[caption id="attachment_82252" align="aligncenter" width="640"] Source: Company reports/Coresight Research[/caption]   1Q19 Results Swedish clothing company H&M reported 1Q19 results and the highlights are as follows:

• H&M pre-reported 1Q19 sales earlier this month; in its full results, it confirmed that it grew net sales by 10% to SEK 51.02 billion, a slightly slower pace than the 12% growth in 4Q18. Total net sales came in marginally ahead of the consensus of SEK 50.96 billion recorded by StreetAccount. Net sales increased 4% year over year in local currencies. The performance was driven by more full-price sales, fewer markdowns and increases in market share in many markets.
• By region, in local currencies, the US grew revenues 2%, France 3%, Italy 4%, Spain 7%, Sweden 11%, the UK 8%, China 16% and India 42%; Germany revenues fell 7%, while the Netherlands was flat.
• H&M grew gross profit 11% year over year to SEK 25.5 billion; the gross margin expanded by 10 basis points to 50%, beating consensus of 49.1%.
• H&M noted that strong customer offerings combined with ongoing improvements in buying and logistics reduced markdowns in relation to sales 1.5 percentage points compared to same quarter in the previous year.
• Profit after financial items stood at SEK 1,043 million, down 17.4% year over year. Profits were negatively affected by lower sales in Germany, costs of around SEK 250 million related to the replacement of the online platform in Germany and costs related to implemented and upcoming transitions to new logistics systems.
• The company’s profit after tax was SEK 803 million, down 41.5% year over year. The year-over-year change in net profit was impacted by a one-off SEK 399 million benefit from the US Tax Cuts and Jobs Act in the year-ago quarter.
• EPS fell 41% year over year to SEK 0.49 but was well ahead of consensus of SEK 0.31 recorded by StreetAccount.
• H&M also reported year-over-year net sales growth for the post-1Q19 period March 1 to March 27 of 7% in local currencies.

CEO Karl-Johan Persson said:

Our ongoing transformation work has contributed to stronger collections with increased full-price sales, lower markdowns and increased market shares. Sales developed well both in stores and online in many markets. The rapid transformation of fashion retail continues and we can see that our own transformation work is taking us in the right direction, even if many challenges remain and there is still hard work to do. The progress we have made in our strategic focus areas confirms that we are on the right track.

Outlook

• The company said its loyalty program now has 35 million members and it plans to launch an upgraded version shortly.
• H&M will launch on e-commerce platforms Myntra and Jabong in India later this year.
• H&M online is available in 47 markets and the company plans to add Mexico as new market in 2019.
• In 2019, H&M plans a net addition of 175 stores with most in growth markets, while it plans to reduce H&M stores in Europe by 50.

In FY19, the consensus estimates recorded by StreetAccount predict H&M to report revenues of SEK 222.7 billion and EPS of SEK 7.45.