FULL-YEAR REPORT 2011 H & M HENNES & MAURITZ AB FULL-YEAR REPORT 1 December 2010 – 30 November 2011 FULL-YEAR The H&M Group’s sales including VAT increased in local currencies by 8 percent during the financial year. Sales in comparable units decreased by 1 percent. Sales in SEK were strongly negatively affected by currency translation effects. Converted into SEK, sales excluding VAT amounted to SEK 109,999 m (108,483). Gross profit amounted to SEK 66,147 m (68,269), corresponding to a gross margin of 60.1 percent (62.9). Profit after financial items amounted to SEK 20,942 m (25,008). Of this year’s profit decrease compared to the previous year, approximately SEK 1.5 billion in total is due to negative currency translation effects and the item affecting comparability relating to the H&M Incentive Program. Group profit after tax was SEK 15,821 m (18,681), corresponding to SEK 9.56 (11.29) per share. Strong expansion during the year. The Group opened 266 (218) new stores net. China, the US, the UK and Germany were the largest expansion markets. THE FOURTH QUARTER The H&M Group’s sales including VAT increased by 6 percent in local currencies in the fourth quarter. Sales in comparable units decreased by 3 percent. Converted into SEK, sales excluding VAT amounted to SEK 30,952 m (29,711). Gross profit amounted to SEK 19,150 m (18,792), corresponding to a gross margin of 61.9 percent (63.2). Profit after financial items amounted to SEK 6,802 m (7,178). Group profit after tax amounted to SEK 5,357 m (5,487), corresponding to SEK 3.24 (3.32) per share. ------------------------------------------------------------------------------------------------------------------------------------------ The Board of Directors proposes a dividend of SEK 9.50 (9.50) per share for the financial year 2010/2011. Sales in December 2011 increased by 13 percent in local currencies compared to the same month the previous year. Sales in comparable units increased by 4 percent. Sales in the period 1–24 January 2012 increased by 12 percent in local currencies compared to the same period last year. H&M plans a net addition of around 275 stores for the financial year 2011/2012. Bulgaria, Latvia, Malaysia and Thailand will become new H&M markets in 2012. In addition to these countries, H&M plans to expand into Mexico in autumn 2012. The first COS stores in Hong Kong, Italy, Finland and Kuwait are planned to open in 2012. Comments on the full-year by Karl-Johan Persson, CEO “H&M stands strong in a challenging market. We increased sales by 8 percent in local currencies and continued to gain market share during what was one of the toughest years for a long time for the fashion retail industry in many countries. The fact that we have gained market share, proves that our customers appreciate our collections, which offer a wide range of inspiring fashion for everyone. The situation in the sourcing markets has also been challenging. Cost inflation has been high resulting in increased purchasing costs for the fashion retail industry. Despite increased purchasing costs, we chose a strategy of strengthening our customer offering and market position even further relative to competitors. The investments have varied over time and have involved everything from even better prices to even higher quality and more sustainable materials. We are convinced that this will gradually become more evident to customers and will strengthen H&M’s already strong market position even further. Our strong expansion continued during the year. We opened 266 new stores net, five new markets were added and we created around 7,000 new jobs. Today we have a strong global presence with around 2,500 stores in 43 markets and more than 94,000 employees. We are also planning for a strong expansion in 2012 with approximately 275 new stores net. The countries in which we will open the most stores during the year are China, the US and the UK. Bulgaria, Latvia, Malaysia and Thailand will become new H&M markets. We also plan to open in Mexico during the autumn 2012, it will be our first store in Latin America. This will make a total of 10 new H&M markets over a period of two years. Expansion will also continue within our other brands such as COS and Monki, including the opening of the first COS stores in Hong Kong, Italy, Finland and Kuwait. The new year has started well, with strong sales development in both December and so far in January. Most indicators suggest that the macro-economic climate in many of our markets will continue to be tough during 2012, but we have a strong belief in our offering and are convinced that H&M will continue to maintain its strong position as the year goes on. We are looking forward to an exciting year full of opportunities.”
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FULL-YEAR REPORT 2011
H & M HENNES & MAURITZ AB FULL-YEAR REPORT
1 December 2010 – 30 November 2011
FULL-YEAR
The H&M Group’s sales including VAT increased in local currencies by 8 percent during the financial year. Sales in comparable units decreased by 1 percent. Sales in SEK were strongly negatively affected by currency translation effects. Converted into SEK, sales excluding VAT amounted to SEK 109,999 m (108,483).
Gross profit amounted to SEK 66,147 m (68,269), corresponding to a gross margin of 60.1 percent (62.9).
Profit after financial items amounted to SEK 20,942 m (25,008). Of this year’s profit decrease compared to the previous year, approximately SEK 1.5 billion in total is due to negative currency translation effects and the item affecting comparability relating to the H&M Incentive Program.
Group profit after tax was SEK 15,821 m (18,681), corresponding to SEK 9.56 (11.29) per share.
Strong expansion during the year. The Group opened 266 (218) new stores net. China, the US, the UK and Germany were the largest expansion markets.
THE FOURTH QUARTER
The H&M Group’s sales including VAT increased by 6 percent in local currencies in the fourth quarter. Sales in comparable units decreased by 3 percent. Converted into SEK, sales excluding VAT amounted to SEK 30,952 m (29,711).
Gross profit amounted to SEK 19,150 m (18,792), corresponding to a gross margin of 61.9 percent (63.2).
Profit after financial items amounted to SEK 6,802 m (7,178). Group profit after tax amounted to SEK 5,357 m (5,487), corresponding to SEK 3.24 (3.32) per share.
The Board of Directors proposes a dividend of SEK 9.50 (9.50) per share for the financial year 2010/2011.
Sales in December 2011 increased by 13 percent in local currencies compared to the same month the previous year. Sales in comparable units increased by 4 percent.
Sales in the period 1–24 January 2012 increased by 12 percent in local currencies compared to the same period last year.
H&M plans a net addition of around 275 stores for the financial year 2011/2012.
Bulgaria, Latvia, Malaysia and Thailand will become new H&M markets in 2012. In addition to these countries, H&M plans to expand into Mexico in autumn 2012.
The first COS stores in Hong Kong, Italy, Finland and Kuwait are planned to open in 2012.
Comments on the full-year by Karl-Johan Persson, CEO “H&M stands strong in a challenging market. We increased sales by 8 percent in local currencies and continued to gain market share during what was one of the toughest years for a long time for the fashion retail industry in many countries. The fact that we have gained market share, proves that our customers appreciate our collections, which offer a wide range of inspiring fashion for everyone. The situation in the sourcing markets has also been challenging. Cost inflation has been high resulting in increased purchasing costs for the fashion retail industry. Despite increased purchasing costs, we chose a strategy of strengthening our customer offering and market position even further relative to competitors. The investments have varied over time and have involved everything from even better prices to even higher quality and more sustainable materials. We are convinced that this will gradually become more evident to customers and will strengthen H&M’s already strong market position even further. Our strong expansion continued during the year. We opened 266 new stores net, five new markets were added and we created around 7,000 new jobs. Today we have a strong global presence with around 2,500 stores in 43 markets and more than 94,000 employees. We are also planning for a strong expansion in 2012 with approximately 275 new stores net. The countries in which we will open the most stores during the year are China, the US and the UK. Bulgaria, Latvia, Malaysia and Thailand will become new H&M markets. We also plan to open in Mexico during the autumn 2012, it will be our first store in Latin America. This will make a total of 10 new H&M markets over a period of two years. Expansion will also continue within our other brands such as COS and Monki, including the opening of the first COS stores in Hong Kong, Italy, Finland and Kuwait. The new year has started well, with strong sales development in both December and so far in January. Most indicators suggest that the macro-economic climate in many of our markets will continue to be tough during 2012, but we have a strong belief in our offering and are convinced that H&M will continue to maintain its strong position as the year goes on. We are looking forward to an exciting year full of opportunities.”
FULL-YEAR REPORT 2011
2
Sales and store openings
Sales including VAT increased by 8 percent in local currencies for the financial year. Sales
in comparable units decreased by 1 percent. Converted into SEK, sales increased to
SEK 128,810 m (126,966). Sales excluding VAT increased to SEK 109,999 (108,483).
The strengthening of the Swedish krona during the year has meant that most of the sales
countries’ currencies have depreciated against the Swedish krona compared to the
previous year. For H&M, this fact has had significant negative effects when translating
sales in local currencies into the company’s reporting currency of SEK. As a result,
although sales increased by 8 percent in local currencies, the increase in Swedish krona
was only 1 percent.
Sales including VAT for the fourth quarter increased by 6 percent in local currencies. Sales
in comparable units decreased by 3 percent. Converted into SEK, sales increased by
4 percent to SEK 36,191 m (34,792). Sales excluding VAT increased to SEK 30,952 m
(29,711).
The Group opened 296 (243) stores and closed 30 (25) stores during the financial year,
i.e. a net addition of 266 new stores. In the fourth quarter, 160 (138) stores opened and
13 (10) stores closed. The total number of stores in the Group as per 30 November 2011
thus amounted to 2,472 (2,206), of which 70 franchise stores, 45 COS stores, 52 Monki
stores, 19 Weekday stores and 4 Cheap Monday stores.
Results for the financial year
Gross profit for the Group for the financial year amounted to SEK 66,147 m (68,269), a
decrease of 3 percent. This corresponds to a gross margin of 60.1 percent (62.9).
The operating profit amounted to SEK 20,379 m (24,659). This corresponds to an
operating margin of 18.5 percent (22.7).
Operating profit for the financial year has been charged with depreciation amounting to
SEK 3,262 m (3,061).
Consolidated net interest income was SEK 563 m (349).
Profit after financial items amounted to SEK 20,942 m (25,008).
The Group’s profit for the financial year after applying a tax rate of 24.5 percent (25.3) was
SEK 15,821 m (18,681), which represents earnings per share of SEK 9.56 (11.29), a
decrease of 15 percent.
Return on shareholders’ equity was 35.8 percent (44.1) and return on capital employed
was 47.1 percent (58.7).
FULL-YEAR
2011
FULL-YEAR
2010
Q4
2011
Q4
2010
(SEK m)
Net sales 109,999 108,483 30,952 29,711
Gross profit 66,147 68,269 19,150 18,792
gross margin, % 60.1 62.9 61.9 63.2
Operating profit 20,379 24,659 6,665 7,060
operating margin, % 18.5 22.7 21.5 23.8
Net financial items 563 349 137 118
Profit after financial items 20,942 25,008 6,802 7,178
Tax -5,121 -6,327 -1,445 -1,691
Profit for the period 15,821 18,681 5,357 5,487
Earnings per share, SEK 9.56 11.29 3.24 3.32
FULL-YEAR REPORT 2011
3
Comments on the full year
H&M has continued to gain market share in a year that has been very challenging for the
fashion retail industry in many countries. Economic uncertainty in a number of markets has
had a negative effect on consumption resulting in fiercer competition for consumer
spending. For fashion retailers, this has resulted in multiple price activities and markdowns
which were intensified during the second half-year.
In these circumstances, sales have been good showing that H&M’s strong offering has
been well received by customers. The fact that sales in comparable units decreased by
1 percent for the full-year should also be viewed in the light of last year’s strong
comparables of a 5 percent increase in comparable units. Sales development has been
very positive in countries such as the US, China, Russia and the UK.
The Group’s other brands COS, Monki, Weekday and Cheap Monday have also had a
positive sales development during the year. It has been a very good year for COS in
particular, which has developed beyond the company’s high expectations both regarding
sales and profits. There are now nearly 50 COS stores in nine countries and the expansion
continues.
It has also been a challenging year in the sourcing markets, where high cost inflation,
mainly as a result of very high cotton prices, has led to increased purchasing costs.
To maintain a long-term perspective and always be able to offer customers the best
combination of fashion and quality at the best price in each market, H&M has deliberately
invested to further strengthen its customer offering and thereby its position in the market.
The investments have varied over time and have involved everything from even better
prices to even higher quality and more sustainable materials.
A total of 266 new stores net were opened in 2011, which was more than the originally
planned 250 stores. The fact that more stores than planned were added was mainly due to
greater expansion opportunities in China and the very positive reception in H&M’s new
markets of Romania and Croatia. China, the US, the UK and Germany were the largest
expansion markets during the year.
The reception in H&M’s new market of Singapore in South East Asia has been very good.
The new franchise markets Jordan and Morocco, which opened at the end of November,
have also made a good start.
E-commerce is becoming increasingly important for the fashion retail industry as well as for H&M. The new H&M Shop Online, which was launched at the beginning of 2011, offers an inspiring, innovative and interactive shopping experience. H&M’s website including the new H&M Shop Online is today one of the world’s most visited websites in the fashion retail industry. The newly launched shop online for COS and Monki in 18 markets have been well received.
During the year H&M increased its investments within marketing, IT and online and
catalogue sales. The purpose of these investments is to further strengthen H&M’s market
position in the long term and to secure future expansion. The company has also introduced
a long-term incentive programme for all employees, the H&M Incentive Program, which
aims to encourage long-term commitment and support future recruitment. Even if these
investments have led to cost increases, the cost control remains good. Costs in
comparable stores have decreased compared to the previous year.
The profit decrease compared to the previous year is mainly related to the increased
purchasing costs combined with the fact that H&M chose a strategy of further
strengthening its customer offering and its market position relative to competitors. In
addition, more than SEK 1.2 billion of the decrease in profit after financial items compared
to the previous year is related to negative currency translation effects, as most of the sales
countries’ currencies have depreciated relative to the Swedish krona during the year. The
item affecting comparability, SEK 248 m to the H&M Incentive Program, has also affected
the year’s profits.
FULL-YEAR REPORT 2011
4
The number of refurbished stores remained at the same high level as in the 2010 financial
year while investments for new and refurbished stores were lower per unit than in 2010.
Results for the fourth quarter
Gross profit for the fourth quarter amounted to SEK 19,150 m (18,792), an increase of
2 percent. This corresponds to a gross margin of 61.9 percent (63.2).
Operating profit for the fourth quarter amounted to SEK 6,665 m (7,060).
This corresponds to an operating margin of 21.5 percent (23.8).
Profit after financial items was SEK 6,802 m (7,178).
Profit after tax was SEK 5,357 m (5,487), corresponding to SEK 3.24 (3.32) per share, a
decrease of 2 percent.
Comments on the fourth quarter
H&M’s sales including VAT increased by 6 percent in local currencies in the quarter.
Converted into SEK, sales amounted to SEK 36,191 m (34,792). Sales are considered to
be satisfactory considering that consumption in many of H&M’s markets was affected by
unseasonably warm weather and was also restrained due to concerns regarding the
effects of the debt crisis in Europe.
The gross margin was 61.9 percent (63.2). The decrease in the gross margin was mostly
due to increased purchasing costs during the time of sourcing for the fourth quarter 2011
compared to the corresponding period the previous year, combined with the chosen
strategy of further strengthening the customer offering and the market position relative to
competitors. The increased purchasing costs are mainly related to the continued sharp
increase in the cotton price during 2011 compared to the already high levels in 2010. The
cotton price peaked in spring 2011, but remained at higher levels than in 2010 right up until
the autumn.
The gross margin has also been negatively affected by 0.6 percentage units as a result of
increased markdowns in relation to sales compared to the corresponding quarter the
previous year.
The decrease in the gross margin has been partly offset by a positive US dollar effect at
the time of sourcing for the fourth quarter compared to the corresponding period the
previous year.
Selling and administrative expenses in the quarter amounted to SEK 12,485 m (11,732),
an increase of 6 percent. In local currencies, the increase was 8 percent. The cost
increase compared to the fourth quarter 2010 is mainly due to the expansion and to
investments within IT and online in order to further strengthen H&M’s market position in the
long term and to secure future expansion. Cost control in the Group remains good.
Costs in comparable stores decreased compared to the fourth quarter 2010.
Profitability remained strong with an operating margin of 21.5 percent (23.8). Profit after
financial items amounted to SEK 6,802 (7,178), a decrease of 5 percent.
The stock-in-trade increased by 20 percent compared to the same time the previous year
and amounted to SEK 13,819 m (11,487). In local currencies the increase was also
20 percent. The stock increase is mainly explained by the expansion and higher
purchasing costs, but also by the warm autumn’s effect on sales of winter garments. The
stock-in-trade as of 30 November 2011 consists of more winter garments compared to the
same time the previous year and is therefore slightly higher than planned. Apart from this,
the level and composition of the stock-in-trade are deemed satisfactory.
FULL-YEAR REPORT 2011
5
Financial position and cash flow
Consolidated total assets as per 30 November 2011 amounted to SEK 60,188 m (59,182),
an increase of 2 percent compared to the same time the previous year.
The current operations generated a positive cash flow of SEK 17,420 m (21,838). Cash
flow was among other things affected by dividends of SEK -15,723 m (-13,239),
investments in fixed assets of SEK -5,174 m (-4,959) and by changes in short-term
investments with a duration of four to twelve months of SEK 1,209 m (-5,166). During the
financial year, the Group generated a cash flow of SEK -2,359 m (-1,530). Liquid funds and
short-term investments amounted to SEK 21,277 m (24,858).
The stock-in-trade increased by 20 percent compared to the same time the previous year
and amounted to SEK 13,819 m (11,487). This corresponds to 12.6 percent (10.6) of sales
excluding VAT. The stock-in-trade was 23.0 percent (19.4) of total assets.
The equity/assets ratio was 73.3 percent (74.6) and the share of risk-bearing capital was
74.9 percent (76.2).
Shareholders’ equity apportioned on the outstanding 1,655,072,000 (1,655,072,000)
shares as per 30 November 2011 was SEK 26.65 (26.69).
Expansion
H&M remains positive as regards future expansion and the Group’s business
opportunities.
H&M’s growth target remains intact. The growth target is to increase the number of stores
by 10-15 percent per year with continued high profitability, while at the same time
increasing sales in comparable units. For the 2011/2012 financial year a net addition of
approximately 275 stores is planned. China, the US and the UK are expected to be the
largest expansion markets for H&M in 2012. There are also still great opportunities for
expansion in markets such as France, Italy and Germany.
The proportion of refurbishments of existing stores is expected to remain at the same high
level as during 2010/2011.
H&M will open its first store in Sofia, Bulgaria in March 2012. H&M is continuing to expand
in South East Asia with a store opening in Kuala Lumpur in Malaysia during the autumn
2012. In autumn, H&M will also open its first stores in Riga in Latvia. In addition to these
new H&M countries, H&M plans to open in Mexico in autumn 2012. It will be the
company’s first store in Latin America. Thailand will become a new franchise market in
cooperation with the franchisee J.S.Gill. The first store is scheduled to open in autumn
2012 in Bangkok. The franchise opening in Jakarta in Indonesia has been postponed until
spring 2013.
In autumn 2012 H&M will start online sales in the US, the world’s largest online market.
Expansion continues for the Group’s other brands COS, Monki, Weekday and Cheap
Monday. COS, for example, will open its first stores in Hong Kong, Italy and Finland during
spring 2012 and in Kuwait during autumn 2012. The opening in Kuwait will be in
cooperation with the franchisee Alshaya. H&M Home will also continue to expand.
FULL-YEAR REPORT 2011
6
Tax
The tax rate for the financial year 2010/2011 was 24.5 percent (25.3). The lower tax rate
compared to the previous year’s tax rate, is mainly due to adjustments of previous years’
tax costs.
For the financial year 2011/2012 the tax rate is expected to be in the region of 25–26
percent, depending on the results of the subsidiaries in each country.
Employees
The average number of employees in the Group, converted into full-time positions, was
64,874 (59,440), of which 5,855 (5,398) are employed in Sweden.
Parent company
The parent company’s external sales amounted to SEK 24 m (6) for the financial year.
Profit after financial items amounted to SEK 16,451 m (14,868). Investments in fixed
assets amounted to SEK 119 m (100).
Comments on the current quarter
Sales including VAT in December 2011 increased by 13 percent in local currencies
compared to the same month the previous year. Sales in comparable units increased by
4 percent compared to the same month the previous year.
Sales during the period 1–24 January 2012 increased by 12 percent in local currencies
compared to the same period last year.
The stock-in-trade as of 30 November 2011 was slightly higher than planned and
contained more winter garments compared to the same time the previous year due to the
unseasonable warm autumn. The company’s view is that this will likely lead to somewhat
increased markdowns in relation to sales in the first quarter 2011/2012 compared to the
same quarter the previous year.
Dividend policy and dividend proposal
H&M’s financial goal is to enable the company to continue enjoying good growth and to be
prepared to exploit business opportunities. It is essential that the expansion, as in the past,
proceeds with continued high degree of financial strength and continued freedom of action.
Based on this policy, the Board of Directors has determined that the total dividend should
equal about half of the profit after tax. In addition, the Board may propose that any surplus
liquidity is also distributed.
The Board of Directors has decided to propose a dividend of SEK 9.50 per share (9.50) to
the 2012 Annual General Meeting corresponding to 99 percent (84) of the profit after tax.
The Board of Directors is of the opinion that the proposed distribution of earnings is
justifiable taking into consideration the financial position and continued freedom of action of
the Group and the parent company and observing the requirements that the nature and
extent of the business, its risks and future expansion plans impose on the Group’s and the
parent company’s equity and liquidity.
FULL-YEAR REPORT 2011
7
Annual General Meeting 2012
The Annual General Meeting 2012 will be held on Thursday 3 May, at 3 pm in Victoriahallen, at the Stockholm International Fairs.
Annual Report 2010/2011
The Annual Report and the Corporate Governance Report are expected to be published on
29 March 2012 on www.hm.com and will be sent out by post to shareholders that have so
requested and will also be available at the company’s head office.
Accounting principles
The Group applies the International Financial Reporting Standards (IFRS) as adopted by the EU. This report has been prepared according to IAS 34 Interim Financial Reporting as well as the Swedish Annual Accounts Act.
The accounting principles and calculation methods applied in this report are unchanged
from those used in the preparation of the Annual Report and Consolidated Financial
Statements for 2009/2010 which is described in Note 1 – Accounting principles.
The parent company applies the Swedish Annual Accounts Act and the Swedish Financial Reporting Board’s recommendation RFR 2 Accounting for Legal Entities, which essentially involves applying IFRS. In accordance with RFR 2 the parent company does not apply IAS 39.
Risks and uncertainties
A number of factors may affect H&M’s results and business. Most of these can be dealt
with through internal routines, while certain others are affected more by external
influences. There are risks and uncertainties related to fashion, weather situations,
changes in consumer behaviour, climate changes, trade interventions, external factors in
production countries and foreign currency, but also in connection with expansion into new
markets, the launch of new concepts and how the brand is managed.
For a more detailed description of risks and uncertainties, refer to the Administration
Report and to Note 2 in the Annual Report and Consolidated Accounts for 2009/2010.
There were no significant changes in risks and uncertainties during the period.
Key-ratio definitions
Return on equity: Profit for the year in relation to average shareholders’ equity.
Return on capital employed: Profit after financial items plus interest expense in relation
to average shareholders’ equity plus average interest-bearing liabilities.
Share of risk-bearing capital: Shareholders’ equity plus deferred tax liability in relation to
the balance sheet total.
Equity/assets ratio: Shareholders’ equity in relation to the balance sheet total.
Equity per share: Shareholders’ equity divided by number of shares.
P/E ratio: Price per share divided by earnings per share.
Comparable units: Comparable units comprise the stores and the internet and catalogue
sales countries that have been in operation for at least one financial year. H&M’s financial year is from 1 December to 30 November.
All figures within parenthesis refer to the corresponding period or point of time the previous year.
FULL-YEAR REPORT 2011
8
CALENDAR
29 March 2012 The Annual Report 2011 to be published
29 March 2012 Three-month report, 1 December 2011 – 29 February 2012
3 May 2012 Annual General Meeting 2012, Victoriahallen, at the Stockholm
International Fairs at 3 p.m.
20 June 2012 Six-month report, 1 December 2011 – 31 May 2012
The Full-year Report has not been audited by the company’s auditors.
Stockholm, 25 January 2012
Board of Directors
The information in this Full-year Report is that which H & M Hennes & Mauritz AB (publ) is
required to disclose under Sweden’s Securities Market Act. It will be released for publication at 8.00 (CET) on 26 January 2012.
CONTACT PERSONS
Nils Vinge, IR +46-8-796 52 50 Jyrki Tervonen, CFO +46-8-796 52 77 Karl-Johan Persson, CEO +46-8-796 52 33 Switchboard +46-8-796 55 00
H & M Hennes & Mauritz AB (publ) was founded in Sweden in 1947 and is quoted on NASDAQ OMX Stockholm. The company’s business concept is to offer fashion and quality at the best price. In addition to H&M, the group includes the brands COS, Monki, Weekday and Cheap Monday as well as H&M Home. The H&M Group has around 2,500 stores in 43 markets including franchise markets. In 2011, sales including VAT were SEK 128,810 million and the number of employees was more than 94,000. For further information, visit www.hm.com.