Q3 2026 H&M Hennes & Mauritz AB Earnings Call

September 24, 2026

Speaker #2: Hey, and thank you for standing by. Welcome to the H&M Group nine-month report 2026 webcast and conference call. At this time, all participants are in a listen-only mode.

Operator: Thank you for standing by. Welcome to the H&M Group nine-month report 2026 webcast and conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. Please ask one question at a time and wait for the answer before asking your follow-up question. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Joseph Ahlberg, Head of Investor Relations. Please go ahead.

Speaker #2: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *1 and 1 on your telephone.

Speaker #2: You will then hear an automated message advising that your hand is raised. Please ask one question at a time and wait for the answer before asking your follow-up question.

Speaker #2: To withdraw your question, please press star 1 and then 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Joseph Ahlberg, Head of Investor Relations.

Speaker #2: Please go ahead.

Speaker #3: Good morning and a warm welcome, everyone. Today, we present the third quarter results for 2026 for the H&M Group. My name is Joseph Ahlberg, and I'm Head of Investor Relations.

Joseph Ahlberg: Good morning, and a warm welcome, everyone. Today, we present the Q3 results for 2026 for the H&M Group. My name is Joseph Ahlberg, and I am Head of Investor Relations. Before I hand you over to our CEO, Daniel Ervér, I would like to share this morning's setup. Daniel will start with a brief summary of our results and progress. Our CFO, Adam Karlsson, will provide some details on the financials. After that, Daniel will share a brief outlook. We will then open up for a Q&A session where Daniel, Adam, and I will be available to answer your questions. With that, please welcome Daniel.

Speaker #3: Before I hand you over to our CEO, Daniel Edvier, I'd like to share this morning's setup. Daniel will start with a brief summary of our results and progress, then our CFO, Adam Karlsson, will provide some details on the financials. After that, Daniel will share a brief outlook.

Speaker #3: We will then open up for a Q&A session where Daniel, Adam, and I will be available to answer your questions. With that, please welcome Daniel.

Speaker #4: Good morning, everyone, and thank you for joining us today. In the third quarter, we continued to strengthen the H&M Group. We delivered a strong operating profit and a return to growth.

Daniel Ervér: Good morning, everyone, and thank you for joining us today. in Q3, we continued to strengthen the H&M Group. We delivered a strong operating profit and a return to growth. The operating margin for the quarter reached 10.6%, and this includes a positive one-off effect of approximately 1.6 percentage points relating to tariffs and import of goods that increased the cost of goods sold in previous quarters. The improvement is clear. Looking at the rolling 12 months, the operating margin is now at 9% versus 7.2% for the same time last year. I am happy to see that our summer offer has been well-received and that it contributed to sales improvement, particularly towards the second half of this quarter. Overall, net sales increased by 1% in local currencies, where they were still somewhat affected by logistic disruptions.

Speaker #4: The operating margin for the quarter reached 10.6%, and this includes a positive one-off effect of approximately 1.6 percentage points related to tariffs and import of goods that increased the cost of goods sold in previous quarters.

Speaker #4: The improvement is clear. Looking at the rolling 12-month period, the operating margin is now at 9% versus 7.2% for the same time last year.

Speaker #4: I'm happy to see that our summer offer has been well received and that it contributed to sales improvement, particularly toward the second half of this quarter.

Speaker #4: Overall, net sales increased by 1% in local currencies, while they were still somewhat affected by logistic disruptions. For September, we expect sales growth of 1% compared with the same period last year.

Daniel Ervér: For September, we expect a sales growth of 1% compared with the same period last year. Before we dive in to more progress from the quarter, I would like to share some of the fashion highlights from this quarter in this short video. Please enjoy. Our strategic priorities remain product, experience, and brand. Here is where we can make the biggest difference for our customers. Every day, we compete for customers' attention, and we need to deliver at our best, deliver the most relevant experience in every touch point, whether it is in one of our digital channels, in some of our flagship stores across the globe, or in any of our stores across the world. To support these priorities, we further strengthen a number of key enablers.

Speaker #4: And before we dive into more progress from the quarter, I'd like to share some of the fashion highlights from this quarter in this short video. So please enjoy.

Speaker #5: Let's go.

Speaker #4: Our strategic priorities remain product experience and brand. Here is where we can make the biggest difference for our customers. Every day, we compete for customers' attention, and we need to deliver at our best—deliver the most relevant experience in every touchpoint, whether it is in one of our digital channels, in some of our flagship stores across the globe, or in any of our stores across the world.

Speaker #4: So, to support these priorities, we further strengthen a number of key enablers. We continue to develop our sourcing capabilities, we are empowering our teams closest to our customers, and we are becoming increasingly data-driven to support better and faster decisions across the business.

Daniel Ervér: We continue to develop our sourcing capabilities, we are empowering our teams closest to our customers, and we are becoming increasingly data-driven to support better and faster decisions across the business. We are not yet where we want to be, but step by step, we are firmly building a faster, more flexible, and customer-focused H&M. With a growing share of in-season buying and short lead times, we increase our flexibility and our ability to respond to changing customer needs and trends. This way, we can improve the precision of our offering, create more attractive assortment, and increase the share of full price sales. To deliver even greater value for money, we also continue to invest in product quality and durability. Delivering a stronger customer offer requires progress across the entire value chain.

Speaker #4: We are not yet where we want to be, but step by step, we are firmly building a faster, more flexible, and customer-focused H&M.

Speaker #4: With a growing share of in-season buying and shorter lead times, we increase our flexibility and our ability to respond to changing customer needs and trends.

Speaker #4: This way, we can improve the precision of our offering, create a more attractive assortment, and increase the share of full-price sales. To deliver even greater value for money, we also continue to invest in product quality and durability.

Speaker #4: Delivering a stronger customer offer requires progress across the entire value chain. And as our organization with fewer layers comes into place, we empower our colleagues to make decisions closer to our customers in all of our 82 markets.

Daniel Ervér: As our organization of fewer layers comes into place, we empower our colleagues to make decisions closer to our customers in all our 82 markets. In parallel, the investments we make in data, technology, and in our AI to strengthen our ability to become more efficient in product design, sourcing, and product flow, will also help us to become more personalized across our different touchpoints. We want to make a real difference in how our customers experience H&M in stores and online. Our omni model is a fantastic platform. It allows us to continue to build strong and direct relationships with our customers. As we invest in the most attractive locations, we close the least productive ones, and we upgrade existing stores and expand into new markets. We continue to improve the productivity of our store portfolio.

Speaker #4: In parallel, the investments we make in data, technology, and AI strengthen our ability to become more efficient in product design, sourcing, and product flow, but they also help us to become more personalized across our different touchpoints.

Speaker #4: We want to make a real difference in how our customers experience H&M, both in stores and online. Our omni-model is a fantastic platform; it allows us to continue building strong and direct relationships with our customers.

Speaker #4: And as we invest in the most attractive locations, we close the least productive ones, and we upgrade existing stores and expand into new markets.

Speaker #4: We continue to improve the productivity of our store portfolio. We also continue to invest in technologies that help and improve the customer experience, as well as the way we operate our stores.

Daniel Ervér: We also continue to invest in technologies that help and improve the customer experience and the way we operate our stores. Through the extended use of RFID technology and the extended rollout of self-checkouts, we make it easier for our customers to find what they are looking for and complete their purchases. Together with a more relevant assortment in each store and increased personalization across our digital channels, these efforts create a more relevant and seamless customer journey for all of our customers. To further strengthen our brands and deepen customer engagement, we continue to combine in-house design with strategic collaborations and partnerships. On the left-hand side of your slide, you see how H&M showed up even stronger this year at the London Fashion Week last Thursday night.

Speaker #4: Through the extended use of RFID technology and the expanded rollout of self-checkouts, we make it easier for our customers to find what they're looking for and complete their purchases.

Speaker #4: Together with a more relevant assortment in each store and increased personalization across our digital channels, these efforts create a more relevant and seamless customer journey for all of our customers.

Speaker #4: To further strengthen our brands and deepen customer engagement, we continue to combine in-house design with strategic collaborations and partnerships. On the left-hand side of your slide, you see how H&M showed up even stronger this year at London Fashion Week last Thursday night.

Speaker #4: With a high impact and reach on social media, presenting our in-house autumn/winter collection, ready to buy right away, created lines outside our flagship stores all across the world on Friday.

Daniel Ervér: With a high impact and reach in social media, presenting our in-house autumn/winter collection ready to buy right away, creating lines outside our flagship stores all across the world on Friday. This autumn comes with a line of really exciting collaborations such as WARDROBE.NYC, what you see here in the middle, Elie Saab, as you can see on the right, and H&M Home's Kelly Wearstler collaboration, where we are making great fashion and design accessible to more customers. We are also evolving the way we build our brands and connect with our customers by growing our digital and creator-led approach to marketing. By increasingly working with digital creators and more authentic content, we can reach a broader audience while remaining relevant to different customer groups. This helps us build stronger engagement and bring our fashion to life with trusted voices.

Speaker #4: And this autumn comes with a line of really exciting collaborations, such as Wardrobe NYC—what you see here in the middle—Elie Saab, as you can see on the right, and H&M Home's Kelly Wearstler collaboration, where we're making great fashion and design accessible to more customers.

Speaker #4: We are also evolving the way we build our brands and connect with our customers by growing our digital and creative-led approach to marketing. By increasingly working with digital creators, and using more authentic content, we can reach a broader audience while remaining relevant to different customer groups.

Speaker #4: This helps us build stronger engagement and bring our fashion to life with trusted voices. I will now hand over to Adam for a deeper look at the financial numbers.

Daniel Ervér: I will now hand over to Adam for a deeper look at the financial numbers. Adam, please go ahead.

Speaker #4: Adam, please go ahead.

Speaker #2: Thank you, Daniel, and good morning, everyone. As Daniel highlighted, net sales developed in a positive direction in the quarter and increased by 1% in local currencies.

Adam Karlsson: Thank you, Daniel, and good morning, everyone. As Daniel highlighted, net sales developed in a positive direction in the quarter and increased by 1% in local currencies. If you look at the year-on-year numbers, we saw strong growth in the Nordic region, supported both by a stronger consumer environment and also improvements, of course, in our customer offering. In local currencies, sales grew in all regions except Western Europe, and here market conditions continued to be affected by cautious consumers and a high level of promotional activity, particularly in Germany and the UK. It is also positive to see that portfolio brands return to growth as sales increased by 3% in local currencies. We have seen a continued solid profit development in the quarter.

Speaker #2: If you look at the year-on-year numbers, we saw strong growth in the Nordic region, supported both by a stronger consumer environment and also improvements, of course, in our customer offering.

Speaker #2: In local currencies, sales grew in all regions except Western Europe. Here, market conditions continued to be affected by cautious consumers and a high level of promotional activity, particularly in Germany and the UK.

Speaker #2: It is also positive to see that portfolio brands returned to growth, as sales increased by 3% in local currencies. We have seen continued solid profit development in the quarter.

Speaker #2: The gross margin came in at 54.0%, and as mentioned, it included a positive one-off effect of approximately 1.6 percentage points related to tariffs and goods imports.

Adam Karlsson: The gross margin came in at 54.0% and as I said, it included a positive one-off effect of approximately 1.6 percentage points related to tariffs and goods imports. In addition, and as a reminder, last year, we had a positive impact on the gross margin development related to exchange rate movements on the group internal receivables and liabilities. Taken together and adjusting for these two effects, the underlying gross margin continued to improve year-over-year, and that reflects the long-term improvements we have made in our sourcing. External factors have had a slightly negative impact, and that was driven by higher costs for transportations while markdowns were in line with the previous year. Thanks to good cost control, but with higher costs related to the upgrade of our digital infrastructure, selling and administrative expenses decreased by 1% in a quarter, both in SEK and local currencies.

Speaker #2: In addition, and as a reminder, last year we had a positive impact on the gross margin development related to exchange rate movements on group internal receivables and liabilities.

Speaker #2: Taken together, and adjusting for these two effects, the underlying gross margin continued to improve year over year. That reflects the long-term improvements we've made in our sourcing.

Speaker #2: External factors have had a slightly negative impact, and that was driven by higher costs for transportation, while markdowns were in line with the previous year.

Speaker #2: Thanks to good cost control, but with higher costs related to the upgrade of our digital infrastructure, selling and administrative expenses decreased by 1% in the quarter, both in Swedish krona and local currencies.

Speaker #2: If we look at the longer-term picture, the improvements in profitability and our operational foundations are clear signs of progress in building a stronger and more resilient H&M Group.

Adam Karlsson: If we look at the longer-term picture, the improvements in profitability and our operational foundations are clear signs of progress in building a stronger and more resilient H&M Group. As you can see here in the graph to the left, we have continued to improve our operating margin on a rolling 12 months basis, reaching 9% with the support from a gross margin of 54.4% and bringing us closer to a long-term operating margin target of 10%. The main drivers behind this improvement have been better sourcing, strong cost control, and more efficient ways of working across the business. Moving down to the right-hand side of the slide, key value drivers such as return on capital employed and earnings per share are also continuing to improve. Return on capital employed by 18% and EPS by 23, both on a rolling 12 months.

Speaker #2: As you can see here in the graph to the left, we have continued to improve our operating margin on a rolling 12-month basis, reaching 9%, with the support from a gross margin of 54.4%.

Speaker #2: And bringing us closer to a long-term operating margin target of 10%. The main drivers behind this improvement have been better sourcing, strong cost control, and more efficient ways of working across the business.

Speaker #2: Moving then to the right-hand side of the slide, key value drivers such as return on capital employed and earnings per share are also continuing to improve.

Speaker #2: Return on capital employed increased by 18% and EPS by 23%, both on a rolling 12 months. This reflects not only stronger profitability, but also a business that is deploying capital more effectively.

Adam Karlsson: This reflects not only stronger profitability, but also a business that is deploying capital more effectively. Key levers are here, a more integrated supply chain, a higher share of in-season buying, and a closer collaboration across our channels. While our work with inventory productivity continues, our inventory value increased by 1.4 billion SEK by the end of Q3 compared to last year. It is important that this should be seen in the context of more goods in transit as a result of the disruptions in both global supply chains and the temporary effects related to the consolidation of the European logistic network. As a reminder as well, we had prudent buying for the US during H2 2025. Let me give you a brief recap of our financial outlook before I hand back to you, Daniel.

Speaker #2: And key levers here are a more integrated supply chain, a higher share of in-season buying, and closer collaboration across our channels. And while our work with inventory productivity continues, our inventory value increased by SEK 1.4 billion by the end of the third quarter, compared to last year.

Speaker #2: It's important that this should be seen in the context of more goods in transit, as a result of the disruptions in both global supply chains and the temporary effects related to the consolidation of the European logistic network.

Speaker #2: And as a reminder as well, we had prudent buying for the US during the second half of 2025. So, let me give you a brief recap of our financial outlook before I hand back to you, Daniel.

Adam Karlsson: For Q4, we expect external factors to have a somewhat negative impact on gross margin compared with the same period last year. This is then driven by higher transportation costs, as already seen in Q3. Markdowns are expected to be somewhat higher in Q4 than the same period last year, and this is primarily driven by expectation of a high promotional activity in November and the calendar effect of Cyber Monday falling into Q4 this year. In addition to that, the inventory levels entering Q4 are affected by goods being shifted into the opening balance for Q4 as a result of the delays in Q3 this year. As I already mentioned, the prudent buying in the US for H2 last year.

Speaker #2: For the fourth quarter, we expect external factors to have a somewhat negative impact on gross margin compared with the same period last year. This is driven by higher transportation costs, as already seen in Q3.

Speaker #2: Markdowns are expected to be somewhat higher in the fourth quarter than in the same period last year. This is primarily driven by expectations of higher promotional activity in November and the calendar effect of Cyber Monday falling into Q4 this year.

Speaker #2: In addition to that, the inventory levels entering Q4 are affected by goods being shifted into the opening balance for Q4 as a result of the delays in Q3 this year.

Speaker #2: And as I already mentioned, the prudent buying in the US for the second half of last year. Turning to SG&A, we have demonstrated solid cost control throughout the year, and based on the outcome with one quarter remaining, we are narrowing our full-year guidance for SG&A growth in local currencies to the lower end of the guided range.

Adam Karlsson: Turning to SG&A, we have demonstrated a solid cost control throughout the year. Based on the outcome with one quarter remaining, we are narrowing our full year guidance for SG&A growth in local currencies to at the lower end of the guided range. On CapEx, we have many ongoing projects expected to add to CapEx in Q4, and that gives a back-heavy activation profile. Our current prediction is that we will end up at the lower end of the guided CapEx range for the fiscal year. Finally, on cash flow, a mentioning of that the majority of the remaining provisions recognized in Q2 2026 are expected to be settled in Q4. With that, I will hand back to you, Daniel, for a short business outlook.

Speaker #2: On COPEX, we have many ongoing projects expected to add to COPEX in Q4, and that gives a back-heavy activation profile. Our current prediction is that we will end up at the lower end of the guided COPEX range for the fiscal year.

Speaker #2: And then finally, on cash flow, I'm mentioning that the majority of the remaining provisions recognized in the second quarter of 2026 are expected to be settled in the fourth quarter.

Speaker #2: And with that, I'll hand back to you, Daniel, for a short business outlook. Thank you, Adam. We have done a great deal over the past few years to build the foundation for a stronger and more resilient H&M Group.

Daniel Ervér: Thank you, Adam. We have done a great deal over the past few years to build the foundation for a stronger and more resilient H&M Group. Our focus remains firmly on product, experience, and brand. Through these priorities, our ambition is to create an even greater customer value and continue to strengthen our customer offering. To achieve this, we are step by step increasing the speed and the precision across the value chain. We do this in our supply chain while we give our colleagues more mandate to act. We are becoming more data-driven, and we are scaling up the use of AI. We have more work to do, but we are encouraged by the progress that we are making, and we are very grateful, and I am very grateful for the team who works really hard every day to make H&M stronger.

Speaker #2: Our focus remains firmly on product, experience, and brand. Through these priorities, our ambition is to create even greater customer value and continue to strengthen our customer offering.

Speaker #2: To achieve this, we are step by step increasing the speed and precision across the value chain. We do this in our supply chain, while we give our colleagues more mandate to act.

Speaker #2: We are becoming more data-driven, and we are scaling up the use of AI. We have more work to do, but we are encouraged by the progress that we are making, and we are very grateful—and I'm very grateful—for the team who works really hard every day to make H&M stronger.

Speaker #2: And we remain confident that the initiatives that we are putting in place will continue to strengthen our customer offering over time. With that, thank you so much for listening, and I will now hand over to Joseph for the Q&A.

Daniel Ervér: And we remain confident that the initiatives that we are putting in place will continue to strengthen our customer offering over time. With that, thank you so much for listening, and I will now hand over to Joseph and the Q&A.

Speaker #1: Thank you, Daniel. We will now start the Q&A. Please state your name before asking a question, and try to limit yourself to one question at a time, with a maximum of two questions per participant, so we can answer them one by one and make sure that we have time to answer all of your questions.

Joseph Ahlberg: Thank you, Daniel. We will now start the Q&A. Please state your name before asking a question and try to limit yourself to one question at a time, with a maximum of two questions per participant, so we can answer them one by one, make sure that we have time to answer all of your questions. Over to you, Operator, for questions, please.

Speaker #1: Over to you, Operator Silister. Please put your questions, please.

Speaker #3: Thank you. To ask a question, you will need to press *1 and then 1 on your telephone, and wait for your name to be announced.

Operator: Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. Please ask one question at a time and wait for the answer before asking your follow-up question. To withdraw your question, please press star one and one again. We will now go to the first question. One moment, please. And your first question today comes from the line of Magnus Råman from SEB Markets. Please go ahead.

Speaker #3: Please ask one question at a time, and wait for the answer before asking your follow-up question. To withdraw your question, please press star one and then one again.

Speaker #3: We will now go to the first question. One moment, please. And your first question today comes from the line of Magnus Raman from SB1 Markets.

Speaker #3: Please go ahead.

Speaker #4: Thank you very much.

Magnus Råman: Thank you very much. So I have two questions. Starting with the first one, it is the dynamics of your ERP investments. Because you have been delivering impressive cost control here nine months to date. Then the question is if you still stand by your expectation of single-digit increase in SG&A in local currencies for the full year? Also if you could elaborate a little bit on the effects you expect on resulting Q4 and also for how long the projected extra cost from ERP rollout will continue.

Speaker #1: I have two questions. And starting with the first one, it's the dynamics of your ERP investments. So because you have been delivering impressive cost control here nine months to date, and then the question is if you still stand by your expectation of single-digit increase in SG&A in local currencies for the full year, and also if you could elaborate a little bit on the effects you expect on resulting Q4 and also for along the projected extra costs from ERP rollout will continue.

Adam Karlsson: Hey, morning. Adam here. We still stand by our guidance, but we sort of narrow the range then to somewhat above last year. Low single digits, so to say. That is the still expectation. We are, as also mentioned, focusing more towards the H2 of the year on this ERP work that we do. That will most likely still affect the SG&A for the full year to that extent then. Also looking into the coming years then, this will not be done by the end of Q4 this year. It will be a continuous work throughout 2027 and also into 2028.

Speaker #2: Hey, morning, Adam here. So we still stand by our guidance, but we've sort of narrowed the range now to somewhat above last year, so low single-digit, so to say.

Speaker #2: So that is still the expectation. And we have also mentioned focusing more towards the second half of the year on this ERP work that we do.

Speaker #2: So that will most likely still affect the SG&A for the full year to that extent, then. And also, looking into the coming years, this will not be done by the end of the fourth quarter this year.

Speaker #2: It will be a continuous work throughout 2027 and also into 2028. So that is why we also speak about the need to continue to, of course, focus on the positives of it, but also be realistic that this will be a component of our financial plan for next year, which is likely then to have an upward tick on the SG&A, also for 2027.

Adam Karlsson: That is why we also speak about it, that we need to continue to, of course, focus on the positives of it, but also be realistic that this will be a component of our financial plan for next year that is likely then to have an upward tick on the SG&A also for 2027.

Magnus Råman: Right. That scale, so now it has become low. But still the implicit sort of effect in Q4 should be quite sizable from how I calculate it if you are going to reach a positive figure there. Nevertheless, okay, the second question here is about, well, you mentioned here also in the report about disruptions in your supply chain and that you have experienced through the quarter. Maybe you could also comment on your own consolidation of your European logistics network. When do you expect that to be finalized? The first is what type of disruptions you have experienced, and the second part, when you expect to be finalizing your own consolidation efforts.

Speaker #1: All right, that's clear. So low has become low, low, but still the implicit sort of effect in Q4 should be quite sizable, from how I calculated it, if you're going to reach a positive figure there.

Speaker #1: Nevertheless, okay, the second question here is about, you mentioned here also in the report about disruptions in your supply chain, and that you have experienced during the quarter.

Speaker #1: And maybe you could also comment on your own consolidation of your European logistics network. When do you expect that to be finalized? So the first is: what type of disruptions have you experienced? And the second part: when do you expect to be finalizing your own consolidation efforts?

Speaker #2: So, this is Daniel. Good morning. We see two different types of disruptions. One is related to the global supply chains—a lot related to the situation in the Middle East—where we get disruption and delays on global shipping supply chain lines, as well as the ability to use air freight, which is compromised by the situation.

Daniel Ervér: This is Daniel. Good morning. We see two different types of disruptions. One is related to the global supply chains, a lot related to the situation in the Middle East, where we get disruption and delays on global shipping supply chain lines, as well as the ability to use air freight is compromised by the situation. That meant that we had some delays of goods that were supposed to deliver in Q4 coming into Q3, some delays of goods within Q3, and then some delays of goods. Then we have preponed deliveries of goods into Q4 to mitigate for these delays, which is the explanation of the year-over-year increase of the stock levels. The second disruption relates to what you mentioned, the consolidation of our European warehouses, and that is an ongoing work that will continue.

Speaker #2: So that meant that we had some delays for goods that were supposed to be delivered in Q4 coming into Q3, some delays of goods within Q3, and then some delays of goods—and then we've preponed deliveries of goods into Q4 to mitigate for these delays, which is the explanation of the year-over-year increase of the stock levels.

Speaker #2: The second disruption relates to what you mentioned—the consolidation of our European warehouses. That is ongoing work that will continue. We've had, during the second quarter, the third quarter, and some effects in the beginning of the fourth quarter, effects related to the closure of our warehouse in Belgium.

Daniel Ervér: We've had during Q2, Q3, and some effects in the beginning of Q4, effects related to the closure of our warehouse in Belgium. That has affected mainly Southern Europe. We had a somewhat of an effect of the performance top line in Q3, in the beginning of Q4. But we are now catching up, and we are now seeing that those effects should wear out during the rest of Q4.

Speaker #2: And that has affected mainly Southern Europe. And we had somewhat of an effect of the performance top line in the third quarter. In the beginning of the fourth quarter, but we are now catching up, and we are now sort of seeing that those effects should wear out during the rest of the fourth quarter.

Speaker #1: Thank you.

Magnus Råman: Thank you.

Speaker #3: Thank you. We will now go to the next question. And your next question today comes from the line of Daniel Schmidt from Danske Bank.

Operator: Thank you. We will now go to the next question. Your next question today comes from the line of Daniel Schmidt from Danske Bank. Please go ahead.

Speaker #3: Please go ahead.

Speaker #4: Yes, good morning Daniel, Adam, and Joseph. Could I just maybe touch on the full-year sales effects from the store optimization that you're doing? You're still expected to be slightly positive for the year.

Daniel Schmidt: Yes, good morning, Daniel, Adam, and Joseph. Could I just maybe touch on the full year sales effect from the store optimization that you're doing? It's still expected to be slightly positive for the year. I think it was slightly negative in H1. What was the outcome in Q3? If that was negative, I guess that leaves a lot to be happening in Q4. Is that the way we should interpret it?

Speaker #4: I think it was slightly negative in the first half. What was the outcome in Q3? And if that was negative, I guess that leaves a lot to be happening in Q4.

Speaker #4: Is that the way we should interpret it?

Adam Karlsson: No. The net effect that we guide for the full year is the effect from openings, from closures, and as well as stores that are being closed for rebuilds during the period of time. The net effect for the second half of the year is slightly positive. We had a slightly positive effect in Q3 from that optimization work that we see will also happen in Q4.

Speaker #2: No. So, the net effect that we guide for the full year is the effect from openings, from closures, and as well as stores that are being closed for rebuilds during the period of time.

Speaker #2: The net effect for the second half of the year is slightly positive. So, we had a slightly positive effect in the third quarter from that optimization work, which we see will also happen in the fourth quarter.

Speaker #4: And should we read it as that you had a slight positive in Q3—you mentioned that. Is that going to be more than a slight positive in Q4, then, in order to compensate for the slight negative in H1?

Daniel Schmidt: Should we read it as that you had a slight positive in Q3, you mentioned that. Is that going to be more than a slight positive in Q4 then in order to compensate for the slight negative in H1?

Adam Karlsson: I will see a similar level to what we saw in Q3, but we estimate the effect for the year to be slightly positive.

Speaker #2: I will see a similar level to what we saw in Q3. But we estimate the effect for the year to be slightly positive.

Speaker #4: Okay, good. And then you guide, of course, on external factors, but you don't mention internal factors that we've talked quite a lot about in terms of consolidating the supply base, and tier one and tier two suppliers, and the effects that you've gotten out of that.

Daniel Schmidt: Okay, good. Then you guide, of course, on external factors. But you do not mention internal factors that we have talked quite a lot about in terms of consolidating the supply base and tier 1 and 2 suppliers and the effects that you have gotten out of that. You mentioned that a quarter ago, I think, or two quarters ago, that it would be peaking in H1, but it was still going to be a positive effect for H2. Is that still the fact?

Speaker #4: And you mentioned that a quarter ago, I think, or two quarters ago, that that's still going to be—it would be peaking in H1, but it was still going to be a positive effect for H2.

Speaker #4: Is that still the fact?

Speaker #2: That work continues, and I believe we spoke about it last quarter as well—that we're sort of moving that process backward in the supply chain to more clearly include material suppliers and further down in the supply chain.

Adam Karlsson: That work continues, I believe we spoke about it also last quarters, actually, that we're sort of moving that process backward in the supply chain to also more clearly include material suppliers and further down in the supply chain. So that work continues. What we have, though, also communicated is that we have at least a medium-term target range of the gross margin. As we are now on a rolling 12 basis, starting to operate within that, we are starting to more clearly use the internal effects to also add value to the product, so to say, to reinvest that opportunity. So it will be less of a gross margin expansion driver, but of course, an important part to continue to create strong value for the customer.

Speaker #2: So that work continues. What we have, though, also communicated is that we have at least a medium-term target range for the gross margin.

Speaker #2: And as we are now on a rolling 12-month basis, starting to operate within that, we are starting to more clearly use the internal effects to also add value to the products, so to say, to reinvest that opportunity.

Speaker #2: So it will be less of a gross margin expansion driver, but of course, an important part to continue to create strong value for the customer.

Speaker #2: And mitigate the pressure on external factors, of course. Yes.

Daniel Ervér: Mitigate the pressure on external factors.

Adam Karlsson: Yes, of course. Yes.

Speaker #4: Yeah. And was it still a positive effect from it in Q3?

Daniel Schmidt: Yeah. Was it still a positive effect from it in Q3?

Adam Karlsson: A slight positive effect mitigating the negative parts and our continued efforts and results of those efforts in our own sourcing operations.

Speaker #2: A slight, slight positive effect, mitigating the negative parts. And our continued efforts, and the results of those efforts, in our own sourcing operations.

Daniel Schmidt: Okay, good. Thank you.

Speaker #4: Okay. Good. Thank you.

Speaker #3: Thank you. We will now go to the next question. The question comes from the line of Frederick Iverson from ABG Sundal Collier. Please go ahead.

Operator: Thank you. We will now go to the next question, and the question comes from the line of Fredrik Ivarsson from ABG Sundal Collier. Please go ahead.

Fredrik Ivarsson: Yes, good morning. Thank you. Maybe a brief follow-up on the latest question. You obviously have done a bunch of good work on the gross margin side with the supplier optimization program and so on. How much of this is yet to be done? Do you see more upside and more potential in that sense?

Speaker #4: Yes, good morning. Thank you. Maybe a brief follow-up on the latest question. You obviously have done a lot of good work on the gross margin side with the supplier optimization program and so on.

Speaker #4: How much of this is yet to be done? Do you see more upside, and more potential in that sense?

Daniel Ervér: We continue to, as Adam Karlsson mentioned, to see further opportunities also going into the material side of it. We see more opportunities for consolidation. The sourcing work will continue to be a very important piece of how we mitigate the negative effect on the external factors as we move ahead. But as Adam Karlsson also mentioned, we are now in the gross margin interval, which we see is a sustainable interval, which we will gear towards staying in for the rest of the year as we mitigate external factors but also invest in the product offering. Looking forward, we also look at the different supplier base, and we are shortening the lead times.

Speaker #2: We continue to, as Ada mentioned, see further opportunities also going into the material side of it. We see more opportunities for consolidation. So the sourcing work will continue to be a very important piece of how we mitigate the negative effect of the external factors as we move ahead.

Speaker #2: But as Adam also mentioned, we are now in the gross margin interval, which we see is a sustainable interval, which we will sort of gear towards staying in for the rest of the for the rest of the year as we as we mitigate the external factors, but also invest in the private offering.

Speaker #2: Then, looking forward, we also look at the different supplier base, and we are shortening the lead times. When we look at suppliers with shorter lead times, a bigger part of the gain comes not from both gross margin, but from the realized margin from sales by having a higher sell-through as well on full price.

Daniel Ervér: When we look at suppliers with shorter lead times, a bigger part of the gain comes not from both gross margin, but from the realized margin from sales by having a higher sell-through as well on full price. That will be more important for us as we move ahead with a higher share of closed market and fast source products and assortments.

Speaker #2: And that will be more important for us as we move ahead with the higher share of close market and fast source products. Yeah, and assortments.

Speaker #4: Perfect, thank you. And then, if you could comment on where you are in terms of the new, more flat organization, are all those processes in place, and what have your sort of initial reflections been?

Fredrik Ivarsson: Perfect. Thank you. If you could comment on where you are in terms of the new, more flat organization. Are all those processes in place, and what have your initial reflections been?

Speaker #2: So we have had a couple of go-lives across the world, depending on local regulations and what's possible. The first batch went live at the beginning of summer.

Daniel Ervér: We have had a couple of go lives across the world, depending local regulations and what is possible. The first batch went live in the beginning of summer. We had another majority going live coming into the autumn. To the very vast extent, we are now live with a new organization across all our markets, with one or two markets still being the exceptions. We see that already that is really positive, that we have eyes and ears looking for potential and identifying opportunities in our offering, in the way we set up our stores, the way we operate our business close to customers across the 82 markets. It is an opportunity for us to combine the strengths of a global company and all the muscles we have with the local relevance.

Speaker #2: We had another majority going live coming into the autumn. So, to a very vast extent, we are now live with a new organization across all our markets, with one or two markets still being the exceptions.

Speaker #2: We see that already, and that is really positive, that we have eyes and ears looking for potential and identifying opportunities in our offering, in the way we set up our stores, and the way we operate our business close to customers across the 82 markets.

Speaker #2: And it is an opportunity for us to combine the strengths of a global company and all the muscles we have with the local relevance.

Speaker #2: So, we are starting to see early positive indications of being closer to the customer and becoming more relevant. But then, of course, a large organizational change means that we are putting new teams in place.

Adam Karlsson: We are starting to see early positive indications of being more close to the customer to be more relevant. But then, of course, a large organizational change means that we are putting new teams in place. There is a sort of a startup phase, the teams getting to know the markets that were not placed in the market before. So of course, there is a startup lag to it also. But when it comes to the implementation, we are more or less fully there with the new organization.

Daniel Ervér: We are starting to see early positive indications of being more close to the customer to be more relevant. But then, of course, a large organizational change means that we are putting new teams in place. There is a sort of a startup phase, the teams getting to know the markets that were not placed in the market before. So of course, there is a startup lag to it also. But when it comes to the implementation, we are more or less fully there with the new organization.

Speaker #2: There is a sort of startup phase. The teams are getting to know the markets, markets they weren't placed in before. So, of course, there is a startup lag to it also.

Speaker #2: But when it comes to the implementation, we are more or less fully there with the new organization.

Speaker #4: Okay, thank you. Best of luck.

Fredrik Ivarsson: Okay, thank you. Best of luck.

Speaker #2: Thank you. Thank you.

Joseph Ahlberg: Thank you.

Daniel Ervér: Thank you.

Speaker #3: Thank you. We will now go to the next question. Your next question today comes from the line of Nicholas Ekman from DMB Carnegie.

Operator: Thank you. We will now go to the next question. Your next question today comes from the line of Niklas Ekman from DNB Carnegie. Please go ahead.

Speaker #3: Please go ahead.

Speaker #5: Thank you very much. Can I ask about the external factors? When you talk about some negative effects in Q3 and you say something similar about Q4, can you elaborate at all on the magnitude?

Niklas Ekman: Thank you very much. Can I ask about the external factors? When you talk about some negative effects in Q3 and you say something similar about Q4, can you elaborate at all on the magnitude? I guess both for Q4 and I guess coming quarters as well. Are you seeing the negative effects from Q3 worsening in Q4 and going into H1 of 2027, or is it about the same level?

Speaker #5: I guess both for Q4 and, I guess, coming quarters as well. Are you seeing the negative effects from Q3 worsening in Q4 and kind of going into the first half of '27, or is it about the same level?

Speaker #2: This is Joseph speaking. For Q3, we saw that external factors added up to a net negative effect that was somewhat worse than expected.

Joseph Ahlberg: This is Joseph speaking. For Q3, we saw that external factors added up to a net negative effect that was somewhat worse than expected. The main driver of this development was the increased freight costs year over year. That was the main moving factor explaining this development for the third quarter. Our guidance for Q4 is for markdown to also then increase somewhat year over year. It is the added freight cost that is the key driver here. That is the comment we make about similar development as what we saw there in the third quarter. Then, of course, we expect to also see material prices creating a headwind towards the end of this year, but coming into more effect into 2027.

Speaker #2: The main driver of this development was the increased freight costs year over year. That was the main moving factor, explaining this development for the third quarter.

Speaker #2: And our guidance for Q4 is for markdowns to also increase somewhat year over year. It’s the added freight cost that is the key driver here.

Speaker #2: So that's the comment we make about similar development as what we saw there in the third quarter. Then, of course, we expect to also see material prices creating a headwind toward the end of this year.

Speaker #2: But coming into more effect in 2027.

Speaker #5: Okay. But there's no dramatic shift in the coming quarters, with headwinds increasing. It's still of a fairly similar magnitude as Q3.

Niklas Ekman: Okay. There is no dramatic shift in the coming quarters with headwinds increasing. It is still of a fairly similar magnitude as Q3.

Joseph Ahlberg: That is a fair summary, yes.

Speaker #2: That is a fair summary, yes.

Speaker #5: Very good. And also, talking about markdowns: when you were warned of slightly higher markdowns now in Q4, and you're highlighting Cyber Monday, is that the only reason for higher markdowns, or is there anything in your inventory, or general campaign activity?

Niklas Ekman: Very good. Also talking about markdowns, when you warn of slightly higher markdowns now in Q4 and you are highlighting Cyber Monday, is that the only reason for higher markdowns or is there anything in your inventory or general campaign activity? As a follow-up on that, I guess the timing of Cyber Monday should also be positive for sales. I think last year you lost 1 percentage point of sales in Q4. So all else equal, you should possibly gain 1 percentage point of sales in Q4 this year. Thanks.

Speaker #5: And kind of as a follow-up on that, I guess the timing of Cyber Monday should also be positive for sales. And I think last year you lost 1 percentage point of sales in Q4.

Speaker #5: So, all else equal, you should possibly gain 1 percentage point of sales in Q4 this year. Thanks.

Adam Karlsson: I will start with the markdown. The main effect is the shift of Cyber Monday. Then, as we mentioned, due to the global supply chain disruptions, we have had delays of incoming, which is not optimal for the timing. We want the garments to arrive at the right time to be really relevant for the customers. So we have an increased stock level to manage also due to that. That stock is very fresh because it is stock that was bought to come in in Q3, that was slightly delayed during Q3 or slightly prepone into Q4 to mitigate, but it is a stock level that we will need to manage during the quarter that is partially affected and coming from the global disruptions and the delays. Adam, I do not know if you want to elaborate on the calendar effect further.

Daniel Ervér: I will start with the markdown. The main effect is the shift of Cyber Monday. Then, as we mentioned, due to the global supply chain disruptions, we have had delays of incoming, which is not optimal for the timing. We want the garments to arrive at the right time to be really relevant for the customers. So we have an increased stock level to manage also due to that. That stock is very fresh because it is stock that was bought to come in in Q3, that was slightly delayed during Q3 or slightly prepone into Q4 to mitigate, but it is a stock level that we will need to manage during the quarter that is partially affected and coming from the global disruptions and the delays. Adam, I do not know if you want to elaborate on the calendar effect further.

Speaker #2: So I'll start with the markdown. The main effect is the shift of Cyber Monday. Then, as we mentioned, due to global supply chain disruptions, we've had delays of incoming goods, which is not optimal for the timing.

Speaker #2: We want garments to arrive at the right time in order to be really relevant for the customers. So we have an increased stock level to manage also due to that.

Speaker #2: That stock is very fresh because it's stock that was bought to come in in Q3 that was slightly delayed during Q3 or slightly preponed into Q4 to mitigate.

Speaker #2: But it's also a stock level that we will need to manage during the quarter, and it is partially affected by global disruptions under the days.

Speaker #2: Adam, I don't know if you want to elaborate on the calendar effect further.

Speaker #5: No, but you're right that there will be one more day, so to speak, of selling in November this year compared to last year.

Adam Karlsson: No, but you are right that it will be one more day of selling in November this year compared to last year. So all other things equal should be somewhat positive on the financial 2026.

Speaker #5: So that, all other things equal, should be somewhat positive for the financials in 2026.

Speaker #4: I think the estimated impact you mentioned there, Nicholas, is probably on the high side. So, a positive for November, but not a significant impact on the quarterly sales outlook.

Niklas Ekman: Thank you.

Joseph Ahlberg: I think the estimated impact you mentioned there, Niklas Ekman, is probably on the high side. A positive for November, but not a significant impact on the quarterly sales output coming from that Cyber Monday falls into November this year.

Speaker #4: Coming from that, Cyber Monday falls into November this year.

Speaker #5: Very clear. Thanks.

Niklas Ekman: Very clear. Thanks.

Speaker #3: Thank you. We will now take the next question. The question comes from the line of Richard Chamberlain from RBC. Please go ahead.

Operator: Thank you. We will now take the next question, and the question comes from the line of Richard Chamberlain from RBC. Please go ahead.

Speaker #4: Yeah, thank you. Two from me, please. Just in the statement, it says that exchange rate changes for inter-group payables and receivables had a neutral impact on the quarter's gross margin, while the same quarter last year was positively affected by exchange rate gains?

Richard Chamberlain: Yeah, thank you. Two from me, please. In the statement, it says that exchange rate changes for intragroup payables and receivables had a neutral impact on the quarter's gross margin, while the same quarter last year was positively affected by exchange rate gains. Can you give a sense of what the difference was there year-on-year in terms of exchange rate impacts on the gross margin that you reference in the report? Thank you.

Speaker #4: Can you give a sense of what the difference was there year-on-year in terms of exchange rate impacts on the gross margin that you reference in the report?

Speaker #4: Thank you.

Speaker #2: This is Joseph. Yes, last time we did call out that we had an unusually large FX effect, as you describe here, Richard, with the revaluation of intra-company receivables and liabilities.

Joseph Ahlberg: This is Joseph. Last time we did call out that we had an unusually large FX effect that you describe here, Richard, with the revaluation of intracompany receivables and liabilities. This year, we did not have such an impact of revaluation. It was again demonstrating that last year was an outlier in that sense. Referring back to Adam's comment made earlier, we had in the quarter a positive impact from the tariff adjustments of 160 basis points. Adjusting also for this FX effect in the comp base, it takes our underlying gross margin to a slight improvement year over year.

Speaker #2: This year, we didn't have such an impact from revaluation. It was again demonstrating that last year was an outlier in that sense. And referring back to Adam's comment made earlier, we had, in the quarter, a positive impact from the tariff adjustments of 160 basis points.

Speaker #2: And adjusting also for this FX effect in the comp base, it takes our underlying gross margin to a slight improvement year over year.

Speaker #4: Understood. Excellent. Okay, thanks, Joseph. And the other one is just on the tariff refunds. How far do you think you are through the process of receiving those?

Richard Chamberlain: Understood. Excellent. Okay, thanks, Joseph. The other one is just on the tariff refunds. How far do you think you are through the process of receiving those? Is that broadly going to mirror, I guess, the tariff costs that we were starting to see coming through last year? So it is going to build a bit from here? How are you seeing the outlook for those tariff refunds in the next couple of quarters?

Speaker #4: I mean, is that broadly going to sort of mirror, I guess, the tariff costs that we were starting to see coming through last year?

Speaker #4: So it's going to kind of build a bit from here, or how are you seeing the outlook for those tariff refunds in the next couple of quarters?

Speaker #2: Thank you for the question. This is Joseph again. We don't expect to see any further adjustments connected to tariffs in coming quarters. We entered into a structured process in June, and that process was concluded in the quarter of Q3.

Joseph Ahlberg: Thank you for the question. This is Josef again. We do not expect to see any further adjustments connected to tariffs in coming quarters. We entered into a structured process in June, and that process was concluded in Q3. So no further.

Speaker #2: So no further refunds expected.

Daniel Ervér: Okay. It is all done and wondered. Yeah.

Richard Chamberlain: Okay. It is all done and wondered. Yeah.

Joseph Ahlberg: refunds expected.

Richard Chamberlain: Got it. Okay. Thanks very much.

Speaker #4: Got it. Okay, thanks very much.

Speaker #3: Thank you. Your next question today comes from the line of Georgina Yohannen from JPMorgan. Please go ahead.

Operator: Thank you. Our next question today comes from the line of Georgina Johanan from JPMorgan. Please go ahead.

Georgina Johanan: Hi. Good morning. Thanks for taking my question. I have two, please. The first one was just coming back to the point on OpEx. Just wanted to check my understanding. Am I right in estimating that you are therefore looking for OpEx ex-FX to be up around a mid-single-digit percentage in Q4, please? I ask because just, of course, to help inform our modeling into 2027 in terms of that run rate that we should expect. That was my first one. Thanks.

Speaker #6: Hi, good morning. Thanks for taking my question. I've got two pleas. The first one is just coming back to the point on OPEX; I just wanted to check my understanding.

Speaker #6: So am I right in sort of estimating that you're therefore looking for OPEX XFX to be up around a mid-single-digit percentage in Q4, please?

Speaker #6: I ask because, of course, it will help inform our modeling into 2027 in terms of the run rate that we should expect. That was my first question.

Speaker #6: Thanks.

Adam Karlsson: Joseph here to make a quick comment on that, Georgina. Thank you for the question. If we look accumulated by Q3, we are on a flat development on SG&A in local currencies year over year. Back to Adam's earlier point, we expect to see an outcome for the full fiscal year at the very low end of the guided range of low single-digit growth. I think that takes the Q4 projection to a lower growth rate than what you assumed there, Georgina.

Joseph Ahlberg: Joseph here to make a quick comment on that, Georgina. Thank you for the question. If we look accumulated by Q3, we are on a flat development on SG&A in local currencies year over year. Back to Adam's earlier point, we expect to see an outcome for the full fiscal year at the very low end of the guided range of low single-digit growth. I think that takes the Q4 projection to a lower growth rate than what you assumed there, Georgina.

Speaker #2: Joseph here to make a quick comment on that, George. Thank you for the question. If we look accumulated by Q3, we are on a flat development on SG&A in local currencies year over year.

Speaker #2: So, and back to Adam’s earlier point, we expect to see an outcome for the full fiscal year at the very low end of the guided range of low single-digit growth.

Speaker #2: So I think that takes the Q4 projection to a lower growth rate than what you assumed there, George.

Georgina Johanan: Okay. Apologies. I thought 9 months was running at -1, but perhaps I misread. Apologies. Just a second one. Just to check, was there any timing impacts in either direction that impacted the current trading number? I think there was a slight shift of Labor Day in the US, please. If I have got time, I would love to know what you are seeing post the de minimis removal in Europe, and indeed, if that is causing any harder push of those Chinese players into the UK, please. Thanks very much.

Speaker #6: Oh, okay. Apologies. I thought nine months was running at minus one, but perhaps I misread. Apologies. And then just the second one, just to check, was there any timing impacts in either direction that impacted the current trading number?

Speaker #6: I think there was a slight shift of Labor Day in the US, please. And then if I've got time, I would love to know what you're seeing post the de minimis removal.

Speaker #6: In Europe—and indeed, if that's causing any harder push of those Chinese players into the UK, please. Thanks very much.

Speaker #2: Yeah. On the first question here, we see no material effect from any changes to trading days or similar factors. So, it's a fairly normalized quarter.

Adam Karlsson: On the first question here, we see no material effect of any sort of changes to trading days or so. It is a fairly normalized quarter. Nothing material, of course, there are days moving, but nothing material to call out for the third quarter.

Speaker #2: So, nothing material, of course. There are days moving, but nothing material to call out for the third quarter. And then I'll follow up on the de minimis and also on the fees that are being implemented in Europe.

Daniel Ervér: I will follow up on the de minimis and also on the fees that are being implemented in Europe. We see positive steps towards a more equal playing field where we can compete on equal terms, which we believe is great for customers. That gives them the chance to get the best value for money and also can feel safe with the products they are buying. We see that as a positive step that is happening in both US and Europe, and will continue further on into Europe. We see that at the same time, it is important to remember we are acting in an industry which is very, very fragmented, where we have no player having more than a low single-digit market share. Even if certain players then will have less of engagement and interest, it is still a very fragmented market.

Speaker #2: We see positive steps towards a more equal playing field, where we can compete on equal terms. We believe this is great for customers, as it gives them the chance to get the best value for money and also feel safe with the products they're buying.

Speaker #2: And so we see that as a positive step that is happening in both the US and Europe, and we'll continue further on into Europe. We see that, at the same time, it's important to remember we are acting in an industry which is very, very fragmented, where no player has more than a low single-digit market share.

Speaker #2: So even if certain players will then have less engagement and interest, it's still a very fragmented market. So the impact has to be seen in that light.

Daniel Ervér: The impact has to be seen in that light. But we believe it is a positive step that we are creating competition on equal terms, and that is great for customers across both Europe and the US.

Speaker #2: But we believe it's a positive step that we are creating competition on equal terms, and that is great for customers across both Europe and the US.

Speaker #6: Thank you.

Georgina Johanan: Thank you.

Speaker #3: Thank you. Our next question today comes from the line of Shrita Mahamkali from UBS. Please go ahead.

Operator: Thank you. Our next question today comes from the line of Sreedhar Mahamkali from UBS. Please go ahead.

Sreedhar Mahamkali: Hi. Good morning, team. Thanks for taking my questions. Couple from me as well, please. Daniel, I think in your comments, you mentioned you would look to maintain the normalized gross margins going forward, the 54% to 55%. Does that mean the headwinds that we are discussing into next year are to be largely mitigated with some self-help measures to continue providing positive impact from supply chain consolidation and things like that? Second one is, you also referred a few times in the call to increasing in-season buying. Can you just give us a sense of magnitude of change here and anything you can fill us in on how you are changing proximity sourcing while addressing that? Thank you.

Speaker #4: Hi, good morning, team. Thanks for taking my questions. A couple for me as well, please. Daniel, I think in your comments, you mentioned you would look to maintain the normalized gross margins going forward.

Speaker #4: The 54 to 55 percent. Does that mean the headwinds that we are discussing into next year are to be largely mitigated, with some self-help measures to continue providing positive impact from supply chain consolidation and things like that?

Speaker #4: The second one is, you also referred a few times in the call to increasing in-season buying. Can you just give us a sense of the magnitude of change here, and anything you can fill us in on how you're changing proximity sourcing while addressing that?

Speaker #4: Thank you.

Speaker #2: So, on the first question about the gross margin range, maybe I can start on that and then you can fill in, Daniel. Of course, the ambition is—as we said—the key lever of our margin target is to have a gross margin that is sort of normalized over time.

Daniel Ervér: On the-

Adam Karlsson: The first question

Daniel Ervér: on the gross margin range.

Adam Karlsson: Maybe I can start on that and then you can fill in, Daniel. But the ambition is, as we said, that the key lever of our margin target is to have a gross margin that is normalized over time. But of course, we need to be at all times competitive in the market, create the most customer value. This is for us to give an indication to the target interval that we are steering and doing our utmost through our internal work to of course, secure that we both give value to customers, but also mitigate external factors that might go in the other direction. But it is not a given under all types of circumstances.

Speaker #2: But, of course, we need to be competitive in the market at all times and create the most customer value. So this serves as an indication for us regarding the target interval that we're steering towards.

Speaker #2: And doing our utmost through our internal work to, of course, ensure that we both give value to customers but also mitigate external factors that might go in the other direction.

Speaker #2: But it's not sort of a given under all types of circumstances. So, during a sort of normalized period with a decent size of disruptions, we believe that this is a good level to maneuver within, or a range to maneuver in.

Adam Karlsson: During a sort of a normalized period with decent size of disruptions, we believe that this is a good level to maneuver within or a range to maneuver in. But of course, given how the world sends uncertainty all of our ways, it is difficult to exactly predict where things are heading. But the target is that our internal work should mitigate those effects.

Speaker #2: But of course, given how the world sends uncertainty our way, it is difficult to predict exactly where everything's heading. But the target is that our internal work should mitigate those effects.

Speaker #2: But as you said, Adam, the focus is always: how do we create the absolute best value for money? And at this point in time, it's not easy to forecast all of the external effects and the pressure that we'll have, but over time, that's our target range.

Daniel Ervér: But as you said, all the focus is always how do we create the absolute best value for money. And it's at this point in time, not easy to forecast all of the external effects from the pressure that we'll have, but over time, that's our target range. The second question around proximity sourcing, we are increasing significantly the share of especially our fashion assortment that is being bought with shorter lead times. And that can be both proximity sourcing, but it can also be using a different type of supplier base and using different modes of transport to shorten the lead times to be quicker so that we can take lake into decisions.

Speaker #2: So, the second question around proximity sourcing. We are increasing significantly the share of, especially our fashion assortment, that is being bought with short lead times.

Speaker #2: And that can be both proximity sourcing, but it can also be using a different type of supplier base and using different modes of transport to shorten the lead times, to be quicker so that we can take late decisions.

Speaker #2: And specifically, particularly for the assortment that is more sensitive to current trends and changes in fashion, we have a significantly higher part of that assortment sourced.

Daniel Ervér: And particularly for the assortment that is more sensitive to current trends and changes in fashion, we have a significantly higher part of that assortment sourced later in season for Q4 compared to the same period last year.

Speaker #2: Later in the season for the fourth quarter, compared to the same period last year.

Speaker #4: Okay. Thank you.

Sreedhar Mahamkali: Okay. Thank you.

Speaker #3: Thank you. The next question today comes from the line of Matthew Clements from Barclays. Please go ahead.

Operator: Thank you. The next question today comes from the line of Matthew Clements from Barclays. Please go ahead.

Speaker #4: Good morning, everyone. Thank you for taking the questions. First one: you mentioned that you bought cautiously last year for the US. It sounds like you are buying less cautiously in the second half.

Matthew Clements: Good morning, everyone. Thank you for taking the questions. First one, you mentioned that you bought cautiously last year for the US. Is there a risk that you're buying more optimistically into a challenging US consumer environment? That's the first question. The second one is on your portfolio brands, which you've seen significant improvement and outperformed H&M brand. Focusing on COS in particular, can you just give us some color around how COS is performing and perhaps when it starts to make sense to break out that performance and start to talk about it a little bit more transparently? Thank you.

Speaker #4: And that's a key driver of your inventory growth year-on-year. Is there a risk that you're buying more optimistically into a challenging U.S. consumer environment?

Speaker #4: That's the first question. The second one is on your portfolio brands, which you've seen significant improvement in and have outperformed the H&M brand. Focusing on costs in particular, can you give us some color around how costs are performing, and perhaps when it might make sense to break out that performance and start to talk about it a little bit more transparently?

Speaker #4: Thank you.

Speaker #2: So on the first question, we had a very cautious plan for the US last year. As we mentioned in the last quarter report, we could see pockets within price groups and garment types where we had a gap in inventory and weren't able to fulfill the customer demand.

Daniel Ervér: On the first question, we had a very cautious plan for the US last year. As we mentioned, the last quarter report, we could see pockets within price groups and garment types where we had a gap in inventory and weren't able to fulfill the customer demand. Right now, looking at Q4, we have covered those gaps, and that is a significant piece of what is driving the increased stock levels. We believe we are better set up for the US to meet the customer with a good availability, and we're seeing some promising signs that is also resonating with the consumer. As always, we are very on our toes to monitor how the consumer is developing and what their needs and expectations are, and we'll adapt quicker. With a more responsive supply chain, it gives us better opportunity to react.

Speaker #2: And now, looking at Q4, we have covered those gaps, and that is a significant piece of what is driving the increased stock levels.

Speaker #2: So we believe we are better set up for the US to meet the customer with good availability, and we're seeing some promising signs that this is also resonating with the consumer.

Speaker #2: So then, as always, we are very much on our toes to monitor how the consumer is developing and what their needs and expectations are. And we'll adapt quicker and with a more responsive supply chain.

Speaker #2: It gives us a better opportunity to react. But for now, we're happy that we have set up the US to better meet customer demand so that they can come and find good availability for what they're looking for at H&M.

Daniel Ervér: But for now, we're happy that we have set up the US to better meet the customer demand so that they can come and find good availability for what they're looking at H&M. Portfolio brands, it's positive to see that they are back to positive growth in the quarter. We are satisfied with the steps they're making. We're really proud of the journey that COS is on. COS has really found a great spot in the customer's mind and a good space to claim within the market, and they are continuing on that path, and they are being really appreciated by the consumer with the opportunities to extend and open further stores. But we don't have any plans for today to report their progress separate from the rest of portfolio brands.

Speaker #2: Portfolio brands—it's positive to see that they are back to positive growth in the quarter. We are satisfied with the steps they're making.

Speaker #2: We're really proud of the journey that cost is on. Cost has really found a great spot in the customer's mind and a good space to claim within the market.

Speaker #2: And they are continuing on that path, and they are being really appreciated by the consumer. We see opportunities to extend and open further stores.

Speaker #2: But we don't have any plans today to report their progress separately from the rest of the portfolio brands.

Matthew Clements: Okay. Thank you.

Speaker #4: Okay. Thank you.

Speaker #3: Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone and wait for your name to be announced once again.

Operator: Thank you. As a reminder, if you would like to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. Once again, that is star 1 and 1 to ask a question. We will now go to the next question. One moment, please. Your next question today comes from the line of Geoffrey Balaguer Meillier from Bank of America. Please go ahead.

Speaker #3: That is star one, and one to ask a question. We will now go to the next question—one moment, please. Your next question today comes from the line of Geoffrey Belasher-Miller from Bank of America.

Speaker #3: Please go ahead.

Speaker #5: Yes, good morning. Thank you very much for taking my question. The first one is a follow-up on the comments you made regarding the de minimis effect and the duties in Europe.

Geoffrey Balaguer Meillier: Yes. Good morning. Thank you very much for taking my question. The first one is a follow-up on the comments you made on the de minimis effect and the duties in Europe. Have you already seen any small positive effects on market share gains over the summer from obviously these increased taxes? That's the first question. Thank you very much.

Speaker #5: Have you already seen any small positive effects on market share gains over the summer from, obviously, these increased taxes? That's the first question. Thank you very much.

Speaker #2: We have different developments across the markets. It's difficult to say where market share gains are coming from, de minimis or not. We can see, for example, that we have a challenging environment in the German market, which is a very important market for us.

Daniel Ervér: We have different developments across the markets. It's difficult to say where market share gains are coming from de minimis or not. We can see, for example, that we have a challenging environment in the German market, which is a very important market for us, but we are related to the market performing well and gaining market share. We see also a challenging consumer climate in the UK, but there we are not as satisfied with our performance and are putting a lot of efforts in place to strengthen our customer offering in the eyes of the UK consumer. We have a different situation depending on markets. I wouldn't read a direct relation to market share gains related to the de minimis or the tariff change.

Speaker #2: But we are related to the market performing well and gaining market share. And we also see a challenge in the consumer climate in the UK.

Speaker #2: But there, we are not as satisfied with our performance. I am putting a lot of efforts in place to strengthen our customer offering in the eyes of the UK consumer.

Speaker #2: So we have a different situation depending on markets. So I wouldn't read a direct relation to market share gains related to the de minimis or the tariff change.

Speaker #5: Thank you very much. And then the second question is more about the H&M brand. I know you've done a lot of work on women's wear over the last 18 months.

Geoffrey Balaguer Meillier: Thank you very much. The second question is more about the H&M brand. I know you have done a lot of work on womenswear over the last 18 months, and I believe a couple of quarters ago or even 3 quarters ago, you started talking about improvements in the menswear collections and in the kidswear collections. I just wanted to hear a little, where was the growth coming from at the H&M brand? Is it still mostly driven by womenswear, or are you seeing any improvement or inflection in menswear and kidswear?

Speaker #5: And I believe a couple of quarters ago, or even three quarters ago, you started talking about improvements in the menswear collections and in the kidswear collections.

Speaker #5: I just wanted to hear a little bit—where was the growth coming from at the H&M brand? Is it still mostly driven by women's wear, or are you seeing any improvement or inflection in men's wear and kids' wear?

Speaker #2: Thank you for the question. We are seeing a high pace of improvement and activities across the different customer groups to strengthen the offering and really make sure that the breadth that H&M has to offer is built on really strong, separate components that make one strong whole.

Daniel Ervér: Thank you for the question. We are having a high pace of improvement and activities across the different customer groups to strengthen the offering and really making sure that the width that H&M has to offer has built some really strong separate components that makes one strong whole. Looking at the quarter, we are not satisfied with the sales growth of 1%, and that goes across the customer groups where we could see more potential across the customer group. No single customer group was strong enough to push up the performance to a level that we would be satisfied with for the quarter.

Speaker #2: And looking at the quarter, we are not satisfied with the sales growth of 1%. That goes across the customer groups, where we can see more potential across the customer group.

Speaker #2: No single customer group was strong enough to push up the performance to a level that we would be satisfied with for the quarter.

Speaker #5: Thank you very much.

Geoffrey Balaguer Meillier: Thank you very much.

Speaker #3: Thank you. We will now take the next question. And the next question comes from the line of Mia Strauss from BNP Paribas. Please go ahead.

Operator: Thank you. We will now take the next question. The next question comes from the line of Mia Strauss from BNP Paribas. Please go ahead.

Mia Strauss: Hi, good morning. Thanks for taking my question. I just have one. Just on your store optimization, can you maybe give us some color as to how the stores that you have refurbed and you have made changes to, how those are performing, and whether you are satisfied with this performance?

Speaker #6: Hi, good morning. Thanks for taking my question. I just have one. Just on your store optimization, can you maybe give us some color as to how the stores that you've referred to and you've made changes to are performing?

Speaker #6: And are you satisfied with this performance?

Speaker #2: So we are touching our stores in many different ways to make sure that we stay relevant. We are improving, as we spoke about, the technical infrastructure with, for example, RFID technologies and self-service checkouts, to simplify the way the store is operating.

Daniel Ervér: We are touching our stores in many different ways to make sure that we stay relevant. We are improving, as we spoke about, the technical infrastructure with, for example, RFID technology, self-service checkouts to simplify the way the store is operating. We also do improvements into presentation, to layout, and of course, including full rebuilds of completely updating the store space. With a mix of these actions, we have touched approximately one fifth of our portfolio so far. In those stores, we see a positive reception from customers that are appreciating more clarity, more inspiration, a better guided experience, and also a simplified and more convenient shopping journey. We take that as a positive and encouraging sign to continue the work to work through our entire store portfolio. We also see the stores having a positive impact on sales, incrementally for those stores specifically.

Speaker #2: But we also do improvements to presentation and layout, and of course, including full rebuilds and completely updating the store space. So, with a mix of these actions, we have touched approximately one-fifth of our portfolio so far.

Speaker #2: And in those stores, we see a positive reception from customers. They are appreciating more clarity, more inspiration, a better-guided experience, and also a simplified and more convenient shopping journey.

Speaker #2: So, that will give us a positive and encouraging sign to continue the work throughout our entire store portfolio. We also see the stores having a positive impact on sales incrementally for those stores specifically.

Speaker #2: But with further potential to accelerate, and every store we rebuild or touch, we learn what is really appreciated and what can be further accelerated into the rest of the portfolio.

Daniel Ervér: We saw the potential to accelerate, and every store we rebuild or we touch, we learn what is really appreciated and what can be further accelerated into the rest of the portfolio. That work will be ongoing with high activity throughout 2027.

Speaker #2: So that work will be ongoing, with high activity throughout 2027.

Speaker #6: Thank you.

Mia Strauss: Thank you.

Speaker #3: Thank you. Once again, if you would like to ask a question, please press *1, and 1 on your telephone keypad. That is *1.

Operator: Thank you. Once again, if you would like to ask a question, please press star 1 and 1 on your telephone keypad. That is star 1 and 1 to ask a question. We will now go to our next question. One moment, please. Our next question comes from the line of Samantha Conti from Women's Wear Daily. Please go ahead.

Speaker #3: And one to ask a question. We will now go to our next question. One moment, please. Our next question comes from the line of Samantha Conti from Women's Wear Daily.

Speaker #3: Please go ahead.

Samantha Conti: Hi. Hi, good morning. Can you hear me?

Speaker #6: Hi. Hi. Good morning. Can you hear me?

Speaker #2: Yes, we can hear you loud and clear.

Daniel Ervér: Yes, we can hear you loud and clear.

Samantha Conti: Excellent. Thank you so much. I just wanted to know what the impact was of the PETA disruptions on the runway in the COS runway in New York and the H&M runway in London. What kind of impact did they have, and are you speaking to PETA? If you can just elaborate on that, please.

Speaker #6: Excellent. Thank you so much. I just wanted to know what the impact was of the PETA disruptions on the runway, in the COS runway in New York and the H&M runway in London.

Speaker #6: What kind of impact did they have? And are you speaking to PETA? If you could just elaborate on that, please.

Daniel Ervér: We believe it's really important that everyone has the chance to express their voice and have their voice heard. We are sharing the point of view that PETA has that no animals should come to any harm when we produce garments. That is a belief that we share deeply with PETA. We have an ongoing dialogue. We've had that for a long time. It's been a partnership where we have supported the development of the industry, and we will continue that ongoing dialogue moving forward as well. I think that's what we see so far.

Speaker #2: We believe it's really important that everyone has a chance to express their voice and have their voice heard. We are sharing the point of view that PETA has—that no animals should come to any harm when we produce garments.

Speaker #2: And that is a belief that we really share deeply with PETA. We have an ongoing dialogue— we've had that for a long time.

Speaker #2: It's been a partnership where we have supported the development of the industry, and we will continue that ongoing dialogue moving forward as well. And then, yeah.

Speaker #2: I think that's what we see so far.

Speaker #6: Can I just follow that up with what kind of an impact does it have on the brand? Is this a sort of a net-net positive for costs and for both for costs and for H&M, the publicity, the pictures, the headlines of PETA coming onto the runways?

Samantha Conti: Can I just follow that up with what kind of an impact does it have on the brand? Is this a net positive for COS and for both for COS and for H&M? The publicity, the pictures, the headlines of PETA coming onto the runways. What sort of an impact does it have on the brand? Do you see any impact on brand sales?

Speaker #6: What sort of impact does it have on the brand? Do you see any impact on brand sales?

Speaker #2: Oh, as I said, we believe it's important that everyone gets a chance to express their tone of voice, their voice, and their opinion. And, as I said, we also share the underlying purpose that no animals should come to any harm when we produce garments.

Daniel Ervér: As I said, we believe it's important that everyone get the chance to express their tone of voice or their voice and their opinion. As I said, we also share the underlying purpose of that no animals should come to any harm when we produce garments. Then we focus on doing as well as we can to manage the shows in the best way, as well as then managing how we build a more sustainable industry for the future.

Speaker #2: And then we focus on doing as well as we can to manage the shows in the best way, as well as then managing how we build a more sustainable industry for the future.

Speaker #6: Great. Thank you.

Samantha Conti: Great, thank you.

Speaker #3: Thank you. That was our final question for today. I will now hand back to Daniel Elvia, CEO, for closing remarks.

Operator: Thank you. That was our final question for today. I will now hand back to Daniel Ervér, CEO, for closing remarks.

Speaker #2: Thank you so much. And thank you to all of you for attending today's telephone conference and for your continued engagement with H&M Group, which we truly appreciate.

Daniel Ervér: Thank you so much, and thank you to all of you for attending today's telephone conference and for your continued engagement with H&M Group, which we truly appreciate. To summarize the quarter, we continued to strengthen profitability and delivered a return to sales growth. Our summer offer was well-received and contributed to gradual improvement in sales development throughout the quarter. At the same time, we continued to take the important steps in building a faster, more flexible, and customer-focused business. These long-term efforts will continue to strengthen our customer offer and our ability to meet customers with relevant products, inspiring experiences, and strong brands. We still have much left to be done, but we remain confident in creating long-term value for our customers as well as for our shareholders.

Speaker #2: So, quickly to summarize the quarter: we continued to strengthen profitability and delivered a return to sales growth. Our summer offer was well received and contributed to a gradual improvement in sales development throughout the quarter.

Speaker #2: At the same time, we continue to take important steps in building a faster, more flexible, and customer-focused business. These long-term efforts will continue to strengthen our customer offer and our ability to meet customers with relevant products, inspiring experiences, and strong brands.

Speaker #2: We still have much left to be done, but we remain confident in creating long-term value for our customers, as well as for our shareholders.

Speaker #2: This progress would not be possible without the passion and hard work of all our committed colleagues across the world. I am really proud of what we are achieving together.

Daniel Ervér: This progress would not be possible without the passion, the hard work of all our committed colleagues across the world, and I am really proud of what we are achieving together. Once again, thank you for listening, and we wish you all a really lovely day. Thank you.

Speaker #2: So once again, thank you for listening, and we wish you all a really lovely day. Thank you.

Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

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Q3 2026 H&M Hennes & Mauritz AB Earnings Call

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