Good day, and thank you for standing by. Welcome to the three-month report for 2022. 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 will need to press star one on your telephone and wait for your name to be announced. If you require any further assistance, please press star and zero. Please be advised today's conference is being recorded. I'd now like to hand the call over to your speaker today, Nils Vinge, Head of Investor Relations. Please go ahead. Thank you, and hi, everyone. Thank you all for joining us today and welcome to this telephone conference about H&M Group's first quarter results 2022. With me today is our CEO, Helena Helmersson, and our CFO, Adam Karlsson. We will start with a short summary of the first quarter, and after that, we will be happy to answer your questions. You'll find the three-month report on hmgroup.com investor relations. I'll hand over to you, Helena. Thank you, Nils Vinge. I would like to start by saying that we are deeply concerned about the war in Ukraine and sympathize with all those affected. We closed our stores in Ukraine for the safety of our colleagues, and since the beginning of March, all sales have also been paused in Russia and Belarus. H&M Group, H&M Foundation, and the Erling-Persson Foundation have so far donated around SEK 170 million, as well as clothes and other necessities to organizations including UNHCR, Save the Children, the Red Cross, and UNICEF. The H&M Group cares about all our colleagues and stands with all those around the world who are calling for peace. If we then look at the first quarter, we ended last year with sales back on pre-COVID levels and with a strong financial position. We began the year with increased growth-related initiatives to create an even better foundation for long-term growth. The initiatives mainly involve continuing to develop the customer experience by further broadening the assortment and integrating the sales channels and by continuing to invest in infrastructure such as tech and the supply chain, but also in renewable energy and sustainable materials. In addition to the general consequences of the pandemic, such as disruptions and delays in the supply chain, some of our major markets were impacted by a new wave of the pandemic in the first quarter. Despite this, we saw a recovery of sales in physical store compared with last year, while online sales continued to perform well. This shows the value of having both physical and digital channels which strengthen and complement each other. Well-received collections led to full price sales continuing to increase, which led to more than expected decrease of markdowns. We are taking further steps towards offering customers more sustainable products. H&M Group has a long history of working with sustainability, and it has been an integral part of our business for many years. To acknowledge this even further, we are integrating our annual and sustainability report, which is launched today. Some of the sustainability links, highlights are that we have tripled the share of recycled materials used in our garments. We have strengthened our climate goals, committing to achieving net zero by 2040 and reducing our absolute emissions by 56% by 2030. We have launched our innovative circular design tool, Circulator, underlining our ambition to have all our products designed for circularity by 2025. Looking at current trading, we are of course impacted by the consequences of the war in Ukraine, but also by continued effects by the pandemic. Sales from 1st to 28th of March were up 6% compared with last year. Adjusted for the closed markets, sales were up 11%. The group's plans remain intact apart from the consequences related to the lost sales in Russia, Belarus, and Ukraine. We have proven that we can be flexible and act quickly as circumstances change. Value for money is more important than ever, and we are well-positioned to meet customers' continued increasing demand for affordable and sustainable fashion. Thank you, so much for listening, and we are now ready to take your questions. Thank you. We will now begin the question and answer session. If you wish to ask a question, please press star and one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Star and one to ask a question. Your first question comes from the line of Rebecca McClellan with Sanford C. Bernstein. Please ask your question. Yes, good morning. Can you hear me? Yes. Yes. Hi, good morning. A couple of questions. Firstly, can you talk about the trends that in the neighboring markets that are still open rather than the closed markets, what you're seeing there? Secondly, could you give us any update on China, please? Yes. First, about the neighboring markets. It really varies. Of course it's difficult to know also the reasons why, since we still have the pandemic in some markets and some consequences from that as well as the war. Difficult to say something general since it's different from market to market. However, we see that in those markets where spring has arrived, we do see that our spring collection is very well received by our customers. When it comes to China, we are still in a complicated situation. As you all know, one year has passed, and we are still not on the level of sales that we would have wished for. Of course, we are working really hard on this, and we still see China as an important market for us. Just to add on that, remember that China in March and was very strong in China last year for us. Thank you. Thank you. Your next question comes from the line of Simon Irwin of Credit Suisse. Please ask your question. Good morning, everyone. Noting your comments about the factors on input costs, can you talk a little bit about what your response is going to be to this? Quite a lot of your peers have now openly discussed price increases in the current year. Will you be following them? Of course we will also need to adjust prices. Our overall focus, as usual, is truly to make sure that customers can feel secure, that they can come to us and get the best combination of fashion, price, quality, and sustainability. Yes, we have seen that competitors have already started to increase prices. We will adjust differently on different markets and also differently on different product types and always to make sure that we strengthen our position also compared to competition. Thank you. Just in terms of the outlook for gross margins, obviously you've mentioned that 2Q it's negative versus slightly negative for 1Q. Can you just give us a sense about, you know, will 3Q and 4Q be worse again than 2Q in terms of input costs? Yes, that's correct. Okay. Thank you very much. Thank you. Your next question comes from the line of Adam Cochrane of Deutsche Bank. Please ask your question. Hi, good morning. A couple of questions. Firstly, the trajectory of sales as you went through the second quarter last year, can you just remind us of how because of the impact of COVID, sometimes it's quite hard for us to really gauge. Can you just tell us as we look through the comparisons from last year, how the second quarter evolved from March onwards? Does it get easier or tougher as we look forward? The second question is- Could we take one question at a time? It's easier for- Yeah, sure. Adam will take that one. Yep. Looking into the second quarter, April was a month where the number of store closures increased quite substantially versus March of last year. That's one part of Q2 last year that we had a fluctuating number of stores, but April was a high level of store closures last year. You'd expect the sales to accelerate just on a comparative basis. They get easier as you go through the rest of the second quarter. Well, all other things equal, yes. We will meet a higher number of stores closed in April than we did in March. Okay, fine. On the second question, have you been able to work out whether the sales that you've been seeing in March appear to be more cyclical factors or more structural factors in terms of the consumer spending? Maybe are you seeing any signs that it's a bit weaker due to concerns over inflation or anything else, or you still have the view that this appears to be more of a cyclical issue? What we still can see is that customers appreciate novelty and renewal more than a year back when there were more basic demands. That is our focus to continue to ensure that the offering is updated and meeting that overall demand. We see big differences from markets to markets again due to, I mean, COVID, different COVID situations this year and last year, also different weather. As Helena said, where we have spring weather, we see strong well-received collections in those markets. Okay, thank you. Your next question comes from Daniel Schmidt of Danske Bank. Please ask your question. Yes. Good morning, guys. Do you hear me? Yes, morning. Yes. A couple of questions from me. I might have missed it, but could you give us any indication on what you see in terms of markdowns for the coming quarter, if I start there? No, we haven't guided. We typically don't guide for markdowns. Just to remind you, second quarter is more a full price quarter and not so much markdowns, typically. All right. Coming back to Q1 then, and sort of the operating leverage. You have of course talked about more growth initiatives and expenses for that, and also the pandemic. Is mix an issue as well when it comes to the sales channels, offline versus online? Given that the online is a little bit down and you see strong growth in offline, although in my head that would mean a good operating leverage, since you have a lot of fixed costs in offline. Could you shed some light on that? It's true, there are mixed effects, both in channel but also geographical. It's complicated. You're right. The online channel obviously has been very profitable during the pandemic. And now when we see that the store channels is picking up and from very low profitability, of course, during the pandemic. It's improving, but it has a negative mix effect now, that's the equation. All right. Okay. Good. Sort of speaking about these growth initiatives, and you mentioned tech and supply chain, could you quantify in numbers what that was in Q1, and what should we expect for the rest of the year? The overarching theme is, of course, the nature of the tech agenda. Looking at Q1, we increased the pace and accelerated the innovation and test agenda. That, of course, affects how the IT costs are taken, rather expensed than capitalized. Of course, we will follow this. When we will build something, we test it and really roll it out, that will then change the balance between the capitalized and expensed cost. It's sort of a moving target, but I think one assessment that can be made is that the expense levels will be higher this year than the pre-pandemic levels. You can't give us- You're onto something here, and of course, what Adam says, mainly the delta between 19, as you refer to that, is explained by the nature of the tech investments, which is more forward-leaning, more about testing and innovation, as Adam said, thus expensed. Okay. You can't give any sort of range in how much more is gonna be expensed compared to the base that you referred to? We will continue, of course, with the test and innovation and tech investment because we are still our long-term target and 2023 targets remain intact. However, of course, now with the given circumstances, we are reassessing a lot of things. Our long-term agenda is still important. Of course, we will continue to invest. Yep. Okay. That was all for me. Thank you. Thank you. Your next question comes from Richard Chamberlain of RBC. Please ask the question. Thank you. Morning. Yeah, a couple of questions from me, please. In the statement, you talk about ongoing supply chain efficiency efforts and the integration of sales channels, and it sounds like inventory might have been down and, if it were not for orders brought forward. You think you can run with a sort of lower inventory level structurally in future. Can you sort of elaborate a bit more on the work you're doing in terms of supply chain efficiency and integration? That's my first question. Thanks. Well, overall, as you know, we're investing in supply chain and technology. It is a lot about being able to react faster to customer demands and also integrating the different channels. This will also, of course, make sure that we have a great customer experience. When looking at the stock levels, of course, these type of efficiency will gradually lead us towards our goals. What you see in the report now is a slight increase, mainly then due to also the disruptions that the industry has seen overall in the supply chain, where we have also placed some of the orders earlier to avoid delays. Okay, thank you. Another one from me is in terms of costs. You talked about the tech investments, but are you gonna be making any specific sort of cost or undertaking any kind of cost control initiatives in response to the Russia-Ukraine crisis or recent sort of COVID outbreaks? Are you gonna be taking a different approach now on costs for the I think the last two years has really shown us that we need to be very agile and flexible. Of course, we are reassessing based on the current situation. I think we can also conclude that a lot of the work done previous years, for example, in the store portfolio optimization initiative and so forth, will continue to benefit us during this year with a higher share of turnover-based rents and so forth. Some initiatives that we previously done will still benefit us, but of course, we will reassess the plans for the year given the circumstances around us. Understood. All right. Thank you. Thank you. Your next question comes from the line of James Grzinic of Jefferies. Please ask your question. Yeah, thank you. Good morning, Helena, Adam, and Nils. Just really trying to understand how you're approaching prices or you approach prices for the spring/summer season and the autumn/winter season, upcoming one. Are you not budgeting for unchanged gross margins? Are you basically saying we'll keep pricing unchanged to start with, then see how competition develops from price points and how we can recover that gross margin as the season goes by? I'm just really interested to understand how you're going about that because it doesn't feel as if you're starting by landing prices at the start of season, so to fully recover the incremental costs. No, but of course, we are acting on the forecast that we can do on how the cost will develop going forward. There are two big levers. One is the price increases that Helena indicated. That will start now to come during the second part of the spring. The other part is, of course, how we can offset that with lower markdowns and more full price selling. We're working with both of these levers. In Q1, it was the markdown lever that was the significant one. For second quarter and onwards, we will work more on the full price. Okay. In terms of that pricing policy, you adjust within season in specific markets, looking at how the pricing architecture has developed around you, basically. Is that the way I should be thinking about it? Yes, exactly. As Helena said, we will do it to ensure that we are competitive in each market and within each product category. Okay. That's very clear. Thank you, Adam. Thank you. Your next question comes from the line of Georgina Johanan of JP Morgan. Please ask your question. Thanks for taking my question. Two from me, please. I'll ask them separately. The first one was just with regards to the gross margin. Just to understand a little bit better the moving parts there, if possible, please. Because if I look at your gross margin sort of back versus 2019, I think it was still down. Is it possible to provide some sort of bridge for us, on that, please? I'd have expected it to be better given that markdowns came in better. That was my first question, please. Right. I think it's easier if you start actually with last year. As we guided for improvement in markdowns of 100 basis points, which we actually exceeded. There is one part of the delta compared to last year. Of course, we got some leverage on the increase in revenues compared to last year. We have, as we state in the report, we saw the increased input prices, mainly on freight, started to come through a bit earlier than we planned. That's basically the equation. From a leverage perspective, is that now kind of back to normal or should we be still expecting, say, next year, some further leverage to come through if you can go further on sales? As revenues are coming back to more or less normal levels, of course. But that doesn't mean that everything is fixed. That's why we call it semi-fixed, because there is always things that we do to improve things and also invest. Part of the investments that Adam was referring to that we talk about is also applying in COGS for logistics and supply chain, of course. Thank you. My second question was, apologies if I've missed it in the annual report, but I was just wondering if you could clarify what portion of EBIT is actually coming from Russia and Ukraine, please? We don't specify, but it's not a secret that Russia was one of the most important growth markets. It was also very profitable. Okay, great. Thank you. Thank you. Your next question comes from the line of Anne Critchlow of Société Générale. Please ask the question. Good morning. Thanks for taking my questions. I've got two, please. The first one is about Russia. Just wondering how flexible the cost base is there. What percentage of normal operating costs do you think you might be able to save this year? It is a flexible cost base in Russia, not 100%, obviously, but we are looking into how to manage that of course day by day now given the conditions in the country. Generally it's a flexible cost base. Okay, thank you. My second question's about the marketplace that you've started in a few countries, I think, for H&M. Just wondering how many brands so far and how that plays into your assumptions for 2030, the doubling of sales that you're targeting. Do you think marketplace will be really quite important within that? Thank you. Yes, we're now testing several brands on h&m.com. We have started to test it in Sweden and also in Germany. Here we have invited, of course, our own amazing brands, also the smaller ones. Also we are in partnership with some external brands. This is a trial where we simply want to widen the assortments for our customers and make sure that we can offer them and kind of inspire them to really have their own personal style. Early days, difficult to say exactly how this will proceed, but very, very interesting testing and positive feedback from our customers. Of course, this is one out of many initiatives to take us towards our 2030 goals. Thank you very much. The next question comes from the line of Fredrik Ivarsson of ABG Sundal Collier. Please ask your question. Yeah. Thank you. Good morning, guys. Two from me as well. Firstly, can you help us understand the March figure a bit better? Because if I do my math right, we're looking at a double-digit decline versus March 2019, and that's obviously a steep deceleration from Q1. Is this a result of the supply chain issues, or is there anything wrong with the spring collection? Or yeah, if you could talk around that for a second. No, but there is of course, as we mentioned here, one effect of the paused operations in Russia. If we look at the like for like versus 2019, we are seeing 2%-3% decreases versus 2019. If you take out Russia? Yes, exactly. Excluding Russia, okay. Fine. Yes. A more general question on consumer behavior. Have you seen consumers reacting to the surging inflation rates yet? If you could give any color on what you're seeing out in the markets. Of course it's a competitive environment and with all other costs increasing, we closely monitor this. Primarily, we see that customers appreciate our collection, and we believe that we are well positioned with our complete offer to be successful also within this sort of inflationary trends. Great. Thank you. Thank you. Your next question comes from the line of Charlie Muir-Sands of BNP Paribas. Please ask your question. Yes, good morning. Thank you. I've just got one question that hasn't already been asked. It relates to your annual report. Obviously, last year you did a fantastic job with working capital and generated over SEK 12 billion in inflows from payables. I remember at the time you said that that was effectively through facilitating your suppliers' access to reverse factoring or supply chain financing. I wondered if you could disclose what the figure is, as some companies do. For last year you mean, for 2021? Yeah, correct. How much of the SEK 12 billion was driven by reverse factoring or supply chain financing that you facilitated? The vast majority 90% of it, so about SEK 11 billion was the total for 2021. Many thanks. Thank you. Your next question comes from the line of Anton Wilen of Bloomberg News. Please ask your question. Yeah. Hi. Thanks for taking my questions. I wonder if you can tell me those 42 stores that were closed as of yesterday due to the pandemic, which markets? We have 42 stores closed in China right now due to the pandemic. All right. Can you tell me which markets do you see now as most interesting for growth going forward? That's an interesting question. Of course, we see a lot of possibilities moving forward, both when it comes to mature markets, but I would say also a lot when it comes to the new markets. Right now we're seeing great development in North and South America. Again, a mix of mature markets and more new markets. Also in U.K., also great development in India, just to give a few examples. We have a lot of initiatives ongoing with integrating channels, which obviously it's a true strength that we have physical presence as well as digital. We also have a lot of other growth initiatives. A little bit of mix of new markets and mature markets when looking at the potentials. Okay, thanks. Thank you. Your next question comes from the line of Magnus [Raman]. Please ask your question. Yes, thank you. I would just like to ask about the inventory position in Russia. If you can comment on to what extent you had a sort of currency affected write down of the inventory due to the ruble depreciating when you exited this quarter since the interest rate, of course, has been jumping up quite a lot and if you use the end date there. If perhaps you can give us any lead into the size of the inventory position in Russia. If I would use, for example, the global inventory trailing sales number, it would suggest roughly SEK 1.5 billion of inventory value in Russia. Could you comment on if that's along the lines correct? Thank you. If we start with the second question, I think the sales proportion of Russia, I think it's a good proxy for the stock price as well, though even though Russia has been trading at slightly lower stock to sales than average. Your number there is probably on the high side. If you look at how we handled it for Q1, we haven't done any adjustments to the inventory levels from a valuation point of view. Of course, we will look into it during the quarter how to assess the situation. All right. Is it correct that you translate the inventory value into Swedish krona each quarter for inventory in all the markets? Yes, it is in Swedish krona. It's valued in, yeah, exactly, Swedish currency. Thank you. Yeah. If it was a 25% depreciation of the ruble versus a SEK, that would be also the impact would have been like 25% of that SEK 1.4 billion or whatever. My question on the depreciation from translation is actually if you use the average currency rate or if you as a balance sheet post the end date of the quarter currency there for the translation. The stock is valued in SEK, and then when it's sold, it is then paid by the local market. It's kept in Swedish crowns. Yeah. All right. Thank you very much. Thank you. Just to remind you, it's star and one, should you wish to ask a question. Your next question comes from Olivia Townsend of UBS. Please ask your question. Thanks. Yeah. I just have a few sort of clarification questions. For markdown in Q2, I understand you might not want to give a number, but I just was wondering if you could give your view in terms of where you are expecting that to go directionally, i.e., up or down, year-on-year. That would be helpful. It's still very early days in the quarter, so we, as I said, prefer not to guide on markdowns. It is a small markdown quarter. Sorry. We will come back to that later. Okay, understood. Just secondly, on the investments being made in order to reach that 2030 target on sales. I understand you might not want to quantify the amount that's needed to invest in order to get there, but given you've done quite a few investments into online over the last few years, I was just wondering if you could give us some kind of sense of where you feel you are already in terms of the amount that you would need to invest. You know, are we very early on in that process, or do you think we're kind of further along? It just would be helpful to get a sense of that, please. I think we can say that a lot of the platform investments have been taken, and we've been seeing the benefits of the previous investments during the pandemic, primarily connected to our digital store and our supply chain. Now, as mentioned, we are accelerating the sort of test and innovation agenda. It will still be high activity to ensure that we develop, and primarily within the tech side, but it will be less of the big platform investments this year than compared to pre-pandemic levels. Great. Thanks. Just one final clarification just on a question that was asked earlier, just around Q2 and the plans for the investment in Q2. It sounded like you were sort of suggesting that maybe you focused a bit more on protecting profitability for Q2, given the, you know, obvious situation in Russia and Ukraine. Is that the right way to think about it, that the investments might have been dialed back for Q2, but you would be looking to sort of ramp them up again for Q3? Or is that sort of a bit too granular to comment on? Thanks. Oh, no, of course. I mean, in this current situation, we have to be agile and assess and make a holistic assessment, so to speak. Of course, margins profitability is also important part for us. Thank you. Thank you. Your next question comes from Daniel Schmidt of Danske Bank. Please ask your question. Yes, just a follow-up question from me and maybe related to what Adam just talked about a while ago when it comes to price increases. I think you said that you will start to do price increases entering the second part of the spring. Does that basically how should you sort of stack that against the external factors entering this quarter? Does that mean that you would sort of aiming to get half compensation or some compensation or full compensation for what you're seeing in terms of input costs? Of course, we can't be that granular, but what is clear that we won't give our customers all the burdens, and we'll take part of it. As Helena said, that's the most important. The customers always trust us to give the best combination of fashion, quality, prices, the same thing we do with H&M. Of course, given the substantial input price increases, we need to adjust. As Adam said, and Helena said also, it will vary how much from market to market and from category to category and even product by product. Entering the second sort of part of the spring, is that April and onwards or? It's a gradual shift, of course. It's not from one day to the other. It's already. I mean, it's a gradual ramp up, of course. Okay. Is it fair to say that you haven't done the adjustments yet? It's a gradual ramp up, as I said. If you walk the stores and online, you will see that some prices might have been adjusted already. Okay. Thank you. Thank you. There are no further questions coming through on the line. Please continue. Thank you all very much for participating in this conference call, and bye for now. Thank you. That does conclude our conference for today. Thank you all for participating. You may all disconnect.