Hennes & Mauritz AB (HMRZF) Q4 2024 Earnings Call Highlights: Strong Sales Growth and ...

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Fri, Jan 31, 2025, 12:27 AM 4 min read

Q4 Net Sales: SEK62.2 billion, a 3% increase in local currencies.
Full Year Sales: SEK234.5 billion, a 1% increase in local currencies.
Q4 Earnings Per Share: Nearly doubled due to solid cost control.
Q4 Gross Profit: SEK33.9 billion, with a gross margin of 56.5%.
Full Year Gross Margin: 53.4%, an increase of 4% to SEK125.3 billion.
Q4 Operating Profit: SEK4.6 billion, with an operating margin of 7.4%.
Full Year Operating Profit: SEK17.3 billion, with an operating margin of 7.4%.
Stock in Trade: SEK43.3 billion, an 8% increase compared to last year.
Online Sales Contribution: 30% of total sales during the financial year.
Store Openings and Closures 2024: Opened 88 new stores, closed 204, and refurbished 242.
Store Plans for 2025: Plan to open at least 80 new stores, close 190, and refurbish around 190.
Dividend Proposal: Ordinary dividend increase to SEK680.

Warning! GuruFocus has detected 7 Warning Sign with HMRZF.

Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Hennes & Mauritz AB (HMRZF) reported a 3% increase in sales in local currencies for Q4 2024, driven by strong performance in women's wear and sportswear collections.
The company nearly doubled its earnings per share in Q4 2024 due to solid cost control, despite significant investments in marketing and costs related to winding down Monki.
Online sales accounted for 30% of total sales during the financial year, showing strong performance and contributing positively to overall sales growth.
The company has made significant progress in elevating its product offering, shopping experience, and brand building, particularly in women's wear, which has been well-received by customers.
Hennes & Mauritz AB (HMRZF) plans to continue its focus on organic growth, with strategic investments in store refurbishments, supply chain flexibility, and marketing to strengthen its brand and customer relationships.

Negative Points

The company faced challenges with extended transportation lead times, impacting stock levels and requiring adjustments to purchasing plans.
Despite the positive sales growth, the overall sales increase for the full year was only 1% in local currencies, indicating room for improvement.
The winding down of Monki and Afound had a negative impact on the portfolio brands' sales, highlighting the challenges in managing brand transitions.
External factors such as increased transportation costs and currency fluctuations negatively affected the gross margin, with expectations of continued pressure in the first quarter of 2025.
The company anticipates a slight increase in markdowns in Q1 2025 due to the timing shift of Black Friday sales, which could impact profitability.

Q & A Highlights

Q: Is the increase in working capital receivables only due to Black Friday, and what are the expectations for working capital in 2025? A: The increase in receivables is due to orders placed but not yet delivered and paid, which is partly due to Black Friday. For 2025, the focus will be on improving stock productivity despite supply chain challenges.

Q: Can you provide more details on the planned investments of SEK11 billion to SEK12 billion? A: Investments will focus on optimizing the store portfolio, enhancing supply chain flexibility, improving product quality, and tech developments. We are prioritizing initiatives that offer the highest returns, such as consolidating Monki into Weekday.

Q: What are the main components affecting the gross margin, and how do you see this evolving in 2025? A: The gross margin is influenced by external factors like raw materials and shipping costs, investments in product quality, and internal adjustments. We expect these factors to continue affecting us in 2025, but we are working to mitigate their impact.

Q: How do you view the anticipated increase in markdowns for Q1, and what is the impact of Black Friday on this? A: The increase in markdowns is partly due to the timing of Black Friday, which shifted sales into December. There is also a slight increase in markdowns expected for Q1 compared to last year.

Q: Can you elaborate on the impact of marketing costs in Q4 and expectations for Q1? A: Marketing costs were extraordinary in Q4 at SEK600 million, and while Q1 will see additional investments, they will be somewhat smaller than in Q4 but higher than Q1 of last year.

Q: What is the strategy for online sales and the implementation of return fees? A: We see benefits in offering returns both online and in physical stores. Positive outcomes from pilot programs have led us to accelerate the rollout of return fees, benefiting both the customer and the environment.

Q: How is the performance of women's wear compared to other segments, and what are the future plans? A: Women's wear has shown strong performance, driven by strategic improvements. We plan to apply these successful strategies across other segments like menswear and kidswear to achieve more balanced growth.

Q: What are the expectations for selling and administrative expenses growth in the coming year? A: Apart from marketing, we aim to keep cost increases minimal by mitigating inflationary pressures and reallocating resources to enhance customer experience.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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