Ladies and gentlemen, thank you for standing by, welcome to today's full year report for 2020. At this time all participants are in a listen-only mode. There will be a presentation followed by a question and answer session, at which time if you wish to ask a question, you need to press star one on your telephone and wait for your name to be announced. To ask questions today, please connect to the audio call via the link on hmgroup.com. I must advise that this conference is being recorded today, Friday 29th of January 2021. I would now like to hand the conference over to your speaker today, Nils Vinge, Head of IR. Please go ahead, sir. Thank you. Hi everyone, and thank you for joining us today, and welcome to this telephone conference in connection to H&M Group's full year and fourth quarter results 2020. With me today is our CEO, Helena Helmersson and CFO Adam Karlsson. Helena will start by giving a short summary of the full year and fourth quarter 2020. Adam will talk about our financial position before Helena will say some words on current developments and our focus going forward. After that, we will be happy to answer your questions. You will find the presentation material and full year report on hmgroup.com investor relations. Helena, please go ahead. Thank you, Nils. Looking back at 2020, it was a year characterized by the pandemic. The impact on our business was severely negative and came fast. Going into the pandemic, we had a strong momentum with double-digit earnings growth in 2019 and profits more than doubling in the first quarter 2020. Due to extensive lockdowns and restrictions, most of our stores had to close temporarily and market conditions weakened dramatically. At one point, as many as 80% of our 5,000 stores were closed in the second quarter. In markets where stores were still open, customer traffic was significantly decreased. We very quickly took a number of strong measures to deal with the situation and counteract the negative effects of the pandemic. We have been working extremely hard throughout the year, and while many decisions were tough to make, they have all been necessary. I am extremely proud to say that the teamwork carried out by our colleagues across our brands, functions, and markets to deal with this crisis has been absolutely amazing. The crisis work covered all parts of the business, including buying, investments, rents, staffing, and financing, which Adam will tell you more about. We placed greater emphasis on our well-developed digital channels, which remained open in most online markets and partly compensated for the massive drop in physical store sales caused by lockdowns and restrictions. Following a loss in quarter two, our recovery in the third quarter was strong. Restrictions gradually eased, sales began to come back. Customers clearly showed us they appreciate our collections, along with a smooth and inspiring shopping experience in all channels. Our recovery would not have been possible without the recent year's transformation work and significant investments focusing on the digital. Our online sales remained strong as stores opened again. Our actions, combined with an attractive customer offering, resulted in a better recovery than expected up until the second wave of the pandemic. Despite the COVID-19 situation, we managed to increase the customer base in 2020, and we kept inventory under good control. With strong, profitable online growth and good cost control, we ended the year in profit and with a strong financial position. With that introduction, I'm handing over to you, Adam. Thank you, Helena. As Helena mentioned, after a strong first quarter, we needed not only to shift our commercial agenda, but also our financial focus. Top priorities became securing liquidity and a continued financial flexibility while of course also working towards a long-term financial resilience. We took a number of measures to secure this, some of them short-term and 2020 focus, while others will contribute both when managing a second wave and thereafter. When the first wave struck, we immediately took action to ensure operational flexibility and efficiency. Buying levels were adjusted and inventory management were among the many measures taken. Cost management, with a big focus on the store portfolio and store costs, were adjusted, and of course, we needed to adjust scheduling, resources. We went through a lot of rent negotiations and reviewed marketing activities. In addition, of course, we were also looking into other administrative costs. To enhance cash and liquidity short-term, we secured additional credit facilities and in parallel, worked with a more long-term focus as an EMTN program was established to diversify sources of financing. We had temporarily to cap the CapEx and investment levels, when doing it, we proportionally increased the share of investments towards digital and supply chain. As a last measure, the AGM resolved that no dividend would be paid out, and that the available funds would be carried forward. Looking back on 2020, many of the sales-related KPIs are, of course, heavily distorted by the major drop in revenues as a consequence of the pandemic. Combined, the measures previously looked at and the actions we've taken, it led to a positive cash flow development throughout the year. As you can see here, recovery was substantial during the second half of the year. The gradual improvement in the cash flow from current operations enable us to stay well within our capital structure range, and this was despite then the challenges in second quarter, when the net debt to EBITDA ratio rapidly worsened. As Helena described, we saw a better than expected sales and earnings recovery during the autumn, which in turn then also improved this ratio, ending the year in a robust financial position with zero net debt. Looking ahead, our work to ensure financial flexibility and resilience will continue. As you've seen in the report, this will, among other things, include focus on working capital as well as cost-efficient long-term financing. These measures will support our ongoing transformation and ambitious sustainability agenda, and therefore creating good conditions for a continued sustainable growth for the H&M Group. With that, I'm handing back to you, Helena. Thank you, Adam. We have a strong foundation to build on, both to capture opportunities as they arise and handle the ongoing pandemic. We continue our measures to manage and mitigate its negative effects. The ongoing restrictions, along with the many temporary store closures, will have a substantial negative impact on the first quarter. Although the situation at the time is very challenging, it is clear that when customers have the opportunity to shop, they are showing that they appreciate our offering in stores as well as online. A gradual improvement in the COVID-19 situation, combined with our continued transformation, means the H&M Group is well-positioned for strong recovery during the year. We have been in transformation for some years to meet the rapid changes going on in fashion retail already before the pandemic. In 2020, all these changes accelerated. The pandemic has fast-tracked digitalization, awareness of the importance of sustainability has grown, demand for value for money is increasing, and so is the need for local relevance. In parallel with handling the pandemic, our transformation continues at full speed. Customers want to meet us where, when, and how they choose, in the stores, on our websites, on digital marketplaces, and on social media. Like we saw last year, our customers value a convenient and inspiring experience where the channels interact and strengthen each other. We are continuing our initiatives for digital growth, integration of the channels, and optimization of the store portfolio. Speed and flexibility will be even more important going forward, particularly in the supply chain, to ensure the best customer offering and increase availability in all channels. Our key focus remains on developing our strong, unique brands, ensuring we are always relevant for our customers. We strive to give our customers unbeatable value by offering great collections with the best combination of fashion, quality, price, and sustainability. Demand for good value sustainable products is expected to grow in the wake of the pandemic. Our customer offering is well-positioned for this. The percentage of recycled and sustainable materials in the collection is consistently increasing, and our brands are offering an ever-growing range of services for a more sustainable lifestyle. Together with our transformation, our ambitious sustainability agenda will help increase our resilience and contribute to long-term sustainable and profitable growth for the H&M Group. Thank you so much for listening, and we're now happy to take your questions. Thank you. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Once again, please press star one if you wish to ask a question. Your first question today comes from the line of Daniel Schmidt from Danske Bank. Please go ahead. Your line is open. Yes. Good morning, guys. Can you hear me? Yes, we hear you. Great. Just wanted to start off with, I have two questions. You've been delivering, according to me at least, surprisingly good cost control, both in Q3 and Q4. You write about it, of course. I'm just wondering how much of lower operating expenses is sort of declining rent and structural changes to staffing, because there's been some announcements, I think it was announced last week in Germany, you did a few things when it comes to the head office in Stockholm and in London when it comes to costs and so on. How much of these sort of lower costs are structural changes and more permanent nature as we enter 2021, you think? Yeah. That's a relevant and good question. We are, of course, seeing that some of the activities we'd undertaken under 2020, as Helena mentioned, will continue to positively affect during next year. I think not only to highlighting cost savings on the store side, but also the online growth driving a healthy profit development. With store closures, of course, we will take out some rents and other costs related to running the stores. Also, the teams have done a tremendous job negotiating the rent levels. Some of this will continue, some of it will bounce back when we are able to open stores again. All in all, we see a, I think, good outlook at keeping our SG&A costs at a healthy level going forward. Would you say that lower rent is the major part of it, or is that a good proxy? As I mentioned, we've been looking at all costs, and rent is a material part of our cost structure, so of course that plays in. Staffing and as I also mentioned, marketing expenses has also been looked at this year. Some of these will, of course, move up again when we trade more normally. Rents and staffing, I think if you should isolate two, are the main drivers. When it comes to marketing expenses, do you feel that given the size of the H&M Group now that you will be able to go into 2021, even if we have a normalization of the world and you see marketing spend the need to increase, is that going to be a more efficient way of marketing when you have such a big H&M Group that you do have now compared to a couple of years ago? Is that a big advantage? Marketing and communicating with our customers, we do it in many ways. Through our stores, through our social media channels, and through both owned and paid media channels. I think that mix we're constantly reviewing, and I think one of the big assets, if we are and when we're able to open stores again, is that we can communicate more through that channel. I think here again, we have an opportunity to make the marketing spend even more efficient going forward. All right. Just finally on your announcement that you could free up as much as SEK 10 billion in working capital through streamlining and invoicing and payment processes, and you're also writing that you're well positioned for lower stock levels going forward, given shorter lead times and more efficient supply chain and so on. That has been, of course, something that we've seen for some time. What you write about today in terms of SEK 10 billion working capital is, of course, new. What are you doing more exactly that hasn't been done before? Could you shed some more light on that? We are adjusting our payment terms and how we pay invoices to be more aligned with industry standard. As we built up the strong partnerships with the supply chain, this has been a core component in how we work with the supply chain. Now we are together with our partners in supply chain, adjusting the payment terms, and this will have this effect on the cash flow looking into next year. In parallel with this, we're also then connecting our suppliers with banks so they can ensure that they have an efficient way of financing this change. Thank you. That's all for me. Thank you. Your next question comes from the line of Fredrik Ivarsson from ABG. Please go ahead. Your line is open. Thank you. Good morning, guys. Couple of questions from me as well. Helena, you mentioned the importance of speed and flexibility. That has become even more evident during the last year, probably. I'm curious, are you planning to accelerate your investments related to that topic, going forward, or is that ongoing process? Speed and flexibility will definitely be one of the big focuses also going forward. That involves, of course, new ways of working. It also involves digitalization, since that is the key for us in, for example, the supply chain, to make sure that we're more omni-channel and that we're flexible, when it comes to customer demand, where we can, of course, also accelerate the use of AI to know more about what the customers want and what to react upon. That will be one of the key focuses going forward. Great. Second question is maybe related to the other portfolio brands, because you obviously post a small profit for the full year, for the group. I expect that to be more or less fully generated through the H&M brand. Can you talk a little bit about the new business and whether that loss accelerated significantly year- on- year, and if that part of the business has ever been profitable. When it comes to portfolio brands, we truly see that we have a portfolio of really strong and unique brands who have worked hard to also meet the customers where they are at, to stay really relevant throughout the year. The tendency when it comes to portfolio brands is definitely positive also when looking at profitability. Should we expect that part of the business to actually have been positive and profitable during 2020? As you know, we don't break out the profitability per brands. As Helena said, the development is strong and they have a very strong online growth. Okay, thanks. That's all from me. Thanks for answering the questions. Thank you. Your next question comes from the line of Magnus Råman from Kepler. Please go ahead. Thank you. I first have a question regarding to state support. It represented around 1% percentage points margin contribution here in Q4. Should we expect similar or even greater support effects in Q1, provided that we've seen expanded forceful lockdowns in this quarter? That's my first question. The situation this year is still quite uncertain, as we all know. We're still riding through the second wave here on the pandemic, so really difficult to say where that will end up. When it comes to the support we got last year, that we saw as absolutely necessary for us to deal with the crisis as a strong employer and really be true to continued profitable growth going forward. Let's see what happens here after the second wave of the pandemic. Right. Okay. You also mentioned a write down here of immaterial assets of SEK 300 million. Is that a one-off, or do you expect to make additional reviews of this sort that could lead to additional write downs going forward? No, we continuously do the impairment test of the intangible assets. This is part of our normal procedure, and we had some of it booked also in third quarter. This process led to another write down of about SEK 300 million in fourth quarter. We don't foresee any material big write downs. As this process continues over the quarters, there may be write downs, but not a material sort as we see it right now. Okay. That's really helpful. The inventory growth in Q4 was contained, and you mentioned the inventory being in control. We've had restrictions and a strong lockdown, of course, that might have impeded potential clearance activities and so on. In the backdrop of this, is it plausible to expect a lower markdown ratio in Q1? You didn't write anything in the report, could you perhaps provide some more color here? We actually did write for the current quarter. We did write that we expect additional markdowns in Q1 of one to one and a half percentage points due to the COVID and the second wave situation. Okay. Thank you very much for clearing that. That's all for me. Thank you. Your next question comes from the line of Andreas Lundberg from SEB. Please go ahead. Your line is open. Good morning. Thank you, everyone. Start with CapEx. Did you provide any CapEx guidance for 2021, and where will you spend the money this year? Well, of course, 2020 was an extreme year. As Adam said, we really put the brakes and of course, that's not a sustainable level going forward. Now, even though we are right now very much in the second wave, we're gradually, of course, looking ahead, so that we expect a gradual increase in investments again. It's very difficult to give an exact number, but gradual acceleration and as it looks right now, maybe in the range of SEK 7-8 billion or something like that. We will come back to that. Okay. Thank you. Where do you expect to spend most of that money? It will be, like Helena said, very much connected to the digital growth continued, the omni, also sustainability and supply chain. Okay, thank you. Back to the question on the costs there. You mentioned the reported number of employees have been reduced to, I think, 110,000 versus 126,000 a year ago. How many of these would you say are sustainable reduction character? Thank you. The numbers reflect a year where we both had a lot less stores open, and by that, of course, a lot less need for temporary and short-term employees. That reflects that. Also we've had a year with a lot less recruitment throughout the year. Little bit depending on how the pace of opening will develop here. We will probably normalize the recruitment base, and this number will over time not be as dramatic. Some of it will, of course, as we review the store portfolio and also how we evolve that centrally, be permanent effect. You don't want to comment on numbers here? No, not in specifics right now. Okay. Thank you so much. That is all for me. Thank you. Your next question comes from the line of Georgina Johanan from JPMorgan. Please go ahead. Your line is open. Hi. Good morning. Few questions from me, please. The first one, you obviously commented that external factors on the gross margin will be slightly positive in the first quarter, which was helpful. Looking further out into the year, though, can you comment on the outlook, particularly given the sort of material freight inflation that we're seeing and how much of a headwind we should expect to come through from that, please? Second question is obviously again reiterating the space guidance for FY 2021. Have you sort of developed your views on the longer-term outlook for the store portfolio given COVID and how online is progressing, please? Finally, you've talked a lot about omni-channel, but could we get an update on where you are in terms of shipping product from store for online and using the store stock, please? Thank you. Okay. When it comes to external factors, it's always difficult, especially in times like this when everything is distorted. To summarize, as we said, I think it's the currency most of all, the dollar actually has helped us slightly in Q1. That's all in all slightly positive. Going forward, it's a mix of all different things. As you mentioned, raw materials, some are going up, some are going down. Transport, of course, is the topic that everyone is talking about right now, and that creates some disturbances. Hopefully we will manage to navigate that as well. That's pretty much expected in times like this when hopefully the world will go back to normal situation gradually. That's at least what we hope. It's very difficult to have any visibility going forward. It's primarily focused on managing the levels on the purchases to manage the inventory and so on going forward. All in all, we feel that we have a good control of the situation. When it comes to the store portfolio, I would say this is for sure a plan that we will continuously revisit and probably also revise. What we see now, as you know, is that we see a net closure of 250 stores this year as our best estimation. What is most important for us when it comes to these plans is really the integration of the channels, because this we saw in the recovery after the first wave. We definitely saw that customer behavior was that they wanted to come back to physical stores, and by then we also saw many new online customers. They had tried that channel for the first time, and now they wanted to meet us in both channels. The integration of the channels and the fact that they strengthen each other feels quite clear also when analyzing the recovery that we made after the first wave. That is really the most important part. Part of the plan going forward, of course, continued strong digital growth, optimization of the store portfolio, and the integrations of the channels to keep on strengthening each other. Thank you. Just with regards to the integration then, how close are you to being able to ship from store, or is that not a priority at the moment? It's something we are trying and testing, but still on a very small scale. Of course, this is going back to what Helena said, that we look at the stores as an asset and together with the digital creates this omni-channel experience that we have been investing a lot in and will continue, of course. Clearly, customers appreciate that. That's something we will get back to going forward. Thank you very much. Thank you. Your next question comes from the line of Adam Cochrane from Citi. Please go ahead. Your line is open. Hi. Good morning, guys. A couple questions from me. Would you be able to shed any light on the sales either in the fourth quarter or even in the first quarter in the markets where stores have remained open and there's been less restrictions? Is that giving you some confidence as to the underlying business? Secondly, you would normally make some comment about being happy with the quality of the inventory. I appreciate that you've managed it reasonably well, but can you just give us some reassurance that it's all the right product that you can hopefully sell at the right prices? The third point is on sustainability. Post-COVID to increase. Would you be able to give anything in terms of how over the last year or quarter or whatever, how sustainable products within your range have performed versus the non-sustainable products at all? Thanks. Thank you, Adam. Three very good questions. Just to remind everyone that please take one question at a time. I think it's easier for the audience and for everyone. Your first question, in markets where we didn't have so much lockdown and customers were able to visit our stores and so on, we clearly saw that they appreciated our collections. That was very obvious in the recovery we saw from the first wave, also doing now in Q4 and Q1. We have Russia, for example, which I think is amazing. They have +27% in the fourth quarter, just to give you an example. Looking at the inventory levels, as you mentioned, we have worked very actively to secure the overall level. Our somewhat fears early on the pandemic that the composition would be severely harmed has not materialized. We are pleased with the composition, but also humbled that lockdown now during the winter month with somewhat shorter lifespan of the products will be something we need to manage going forward. That is also why we, as Nils spoke about, have also indicated a slightly elevated need for reductions during the first quarter. When it comes to sustainability, as you know, we have invested and worked hard with that for many years. Now we see during the pandemic that customer awareness has gone up even more. Customers demand this in a different way than they used to. Of course, looking at our combination then of price, fashion, quality and sustainability makes us be convinced that we are well positioned for this also going forward. Looking at the collections that we've had, they are definitely well-received. Whether that is because of the sustainability factor, the fashion level, the quality, the price, probably it's a combination of them all. That is obviously where we're going when we say that 2030, all materials will come from sustainable sources. Our investments and hard work in sustainability is definitely to meet customer demand, but obviously also to build resilience in our business as a whole. Are you able to give any idea that the collections are performing significantly better than the non-sustainable collection? Is it something that you're going to do irrespective of whether the sales are better? The recent collections we've had, for example, Conscious Exclusive, have been very well received by our customers, definitely. We will continue with this journey because of two reasons. One, customers demand more sustainability, and two, because we want our business to be more resilient, meaning that we can grow without the huge dependency of natural resources. Thank you. Thank you. Your next question comes from the line of Charlie Muir-Sands from Exane BNP. Please go ahead. Your line is open. Thank you very much. I've got a couple of questions. I'll give you one at a time as you've asked for. The first one is going back to the operating costs. I appreciate there are a mixture of temporary cost savings and government support and other more structural changes. Just to contextualize, I just wondered if H&M were able to get back to its 2019 revenue base, for example, how much more efficient with respect to OpEx to sales do you think the company could be, relative to that pre-crisis performance? I don't think you expect us to give a specific number, Charlie. Of course, as we said many times, the crisis is of course very challenging, but at the same time, we've learned a lot. We have developed and accelerated a lot of things that we were already working on. Hopefully, the answer is that we would be able to manage the business in a more efficient way, or I'm certain we would. Also, the pure fact that there is a bigger mix of online actually helps all things equal to drive profitability. Great. Thank you very much. The second question relates to your ambition to free up SEK 10 billion of working capital. Can you break down how much of that, roughly, you think can come through from lower inventory levels versus payment terms? Within payment terms, am I correct in understanding that basically you're effectively collaborating to provide factoring facilities, and that's where you aim to free up some of that cash? Yep. That is correct on the second assumption. On the first one, this is only connected to the change in payment terms. This has nothing to do with the overall stock levels. It's merely a cash flow related effect. Based on the purchases for 2020. Yes Understood. My final question relates to cotton sourcing and, in particular, China and the building scrutiny there, and the fact that, obviously, for example, the U.S. have even put in place regulatory restrictions with respect to the sourcing of cotton from certain regions of China. Do you currently have the level of supply chain visibility mapping that means that, for example, your products going to the U.S. market, you don't have any challenges in that regard? If that were to become more widespread, do you think that it causes any particular disruption for you? Do you already have enough supply chain visibility to be confident you're not sourcing from some of those regions? Thank you. Obviously, overall, it is challenging for all brands within the textile industry to understand exactly its traceability when it comes to cotton. However, we are working with also certification bodies, and we are also working with BCI, Better Cotton Initiative, and they are, for example, at the moment, not sourcing in these areas. Going forward, that is a pretty secure way for us to go ahead with this. When it comes to the relationship, in this case, between China and U.S., we are just clearly following the development and where that will take us and try to handle that in the best way. Great. Thank you very much. Thank you. Your next question comes from the line of Richard Chamberlain, RBC. Please go ahead. Your line is open. Well, thank you. Yeah, morning team. A couple from me, please. Can I ask you about inventory? Maybe you can give us an update on the inventory composition at the end of the full year in terms of maybe a breakdown between newer garments versus old stock and stock carried forward or carried over from last year. That would be helpful. Thank you. As I mentioned before, we see the composition as healthy by the end of 2020. Of course, the current lockdown and restrictions affecting us are not helping the composition, so to say. We had a strong commercial offering throughout the autumn, and now we're managing the, as I mentioned before as well, the more short-term winter assortment here as a lot of stores are affected and not able to sell the garments that we have bought. Okay, thank you. Just to be clear, what was the reason for the Q4 gross margin decline excluding the markdown impact? Was that mainly cost leverage on the sales fall in the quarter? It is the same effect that we saw in second quarter than when selling dropped so sharply towards the end of October. We get that negative leverage effect. Yeah as we also experienced in second quarter. Okay neutral on the bought margin, but then the negative leverage effect affected the end of the fourth. Okay, thank you. If I can just squeeze in one more. Just going back to the streamlining invoice and payment process, what do you consider is the industry standard for payment terms? There's quite a wide range amongst some of your competitors. How far are you through that streamlining process already, would you say? We're looking at the industry average. It's somewhere between two to three months. Say, on average, 60 - 90 days. We're aiming to be within that interval as we do this adjustment. Okay. It is 30 days now, yeah? Okay. 20 days even. Oh, 20 days now, is it? Okay. Yeah. We are gradually implementing this change market by market. We wanted to shed some light as if the implementation continues as well as it has started, it will have material effects already for first quarter. Yeah, got it. Yeah. Okay. Thanks very much. Thank you. Your next question comes from the line of Anne Critchlow from Société Générale. Please go ahead. Thanks. Good morning, all. I've got two questions. The first one, out of the 52 markets that are online, how many have click and collect and return to store enabled now? We're looking in the numbers. Yes. Click and collect, we have 14 markets that have that right now. 14 markets. 14 markets. Those are the pretty big markets, so it's more than 14% of- Okay Yeah. What about return to store? Is it the same? Online returns in store is 16 markets. Okay, thank you. The second question is about warehousing, and I appreciate that it's an ongoing process to invest in it for online. What percentage of the warehousing base or warehouses have sufficient investment at the moment for online in terms of where you sort of want to be at the moment? What we're really focusing on is, of course, to be able to have a supply chain that is flexible when it comes to omni-channel, integration of the different channels. Here you can work in different ways. You can make sure that the processes are integrated, so it's easy to move garments from one channel to another. You can also go for warehouses where the whole setup is made from an omni-channel point of view. In our case, that means Milton Keynes as one example, and also the investments that we do in the West Coast in the U.S. Okay, thank you. Is that the sort of system you would like to have everywhere in the world at some point? No, it's really looking into not only rebuilding warehouses and the whole setup of a pure physical warehouse, but you can actually do quite a lot also by working with the processes. It's not really one solution fits everything when it comes to this question. All right. Thank you. Thank you. Your next question comes from line of Aneesha Sherman from Bernstein. Please go ahead. Hi. Good morning. I have a few questions, please. The first one is on markdowns. Pre-pandemic, you had several quarters of successive markdown improvement. Beyond the immediate impact of the extended lockdowns that you've spoken about, what's your expectation for markdown control going forward? Are you seeing more opportunities for improvement, perhaps driven by AI? Is it more about maintaining current markdown levels? We absolutely see potential to continue the trend that we were on pre-pandemic. It's connected to both what Helena spoke about, of course, a commercial offering, that we have an efficient supply chain with flexibility. Also, of course, the concept of pricing here is important, and here more data will support us over time. The ambition level is clear that we, over time, should be able to continue the trend of reducing markdown levels. Okay, thank you. On your point about speed and flexibility, do you expect the changes that you're making to bring down the fixed cost portion of COGS, which has caused some deleverage over the past year? Is it about shifting the mix to make your COGS base more variable? No, not as an isolated sort of focus area. That is more of a technical consequence of how our reporting is set up. Our focus is, of course, to have an efficient supply chain, and then sort of the reporting consequences, that's a separate matter that's more of a choice that we historically have done and we intend to keep. Okay. All right, then finally, the payment processes and the extending payment terms and reverse factoring, what's the phasing of that? Do you expect most of that to be in the front half of the year or spread evenly through the year? Do you expect the effect to be 2021 only, or spreading through beyond 2021? According to the current implementation plan, and as I mentioned, if it continues to go as well as it has started, we see a fairly even effect throughout the year as we roll supplies into this new way of working. A fairly even distribution over the year, I would say. Okay, to be completed by the end of the fiscal year? The absolute majority of the effect will be completed by this year, yes. Okay. All right. Thank you very much. Thank you. Thank you. Please be advised that we have 10 further minutes for questions. Your next question comes from the line of Geoff Ruddell from Morgan Stanley. Please go ahead. Your line is open. Good morning, everybody. Two questions, please. The first one very quick, hopefully. Do you expect to make a profit in Q1? As we have written in the report and also said earlier, it all depends on sales, which is pretty uncertain as you know. The situation right now, you also know, is quite severe. Almost 40% of our stores are closed. We're definitely still in a crisis mode to manage that in this quarter, and it feels pretty insecure right now looking at how lockdowns and restrictions will be lifted. If we assume that the U.K. and Germany in particular, obviously big markets locked down at the moment, that continues through February, we would assume you'd make a loss in Q1. Is that right? As you know, we don't give any forecast. As Helena said, and we write, it's very challenging. Also, please remember, Q1 is a small quarter with a lot of markdowns because it's a clearance quarter. Of course, with a loss of 23% or a drop in 23% or more in top line, it's very difficult to achieve a profit in a quarter like that. Okay. Clear. Thank you. Second question. In the U.K. at the moment, there's lots of industry data suggesting that landlords are only managing to collect about half of retail rents. Are you one of the retailers that's paying its rents in full, or are you one of the retailers who's withholding rents in order to negotiate harder? We have been in good dialogues with the landlords over the year. The adjustments we've done is rather around if we prepay rent rather than pay after. We are paying, but with slightly adjusted conditions. Okay, thanks so much. Thank you. Your next question comes from the line of Simon Irwin from Credit Suisse. Please go ahead. Your line is open. Morning. Just to follow up on Geoff's comment about rent. Pre-pandemic, about 30% of your rent was effectively based on sales. How much has that declined in the year just passed? How much of the reduction in rent you pushed through was simply a mechanical effect from sales-based rents, and how much of it was a genuine reduction in the underlying minimum rentals? Pretty even actually, proportionally. We have three categories. One, of course, as you mentioned, is sort of the mechanical effect of the drop in turnover. In other instances, we've had more short-term crisis relief agreements. Of course, as we always do with the contractual setup, with a lot of flexibility, we're in constant dialogue with the landlord. Some of these will obviously also affect us long term. If I look at proportions, they're fairly even. Okay. Thank you. Secondly, what's your attitude to marketplaces? You put most of your smaller brands on marketplaces. I think you only sell the H&M brand on Tmall in China, which seems to be the kind of main exclusion. Is that strategy going to change? Can you see an environment in which you put your main H&M brand onto third-party sites as well? We're really following customer behavior when it comes to this to see where customers want to meet us and looking at our own assets. As we said before, our physical stores will be really important also going forward. It's really the role of a physical store and the different formats and how we can also develop that moving forward. It's the digital growth, the integration, and in some countries, obviously, also we see that a big part of our customer base is also wanting to go to marketplaces where we, of course, also look at collaborations. Myntra is another example in India where we are doing that sort of collaboration. Thank you. Just finally, while I understand that your payment days are less than the industry, I'm just surprised that you're adding effectively 35 days of payment onto your suppliers now at a time when obviously suppliers are having a fairly tough time, given reduced volumes and enormous volatility and stuff. Why do you think it's the right thing to do this year? One part is, of course, the effect that we say that we have changed the payment terms and pushed them out. In parallel, we have worked extremely closely with the suppliers to ensure that they can then finance on their end and connecting them with banks to support them to finance on their end. We actually see this as a win-win, where they then can get attractive financing through the contacts and the structures that we have created. Okay. Just finally, where you are selling sustainable ranges, at the moment, are you able to pay for those with higher prices? At the moment where you are kind of pushing through sustainability initiatives, do they tend to be lower gross margin products at this stage? It has shifted over the years, I must say, and as Helena mentioned, that the route that we have taken, that customer demand, more sustainably sourced materials, with that comes also increased supply. Here we see that the impact is likely to lessen going forward, and we are also investing to make this happen, to ensure that we can also contribute with driving supply. At the end, of course, this will then positively affect the costs on our side. At the end of the day, we see it as a whole offering where customers then should have price, quality, fashion in a sustainable way without having to pay more. Great stuff. Thank you very much. Thank you. Your next question comes from the line of Geoff Lowery from Redburn. Please go ahead. Your line is open. Good morning, team. Just one question, really. Could you talk about how significant H&M Club is in terms of your online business, your total business, anything by geography? I'm just trying to gauge how important we should deem the absolute customer number in terms of its significance to the actual revenue-generating power of the channels and the business? What a great question. H&M's customer loyalty program now has around 114 million members. Last year, we made sure that this exists in 26 of our markets. We managed, despite the pandemic, to also increase the number of countries where we can offer that. Of course, this is a huge advantage for us in how we can engage with our customers in different ways. Long term, we see this as really part of why we say that we can go out and leave the pandemic one day behind us and still be in a very strong position. How significant are those members to your online operations? They are, as Helena said, they are, of course, very important for us as it's a means for creating dialogue and engagement with our customers. Of course, it is a vital part, and as I also mentioned, we spoke about marketing cost and so forth, and we believe that this is an important relationship channel with our customers that will affect both how we develop, but also how we interact with the customers going forward. It's a big part of the digital growth we see ahead of us. I would like to add that it's not just digital, of course. It's the omni, because we also can follow how they interact with us in our stores. Understood. Can I just ask one quick follow-up on the working capital? Usually, there's some trade-off between how quickly a retailer pays and the physical cost per item that they achieve. Just for clarity, are you managing to achieve the new payment terms without sacrificing anything in terms of cost per garment? That has been the whole idea of ensuring that this is a win-win here, both for the suppliers, that we don't affect their ability to get paid, and in practice, they will actually get paid quicker here. Also we have developed a way of course, looking into, Nils mentioned external factors and so forth. We have a strong method of ensuring that we capture external components of the price as well. We feel confident that this change is well taken care of. Okay. Thank you. Thank you. Your next question comes from the line of Jörg Nowicki from TextilWirtschaft. Please go ahead, your line is open. Hi. Good morning. Thank you for taking my question. You don't really need that much merchandise, obviously, at the moment, but still, how do the low capacities for shipment from China to other countries affect your business at the moment? Sorry, say again, how does what from China? The low capacities for shipment and logistics coming from China to other countries. Obviously, that is not going very well at the moment, and prices are very high for containers and for shipments. How does that affect your business? As I mentioned, of course, it is a challenge for all of us in the industry. Thanks to our good relationships with the freight forwarders and so on, we think we can manage it even though it of course creates some short-term challenges, yes. Okay. Got it. Okay. Thank you. Thank you. Please be advised that we have four questions remaining, and that is the only questions we'll be taking for today. Thank you. Your next question comes from the line of James Grzinic from Jefferies. Please go ahead. Your line is open. Yes. Good morning, everybody. I guess, Adam, you talked about the extent to which online is being increasingly accretive in the past year. I was just wondering if you can help us attach the KPI to that and how you guys more broadly think about the stickiness of that margin accretion. Anything on what's happened to return rates, markdown rates online would be really helpful. We see both, of course, that we have some temporary effects connected to what parts of the assortment has been bought here. We see that more basics have been at higher demand, and these are more prone to not be returned, so to say. Some of these effects are potentially more short-term. In parallel with that, and also what Helena mentioned, we have reviewed and invested heavily over the years now in an efficient supply chain. We believe when volumes will now come, that we can benefit from that. We've also focused a lot on stability in our IT system, and that has also helped us to have an efficient operations in the warehousing, and this we obviously intend to maintain going forward. That's very helpful. Thank you. If you were to apportion how much of the improvement is down to more temporary dynamics like mix shifts and more sustainable ones like structural improvements to the supply chain, how would you split that improvement that you're seeing between the two? It's difficult to decompose because we don't really know how much the demand for this type of garments will remain and so forth. We hope, of course, that the demand for these kind of garments will remain high. I dare not top of mind decompose it at this moment. Can you perhaps just add whether the supply chain component is a significant part of that margin increase? Yes. We believe it, depending on how you define significant, but it is a material part of it, and also with, as Helena mentioned, also higher flexibility in how we buy and within the whole supply chain. That will also affect the levels we need to warehouse in relationship to selling. There are a lot of components affecting here, but we see improvement opportunities that should support the improved profitability levels going forward. Understood. Thank you very much. Thank you. Your next question comes from the line of Anton Wilen from Bloomberg News. Please go ahead. Your line is open. Yeah. Hi, thanks for taking my calls. My question is, I wonder which brands, the stores you will close in 2021, from which brands will they be mostly? What brands in the group, you mean? It's primarily the H&M brand. Yeah, which chains? Yeah. Yeah. Primarily the H&M brand. All right. Regarding the inventory, have you considered making a write-down to inventory, or are you still considering you can sell those garments to a decent price? That is our assessment of the situation right now. As also indicated, we slightly elevated the need for markdowns, most likely during first quarter. That's how we see and follow the situation. Thank you very much. Thank you. Your next question comes from the line of Paul Rossington from HSBC. Please go ahead. Good morning. A slightly duller question. You've mentioned, or talked about going back to dividends in due course. Should we expect you to revert to kind of a historic dividend policy in due course, or are there any thoughts on that topic just yet? It may be too early, but that's my only question. Thank you. Yeah. As you know, this is a question for the board to suggest. Right now being then in the second wave of the pandemic, the situation is obviously quite insecure. As soon as we can oversee the consequences of this wave, and we also of course follow the vaccinations, how those are being rolled out in different parts of the world, the board will come back with both regards to the timing and the level of the dividends. That's just about what we can say at the moment. Thank you. Thank you. We will now take our last question. The question comes from the line of Adam Cochrane from Citi. Please go ahead. Your line is open. Oh, thank you for taking the follow-up. It was actually on the dividend point. You discussed earlier about taking potentially state support for various bits in last financial year. I'm not sure what you're planning for the first quarter of this year, how have you considered whether paying a dividend is really the right thing to do if you are taking governmental support in the same fiscal year as the dividend? Thanks. As I said before, right now the situation both when it comes to the board suggestion on dividends and also state support, the situation is simply too unpredictable to say what kind of actions we will take going forward. We took state support last year, and we felt, and we're convinced that was absolutely necessary for us at that time to come out strong of that first wave. Of course, stay a strong employer. At that moment, that was absolutely necessary. Let's follow now the development in this quarter and moving forward during the year. There's no discussion of using the extra cash flows that you've generated to repay the support that you took last year. The situation is simply too unpredictable to say what kind of actions we will take when it comes to that, beginning and further on during this year. Okay. Thank you. Thank you. I will hand the call back for closing remarks. Thank you all very much for all your engagement and your questions. Thank you for participating in this call, and have a great day. Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.