Morning and welcome everyone to H &M Group C onference Call Nine-Month Report for 2025. For the first part of this call, all participants will be in a listener-only mode during the speaker presentation, and afterwards, there'll be a question and answer session. If you wish to ask a question, please register via the link in the confirmation email and then dial in and press star followed by one on your telephone keypad. Please be advised that this conference is being recorded. Today, I am pleased to present Joseph Ahlberg, Head of Investor Relations. I will now hand over to our speakers. Please begin. Good morning and warm welcome to everyone. Today, we present the third quarter results for 2025 for the H &M Group. I am Joseph Ahlberg, and I'm Head of Investor Relations. Before I hand over to our CEO, Daniel Ervér, I would like to share this morning's setup. As usual, Daniel will share a short summary of our results, a run-through of selected highlights from the quarter, as well as a brief outlook. We will continue with a Q&A where Daniel, our CFO, Adam Karlsson, and I will be available to answer your questions. With that, please go ahead, Daniel. Thank you, Joseph, and good morning to everyone. It's great to have the opportunity to speak to all of you again. In the third quarter, we continued to take important steps in the right direction. Let me start by summarizing some of the key numbers from the quarter. The positive sales development continued in the third quarter. Sales grew by 2% in local currencies, and this growth should be seen in the context of having 4% fewer stores at the end of this quarter compared with the same period last year. Our upgraded online store rollout earlier this year has been very well received by our customers around the world, contributing to a profitable growth in the quarter. Inventory continued to develop in the right direction and decreased by 9% in sale compared with last year, and that's mainly thanks to an improved demand planning capability, as well as in combination with a well-executed summer sale. The composition of the inventory is good, and we see further opportunities for improvement in the fourth quarter. Sales for the month of September are expected to be on par with last year, and this should be seen in the light of high comparative sales figures from the previous year. We increased our operating profit compared with the same quarter last year, thanks to a stronger customer offer, good cost control, and improved gross margin, where a clear majority of the effect was driven by improvement work in our supply chain, as well as somewhat positive external factors. Additionally, currency exchange effects were positive for the gross margin development in the third quarter. This means that we reached an operating profit for the third quarter of SEK 4.9 billion, and this corresponds to an operating margin of 8.6%, up from 5.9% during the same quarter last year. The increase in profit shows that we are on the right track as we continue to make progress in line with our plan to create fantastic products with outstanding value-for-money, inspiring experiences, and strong brands. That we are on the right track was also reflected in the response we got from customers when H& M opened in Brazil for the first time in August. I had the opportunity to join the team on site, and seeing the pride of our colleagues, the reception in social media, and above all, the excitement of customers entering our stores for the first time was absolutely remarkable. We successfully built on the core of our plan with elevated products, inspiring experiences, and a strong brand, combining these strengths with a deep curiosity for the local market. Please take the time to enjoy a short video from the opening. I hope you could feel some of the energy that we felt by being there. Based on this positive reception from our customers and the opportunity in a well-established fashion market, we see good potential for growth to grow both in Brazil and in other parts of Latin America moving forward. With two stores and online already in place, we will open one more store in Brazil during this year. Additionally, four stores are signed for 2026, all in top locations in important cities, including the first store in Rio de Janeiro. Another highlight this quarter was the opening of our new flagship store in Le Marais in Paris, which you can see on the left screen in front of you. This store has an assortment presentation and interior that is curated for this special location. This is a great example of how we strengthen the brand while we are also creating an inspiring shopping experience in one of the world's most important fashion capitals. We continue to elevate our shopping experience, both in stores and digitally, as well as strengthening the integration between both of these channels. As a part of this, we will continue to upgrade a large part of our physical stores worldwide with improvements in layout, presentation, and tech features. In parallel with improving the customer offer, we continue to drive our sustainability agenda forward, and we are making clear progress towards our ambitious goals as we continue to integrate sustainability into all parts of our business. This morning, Fashion Revolution released their results from the latest What Fuels Fashion 2025 report. Of the 200 major fashion brands and retailers, H& M ranks first for its level of public disclosure on decarbonization and other sustainability areas. Finally, I would like to share two great fashion moments from this quarter. First out, COS returned to New York Fashion Week for the fourth year in a row, underlining their ambition to be the global power brand in the accessible luxury category. The strong autumn-winter collection emphasized materials, contrast, and craftsmanship. Last week, H &M opened London Fashion Week by presenting the new autumn-winter collection. The show clearly highlighted the strength of H& M collections and the creativity of our in-house design teams, featuring both women's wear and menswear. The collection is now available in stores and online, with a wide range of price points to cater for a diverse set of fashion needs. With leading models on the catwalk and many well-known guests in the audience, the show also included a special performance by British music talent Lola Young, featured here on the right. While we continue to drive our plan forward, the world around us remains uncertain. With geopolitical challenges and a cautious consumer, it becomes even more important for us to stay focused on what we can influence and where we can make the biggest difference. Everyone across the entire company stays fully focused on our customer offer to always deliver best and outstanding value-for-money. In an increasingly complex environment, our strong culture, together with good cost control and flexibility, allows us to build a stable foundation for long-term profitable and sustainable growth. With that, thank you so much for listening in this morning, and I will now hand you over to Joseph Ahlberg to take us through to the Q&A. Thank you. Thank you, Daniel. A kind reminder to please introduce yourself and please ask one question at a time so we can answer them one by one. Also, please limit yourself to a maximum of two questions per analyst. With that, over to you, operator, to facilitate the questions. Thank you. As a reminder, if you wish to ask a question, please register via the link in the confirmation email and then dial in and press star followed by one on your telephone keypad. Please ask one question at a time so that we can answer them one by one. The first question goes to Frederick Iverson of ABG Sundal Collier. Frederic, please go ahead. Thank you. Good morning, Tim. You've been talking about the strength in women's collections during the last year or so. Can you give us an update on the various performances in the categories during the quarter? Women's wear continues to be the main priority for us as a company. As we make progress on our plan, we're really, really focused to win women first, and that's where we put the most emphasis. As we shared before, that's a long-term work where we work systematically and disciplined to strengthen the customer offer. As we shared before as well, we see a lot of the learnings that had an effect on women's wear will be relevant for our other customer groups as well. Sequentially, we start to see an improvement on other customer groups, but the main priority and the main strength still remains the women's wear performance and collections. Thank you. The second question on cost, OpEx down 1% in local currency, despite top line growth and underlying cost inflation and such. Can you share with us the sort of key drivers of the lower OpEx? I recall you spent quite some money on marketing in Q3 last year, for instance. Did you reduce those kind of costs, or is there anything else in there? Overall, I think it's important to recognize in this quarter it's been a tremendous work done by the teams on cost efficiency. As we continue to invest and have a high activity around strengthening the collections, improving the experience, and investing in marketing and branding, we gradually learn what takes an effect and not, and are very disciplined in steering resources and investment towards what really impacts the customer. I don't know, Adam, if you want to shed a bit more light on the cost development. As you said, Daniel, it's generally quite a broad efficiency improvement we see. We've managed to plan our store operations well, connected to how we execute on the summer sale. We see that we have improvements in our logistics efficiency, and that can also be reflected in the stock levels coming down, which supports OpEx on the logistics sides. The overall long-term ambition to reduce complexity and bureaucracy in our organization still supports the margin expansion here. It's a broad profit improvement for many parts of the operating part. Okay, it sounds fairly sustainable then, to me at least. We see that we have done long-term improvements, and that is one of the benefits, for example, of now improving the management of the stock. That reflects both in how we operate the stores and also benefits logistics efficiency. With that trend, we see that we have a good foundation to continue to be efficient within our operations. Okay, that's great. I'll jump back into the queue. Thank you. The next question goes to Niklas Ekman of DNB Carnegie. Niklas, please go ahead. Thank you very much. Yes, can I ask you to just elaborate a little bit about current trading? I know that this is a short period and it's always tricky, maybe for just that reason. I know you had 11% growth last year, but - 10% the year before. Is there anything you can say about weather, comparisons, anything about underlying markets, any tangible improvements to your own collections? Anything you can shed some more light on this figure, which today at least seems to have been a lot stronger than what consensus had assumed. Yeah, as you already pointed out, it's a number that should be handled with a lot of caution because it is very short-sighted. We are now in a period, at least in the northern hemisphere, and especially in the northern parts of Europe, where weather is changing dramatically, going from summer into fall, and that has a significant effect on customer demand. September is a volatile month, and we should be really cautious to manage the number, as you pointed out yourself. What we have seen is that we saw a good weather development late August, early September, and then we have seen a little bit warmer end of September. It is a month where the weather really is shifting. When we look at the trend, we see it very much in line with the sales trend that we have seen so far. There is no significant deviation from the trend that we have seen when we look ourselves at the September performance. Okay, that's very clear. Thank you. Second question, just on the Q4 here and the guidance that you're giving about the external factors, saying that they will be less positive in Q3. I imagine that, for instance, U.S. dollar and freight should be a lot lower year- over- year compared to the effect in Q3. You mentioned tariffs here as a negative. Can you elaborate a little bit about these different components here behind the guidance for Q4? Adam here. It's a balancing effect here that we believe will somewhat neutralize. We see the benefit of the dollar euro pair working in our favor throughout the spring, into the summer, and into the autumn. Against that, we have the impact of the tariffs that will then, based on the tariffs we pay during Q3, a lot of those garments will be sold during Q4, and that's when they affect our profit and loss. There are some counterbalancing effects here, but the effects we speak out as currency, freight, and raw materials are still to be seen as somewhat positive. Okay, very clear. Thank you for taking my questions. Thank you. The next question goes to Daniel Schmidt of Danske Bank. Daniel, please go ahead. Yes, good morning, guys. Maybe a question on the growth potential. You talk about it when it comes to Latin America, and you seem to be very excited about the start so far in Brazil. Do you think that the expansion plans that you have for Latin America will be able to turn the trend when it comes to net store closures in 2026? We are really excited about the opportunity in Brazil, mainly based on how well we have been received by the customers in Brazil and how they have appreciated our offer. We also see continued opportunity to optimize the store portfolio, and that work is ongoing. For Q4, it will have a slightly negative impact on sales, as we have communicated before. The outlook for 2026, we will share connected to the Q4 report. We are working hard to find opportunities for H& M to continue to be a growth company, and that's part of the work. The specific numbers of what we will see, we will share in the fourth quarter when we talk about the total net effect of the optimization work that we will do in 2026. Okay, is it fair to say, you mentioned four new stores in Brazil for 2026, for example, is it likely that there will be many more stores in Brazil than these four, or are the lead times much longer than you think? As always, when we work to establish ourselves in a new market, it's important that we establish ourselves in the right locations, and that is really to be in the malls with the right customer demand, in the right location in the mall where we can provide the full H&M experience. Brazil is a mature fashion market and retail market, but it's also a well-established market. It's not new malls being built. It's finding locations in existing, very strong performing malls, but it's finding those locations. That's the work that needs to balance speed for chasing the potential with quality of building fantastic stores in the right location. When we look at the total portfolio optimization, of course, Brazil will be one key important part, but we will also see opportunities in other parts of the world, as well as continued need to consolidate parts of our portfolio where we don't have the customer demand. We will come back in Q4 with a more holistic view of how we look at 2026. Yeah, yeah. Maybe just one question for Adam then. The question was already up on the table, but could you maybe sort of give us a ranking of the impact when it comes to the gross margin of these factors that we've talked about, improved supply chain, external factors, markdowns, FX? Yes, I'll try that. The majority of the improvement comes from our own work, so to say, the work that we've been speaking about, how we collaborate with the partners in our supply chain, how we leverage that partnership, how we also work all the way down to the second and third tier of our supply chain to ensure that we have a very competitive offer that we can put in front of our customers. The majority comes from our own work. Last year we had some effects that went against that, and those we don't think we will have supporting year on year in Q4 as we did now in Q3. The majority will remain. The trend is clear, but some of these one-off effects that we saw during Q3, we don't think will materialize in Q4. Thank you. The next question goes to Adam Russ of Deutsche Bank. Adam, please go ahead. Good morning, guys, and well done on the results. Firstly, the markdown was much lower than I think we expected in the third quarter. Can you just say how you cleared the inventory position with less markdown than you were expecting? Did you do anything differently, or was it the consumer demand was stronger than expected? This is Daniel. Starting off, the team has done a great job with how we executed the summer sale. We were able to solve a lot of stock in an efficient way, which is well done on the execution and the teams working throughout our market. We also see with stronger collections that we are in a better situation. We still do see a need, having a cautious consumer that is squeezed for having a squeezed wallet. We still see a need to use reductions to activate the customer from time to time, and that's why we still have a fairly high level of activity in Q3, and that will also continue into Q4. We monitor the cautious customer clearly, and we do activities, but we are stock level-wise in a very good situation after a well-executed summer sale. On that point, are your collections better and they're selling well, and at the same time, you have to do selective promotions in order to get other consumers to spend the money? Is it a sort of mixed impact on the consumers? I'm trying to understand really how you can have better collections that are being received well, and you still have to put some markdowns or promotions in to get other consumers to purchase. Yeah, the work we are doing is a long-term journey to strengthen and build a really strong competitive offer. To do that, we always need to make sure that we offer outstanding value-for-money. That's both in the price and how we work closely with suppliers, as Adam Russ shared, to really offer outstanding value for the price that we charge. It also is around how we provide short-term offers and activities to really stay competitive. Here we act differently in different markets, and we monitor the market situation. We're also looking at the customer base that we have and the ones we're moving towards. In that play, we need to still work with activities and reductions to activate the customer, even though we see a gradual strengthening from the full price performance of well-received collections. The second one is you talked about some of the store refurbishments that need to happen and the tech investments and things. What is the scale of these store refurbishments when you go across your existing estate? How much do you have to invest on a store? Is there any sales uplift that you do from that? How long will it take you to go across the entire estate to get them into the, you know, to put these investments into each store? We're working across the entire portfolio with different levers to build a really competitive experience. Sometimes that's a full rebuild of a store. We have done that, for example, Times Square is a good example of a full complete rebuild of a store in New York, and we have many others. Based on those rebuilds and our updated formats, we find components that we believe are good for strengthening the experience, the service, the customer offer in a wider part of the portfolio. With a lighter program, we roll that out to a wider set of the portfolio. That's the work that we're mentioning in the report that is starting now. That will reach sort of at the lower investment level, but with important improvements for the consumer, it will reach a wider part of the portfolio. That's a work that we are initiating now that will happen in the fourth quarter, but also moving into 2026. I think it will be completed by the end of 2026. No, it's an ongoing work. We have almost 4,000 stores, and we always need to make sure that we are competitive in each location. It will be an ongoing work of optimizing and improving the experience. Okay, thank you. The next question goes to Warwick Okines of BNP Paribas. Warrick, please go ahead. Thanks. Good morning. First question is on tariffs in the U.S. I was just wondering what sort of proportion of the goods sold in Q3 were actually bought in the tariff regime. What were sort of pre and post-tariff purchases? Adam here. It varied throughout the quarter. What we call out here is that we've seen an increase throughout the quarter, and we believe that increase and the effect will sort of become fully loaded towards the end of Q4 and then into Q1 next year, given, of course, the uncertainty of the exact tariff level. We're not giving any guidance of those, but it's just when the goods were imported and when they were planned to sell. It's an increase throughout the third quarter that we potentially fully load at the end of Q4 and then continue, as far as we know, currently into the first quarter next year. Thank you. On those products, when they are sold with tariffs, have you made any price adjustments to reflect that, or is your gross margin commentary just reflecting that you're taking all of the tariff impact yourself? They're, of course, linked, but they're also separate, those questions. We need to ensure that we have the right customer offer at all times, and we respond to how the consumer and the competitive set is looking. The gross margin comment right now is more on the sort of the consequence of us importing garments with tariffs, and a higher portion of garments that has been imported with tariffs will be sold in Q4. Thank you. If I may just squeeze in one more, just to sort of clarify, when you talked earlier about Q4 guidance on gross margin, you talked about sort of balance effects that were somewhat neutralized. Does that mean you're expecting tariffs to largely offset the other benefits in the gross margin in Q4? Thank you, Warrick. This is Joseph speaking. Of course, we still guide for a net slightly positive effect from external factors, as we write here in the report. That is taking all these effects into consideration. We do indicate that the net effect is slightly smaller than it was in the third quarter, based on our judgment, connected to the headwind becoming a bit more negative than from the tariffs, which to the technical effects Adam just pointed out. Understood. Thanks very much. The next question goes to James Grzinic of Jefferies. James, please go ahead. Thank you. Good morning all and congratulations on the spring summer. I had a couple of questions really on gross margin. The first one is, can you perhaps remind us what the FX loss that impacted Q3 last year was specifically, so that we can maybe take it out of the 180 basis points increase year on year that you just delivered? Thank you, James. Joseph speaking. Last year we called out the negative FX effect as a factor explaining the gross margin development, meaning it was one of the significant factors that explained the development. This year, we see those effects becoming positive instead. With a negative effect in the comp base and a positive effect this year, the net effect then becomes positive to the year-on-year gross margin development in the third quarter. Now, looking ahead, we don't expect these effects to give a significant year-on-year effect to the gross margin development in the fourth quarter when looking at the comp base of last year for the fourth quarter. We cannot make predictions, of course, on the FX development, but the outlook is more neutral for the fourth quarter present. I just wanted to exclude the fact that there were exceptional charges that fell last year due to effects. You're just referencing the ongoing impacts of contracting in dollar, basically, and just to clarify that. When it comes to the FX effect, it's what we described last year. Part of it is exchange rate losses on intergroup liabilities and receivables. It's the FX movements in the quarter. It's important to stress that a clear majority of the increase in the gross margin comes from the improvement work we are driving in the supply chain and the somewhat positive external factors we saw in the third quarter. We remain to see that as a robust trend also for the fourth quarter. Okay, understood. Thank you for that. Can I also ask, I appreciate the point on the theoretical dilution from gross tariff impact, but one of your peers in the U.S. has talked about moving considerably on pricing a couple of weeks ago, and that was happening at a point where everybody in the space seemed to have been doing exactly the same immediately post back to school being over. First of all, can you confirm that you are also observing that there's an industry in the U.S. that is clearly back-solding for those tariff costs to accelerating price increases? How do you intend to move if indeed you're also observing that, or if indeed you've moved at all? We are Daniel here. We also recognize and observe that there are price increases happening in the market in the U.S. As a general statement, we see the same thing, and we are monitoring also development closely to make sure that we offer a really competitive offer. We are cautious and prudent about the development in the U.S. for the fourth quarter, given the effects that Adam spoke about, that we see that we have already paid tariffs on the garments that have been imported, and those garments will be sold in the fourth quarter. Hence, we will see a bigger impact of tariffs on the gross margins. While we see that on the one hand, on the other hand, we are continuously looking at how do we have a competitive offering and how do we optimize our pricing position. That we do in the U.S., as we do in all other markets, and that leads to both price decreases and price increases to stay competitive. That's an ongoing work. We are cautious about looking at the Q4 development in the U.S., given that we know we have already paid tariffs that will impact the gross margins as we look into the fourth quarter. Thank you. The next question goes to Richard Chamberlain of RBC. Richard, please go ahead. very much. Morning, guys. A couple of points of clarification, please. Just back to the comments you made about markdowns, expecting a somewhat higher impact for Q4, partly as a result of the Black Friday timing shift. Would you expect that timing impact to reverse fully in the first quarter? That's my first question. That’s correct. You see that specific shift we will reverse in the first quarter, but we don't give any guidance for reductions in the first quarter. That would be dependent on how well our collections are being received during the autumn, as well as the consumer sentiment as we head into the first quarter. Just that specific effect will be shifted, but we don't have a guidance for the first quarter at this point in time. We will come back to that when we meet for the fourth quarter report. Okay, great. Very clear. Thank you. My second one was on the when you're talking about the supply chain in the statement, you talk about a more flexible supply chain with a higher share of purchases made in the current season, but at the same time, you're planning for extended transport times. I just wondered how that's influencing your thinking about how much inventory you need to have now in the business and how that will affect your sort of working capital profile in the fourth quarter. Thank you. Adam here. If I start with the transportation lead time, we still see that the negative effects we saw during the autumn of 2023 still persist. We cannot sail the shortest route between sort of supply chain in Asia and customer in Europe. That still persists. Within those guardrails, we try always to optimize both the design lead time, how we buy and source the mix of that, and of course, how we ultimately secure that we are responsive and flexible throughout the supply chain. That is what we call out. That sort of shift when it comes to transportation lead time has not, that we're still seeing and observing that we're not sailing the shortest route. That's what we call out. It's not worse than it's been, but it's not obviously a lot better either than the last 18 months. On the responsiveness on the suppliers here and how we collaborate, as a really important part of how we strengthen the product offering and making sure that we have the most competitive product offering, we are working on how do we increase the speed and reaction time in our supply chain. That's a wide work that includes both, as we mentioned before, how we move production closer to the customer with what we call nearshoring or proximity sourcing, but it's also working with a set of suppliers that can be much quicker and where they can support with a larger part of the product development process. For example, it's working early on and preparing components to be able to do the design decisions at the latest stage, still being quick. It's a broad spectrum of activities that we do where nearshoring is one, but not the only one. We also work a lot with how we collaborate with some of the best suppliers in the world to really speed up our supply chain. That's how we build up higher responsiveness and can buy more in season, which creates better precision and also more relevance for our customers. Right. Okay, thank you. The next question goes to Monique Pollard of Citi Group. Monique, please go ahead. Hi, morning everyone. Two questions from me. The first one is just on the space impact in quarter. Obviously, as you mentioned, 4% fewer stores versus last year, but you'll be closing stores that are less productive. You might be opening larger stores. What's the overall contribution to sales of that 4% fewer stores? Hi, Monique. This is Joseph. In this year so far, and also expected for the full year, we do see a somewhat negative net contribution to selling. Adjusting for this effect, we would see a slightly higher top line development for both the third quarter and expected for the full year. That impacts quite a bit less than the minus 4% of the stores, presumably. That is correct, Monique. We do close low productive, low profitability stores and open the best possible stores, looking in every corner of the world for the best expansion opportunities. Understood. Just a quick one on the marketing cost. Is it possible to quantify the marketing costs that were incurred in the quarter versus the, I think it was about SEK 350 million last year, please? We're keeping a very high activity when it comes to how we strengthen the brand and how we create excitement around all the brands in the portfolio, like the COS show we show, but especially with the focus on the H&M brand, where we continue to invest and have a high activity level. A great example is the Brazil opening, where we used the opportunity for H&M entering Brazil as a global event to strengthen the relevance around the brand. Of course, the show we did on London Fashion Week last week was a real strong statement of putting our own collection on display and building excitement around that. The activity remains. As we have increased the activity over the last 12 months, we also learn a lot of where we can find efficiencies and be more disciplined to steer investments, what have a significant improvement and really break through all the way to the customers. That's the ongoing work. We want to send a clear signal that the activity level is high. We believe a lot in strengthening the brand as part of our journey, but we also find efficiencies where we can really focus around the things that really make a difference. I don't know, Adam, if you want to shed a bit more light on the development. No, I think it reflects what we said, that we had an autumn last year of a restart of investing, like an overall broad investment in the brand. That ambition stays, but we believe that we can find clever ways to get the same and more effective in other ways. I think that is partly reflected in the Q3 result here, where we optimize the resource use and still, as you said, had a very high ambition and engaged with a lot of customers all around the world. Understood. Thank you. The next question goes to Georgina Johanan of J.P. Morgan. Georgina, please go ahead. Hi, thank you. Just two questions from me, please. First of all, just in terms of all of the underlying work that you're doing with the supply chain and going through the different supply tiers, I appreciate you're doing more nearshoring and can be more reactive and so on, but at the same time, you've obviously talked about markdowns continuing to move higher. I assume that you are actually achieving better buying with those suppliers, if you like. I think by the end of this year, you're probably close to some 200 basis points or so cumulative. I'm just trying to get a sense of how far through that process you are, because just from a high-level perspective, 200 basis points is already a great achievement in that regard. My second question, I think you mentioned in the release around how the digital business is contributing strongly to profit growth at the moment. I just wondered if that was coming from the incremental sales that you're generating, or if there's any initiative that's being done, particularly around logistics or anything else in the digital business that is supporting that profitability, please. Thank you. Hi, George. First question I can answer, this is Joseph. On the supply chain, we are really driving several initiatives at the same time. We, for instance, have been talking about the work we do working closer with our strategic suppliers. This has been where we have consolidated the supply base to work very closely with a shortlisted number of strategic suppliers who now stand for a big share of our total order value. These suppliers, we work very closely with them, open book costing and so on, to really make sure that we can deliver on our business idea with really high quality, good sustainability commitments, the right fashion, and of course, at an unbeatable value-for-money. In parallel to this, we are ramping up this work that Daniel talked about earlier with collection suppliers with their own product development capabilities, where our own design team works very closely with these suppliers' design teams to very quickly turn around new design ideas to ready products reaching our customers. That is also being ramped up at the same time as we are on the other part of the supplier base and working closely with the strategic suppliers. I hope that clarifies the two directions we're driving in parallel. When it comes to the second question, I hand over to Adam. Or did you have a follow-up question? Sorry. I was just going to try and understand if possible, sort of, because that makes a lot of sense. Thank you. Just how far through that process you were and whether we should be expecting comparable gains into a third year? Yes, we do see that if we take the collection buying, it's sort of the in-season buying has been growing steadily. The share has been increasing over the past years. Now we are achieving a fairly high share for selected categories of products like light woven and so on. I think looking at the two different, as Joseph clearly explained, the work when it comes to optimizing the way we collaborate with our suppliers on the costing models, the consolidation, and so on, we've come fairly far in the work, and that's given a lot of support to the gross margin. We think we are not done, but we're far on that journey. When it comes to increasing the pace of product development, buying more in season, and speeding up the relevance to market, we have taken the first good steps, but there's still a lot of steps to be taken on that journey and how we speed up and become more relevant. I think to try to guide on the question, we've come quite far on the improvements of how to consolidate and build stronger gross margins. That work will continue, but we're far along when it comes to increasing the speed and pace and buying more in season. We're more in the beginning with some great first steps on that journey. Really helpful. Thank you. I think there was a question about the broad cost sort of activities we drive, and I think that can also be seen in two parts. One is the effects on the, sorry, Dan. I think the question was around digital, the updated digital store, and what has been... It was a long time ago. We lost the question. Let's say, yeah, phrase the question. Rephrase the question. Would you like to repeat your second question? Thank you. I think you mentioned in the release that the digital store has been contributing strongly to profitability improvements. I just wondered if that was simply coming from more sales in the digital store or if there were specific initiatives around maybe logistics or what you're spending on tech or marketing or whatever it was in the digital channel that was particularly supporting profitability improvements. When it comes to the digital development, both the sales team and the tech team have done a great job with including our creative teams who provide the imagery and build up the experience. All of that has significantly improved with the rollout of the new updated experience that was concluded at the end of the spring to all our markets, where the experience really, really elevates the product offering and elevates the product offering with a stronger product offering and stronger product that builds an even stronger value-for-money proposition. We see that is being really well received by the customers. That combination of a great product offering where we have improved the design, the product development, the making, the material choices combined with more inspirational imagery, better flow, better search functions, better size recommendation, that in combination has driven a strong comms sales development and that's a tremendous job done by our teams. We see that we continuously look at the customer promise and the different offers that we have and how we provide a competitive experience and actively then connected to that working on how can we reduce the return rate given that we don't want neither for the stock management nor for the planet and our sustainability targets. It's not good to have high levels on returns. That's also work that had good progress during this quarter where we managed to lower the returns, which we see as very positive for both profitability but as well for our climate impact. Those are the two things for this quarter. Thank you very much. Thank you. As a reminder, if you would like to ask a question, please register via the link in the confirmation email, then dial in and press star followed by one on your telephone keypad. The next question goes to Sreedhar Mahamkali of UBS. Sreedhar, please go ahead. Hi, good morning. Thanks for taking my questions. Most of them are already asked, but I've just got a follow-up from James's question on tariffs and another small follow-up on something else that was discussed. On tariffs, how are you thinking? I understand your point about watching the market, watching the consumer. Are you planning to follow your key competitors that you're watching? If they move, you move. What sorts of kind of time delays should we be thinking about? Clearly, it would be a persisting headwind if you didn't adjust pricing into next year. How should we think about it? What sort of time delay? How do you think about it? That's the first one. If you can just expand a little bit more, that'll be very helpful. A little bit more short term, into Q4 on OpEx. Is there anything we should keep in mind in local currency changes in OpEx, or is Q3 development of 1% reduction in SG&A a good indication for Q4 also? Thank you. Okay, thank you for the question. I'll take the first one, and then Adam will take the second one. We are in all our markets monitoring the price development and how this, I mean, we have many markets with quite significant inflation where we continuously adjust prices based on the market competitive situation. Now we do in the U.S. as well, which leads to both price investments and price increases. We see a general sort of gradual increase in the market. With that said, we always want to protect that we have a competitive customer offer and offer the best value for money, why we are cautious about Q4, where we already now know based on the tariffs that we paid in the third quarter that they will impact the gross margin. We will evaluate, we are assessing the strength of our collections and sort of making sure that they're positioned with a competitive price. Of course, when we are paying increased tariffs, it will have an impact on our gross margin. I'm just trying to understand, you're not trying to increase your price gaps. You're trying to keep the price gaps where you want them to be, but look to move over time. Yes, but in that there are always, there are, sorry. Go ahead. No, go ahead, please. Broadly, that's a fair statement, but we always find opportunities as we look at the competitive situation and our product offering in making changes both up and down. Broadly, that's the direction, yes. On the OpEx side, I think we spoke about three effects that we believe are fairly sustainable. For Q4, I think one can see that the store operations efficiencies and also the logistics efficiencies are likely to remain. A little bit more caution on the marketing advertising side as we, last year when we relaunched the brand, we had quite a lot of costs connected to marketing during Q3 that were not there this year. A little bit less positive impact on the marketing side for the fourth quarter. The next question goes to Matthew Clements of Barclays. Matthew, please go ahead. Yes, thanks for taking my question. Sreedhar, most of my questions have been taken, but I thought I'd maybe zoom out a little bit and focus a little bit less on the long term. Just wondering, when you look to some of your benchmark peers, where do you see on cost the biggest, the most exciting opportunities going forward? Could you highlight a few areas of initiatives? If it's in-store efficiencies, RFID, self-checkouts, etc., or in logistics, automation, etc.? What are the opportunities where currently H& M is underperforming, where you think there's a scope basically to catch up and equalize? Thank you. It's a broad and very interesting question that we work with. Of course, I think one clear view is that as we work on strengthening our customer offer and really being competitive in offering outstanding value-for-money, one key piece would be to increase store productivity. An increase in the sales per square meter and store productivity is an important way to balance the cost base because many of our costs are fixed or are not fixed. When we drive productivity gains, we drive better profitability. I think that's one important scope where we see compared to some of the best peers that there is potential for store square meter productivity. That links, of course, very closely to both the experience, but especially to what we put into the store and the product offering, which is priority number one, two, and three for our entire organization. That's one important piece that I know you, Joseph, if you want to elaborate on other costs. Certainly, we've taken good steps on the inventory productivity over the past two quarters. We have a stock composition which is good, where we are slightly lower on the number of pieces versus last year. This is also, of course, an area where some of our competitors are slightly ahead of us still, and we have long-term targets which are more ambitious than the levels we currently have. This is, of course, an area also that will help us generate a lot of operational efficiencies as we approach these targets. Just to follow up on that, on the inventory point, what are the key kind of initiatives at the moment? I mean, maybe I think some of your peers might talk about RFID, reducing stock management time, visibility through the supply chain, etc. What are the kind of areas where you think you can work on over the next couple of years? This is Daniel. I'll start. One important area is to have a really, really competitive product. A big part of what we spoke about with creating speed and flexibility in the supply chain is one key enabler of making sure that we have a very good quality, relevant product, as well as strengthening our design teams and really sort of celebrating that know-how and those design teams, both with competence, but also with the tech features to help them do efficient, really relevant design. That's one important piece. We see with the use of RFID, as we start to increase the precision and have real-time data of what we carry in all our different locations, physical stores, warehouses, and so on, we see a lot of opportunities for optimization where we can offer better size availability at the lower stock level and having less safety stock to still have a very strong size availability. We are excited about the opportunities as we start to roll out RFID at a broader scale. We work actively with the teams on improving the demand planning. Using all the data we have in a more efficient way to be more precise, how we forecast the demand, and then work actively with improving the supply to be precise to that demand, which also then helps us to come down in stock levels. That's one work that's been done over the last year that shows effect in this quarter, lowering the stock-to-sales ratio while we're actually increasing availability to the customer. Those are a few of the examples. Okay, that's very helpful. Maybe one nearer term question on regional performance. Just looking across your key markets, are there areas where you're particularly happy with performance, areas where you think there's room for improvements and weakness? Just interest on that front. If you look at this quarter, it's a quarter of quite even performance across the markets. We believe there are opportunities in all markets, but there's no one single one sticking out in particular for this quarter. It's quite even performance across the geographical regions. Okay, thank you. The next question goes to William Woods of AB Bernstein. William, please go ahead. William, your line is open. Hi, good morning. The portfolio brands were soft relative to the overall group this quarter and have slowed down on a pretty easy comp. What's driving the weakness in the portfolio brands? Thanks. Adam here. One of the effects that we see is that, of course, the decision to close Monki as a physical store concept. We also highlight that we have within the portfolio brands about 10% fewer stores. That is one isolated main effect and connected to the closure of Monki stores. I think worth calling out is we see strong performance in COS, really continuing to build a very strong position in the market and building excitement around their brand, which we have seen with both the list rankings over the last six months, as well as the reception of their fashion show in New York, which was really well received. I think that's worth a call out. We also see our youth concept Weekday performing well and having a good quarter and a good year so far. That's on the positive side worth calling out. Understood. Thank you. Thank you. There are no further questions at this time. I will now return the call over to Daniel for any closing remarks. Thank you so much. Thank you very much to all participating in this conference call. Thank you for listening in, and we wish you all a continued great day. Thank you from Stockholm. Thank you. This now concludes today's call. Thank you all for joining. You may now disconnect your line.