of the sale or whether you're actually just actively investing in price, say, for lower-priced products?

So as we mentioned, our stock has developed in a positive direction in the second quarter, and we believe the composition is good. So here, it's more about using markdowns and activities to activate the customer and drive top line than solving old stock.

I have had some questions about the Norwegian market. You opened ARKET here in Oslo and in Bergen in May.

How have the ARKET stores in Norway been doing so far?

We're really excited and happy how the ARKET concept has been received by the Norwegian consumer and the market. We had good hopes going in because we saw a good development digitally, and now we're really happy that we're also physically present in Norway.

So we're really satisfied with the expansion to Norway.

And can you say something of how much you have been sold during this first time? And has the performance been better or worse than expected?

It's performed better than we expected actually.

Can you say something more about that?

No. We are really satisfied.

Good. Thank you for all the questions.

Yes, we have room for 1 final question from the room as well. Please go ahead.

Daniel, here at the front.

Daniel from Danske again. I think just one clarification, maybe specifically to Adam.

When you talk about store closures, you mentioned a less negative impact going into the second half. I think you actually said before that you should see a net positive impact in the second half of this year before in terms of sales despite the fact that you are closing stores because you're opening bigger stores and closing smaller and so on.

Is this a slight shift in communication? Or am I getting it wrong?

I think you're getting it right. And we worded it as, I think, 190 closure, now it's just above 200.

So there's a nuance there that's sort of reflected in my comment here with, I mean, a timing effect.

Then we thank you all for coming today and asking many good questions. We wish you a great summer ahead for those of you who are based in the Northern Hemisphere.

Thank you so much. Thank you for joining.

Thank you.