H&M (STO: HM-B) FY17 Results: Sales Growth Slows and Margins Erode as Management Admits “Mistakes”

Executive Summary

• H&M reported SEK 200,004 million in net sales excluding VAT in the fiscal year ended November 30, 2017, slightly below the consensus of SEK 203,277 and up by 4.0% year over year. Sales including VAT increased by 3% in local currencies.
• Diluted EPS contracted by 13.1% to SEK 9.78 during the year and was marginally above the consensus estimate of SEK 9.71.
• In FY17, sales growth was driven purely by store openings, as H&M increased store numbers by 9%. In FY18, the group plans to open around 390 new stores and close 170 stores, resulting in a net addition of 220 stores.
• H&M announced the launch of Afound, an off-price marketplace for fashion and lifestyle brands from H&M’s stable as well as from external retailers.