H&M1

1. INTRODUCTION

Hennes & Mauritz AB, commonly known as H&M, is a limited Swedish company domiciled

in Stockholm, Sweden. It is recognized for its fast fashion and accessible price retail

strategies. They specialize in trendy clothing and accessories for women, men, teenagers,

children, and also home accessories. Founded in 1947 in Västerås, Sweden, this company has

opened more than 4,958 stores in 50 different countries and currently has more than 132,000

employees. H&M current net worth is 15.9 billion U.S dollars and it is publicly traded in the

Stockholm Stock Exchange market. Presently, the retail industry is facing some changes in

regards to the normal modus operandi, challenging companies to adapt as fast as they can in

order to stay relevant. Therefore, H&M is working in new ways to attract consumers, but

their major challenge is having a high quality product at low cost.

2. HISTORY OF H&M

Due to a trip to New York City after World War II, Erling Persson (Swedish businessman)

decided to start a company in the fashion industry. Persson was stunned by how effective and

profitable the "high volume" business model in retail stores was in United States, inspiring

him to imitate this model and open his first store called Hennes on October 4, 1947 in

Västerås, Sweden. At that time, Hennes (Swedish for "hers") only sold women’s clothing.

They had a very stable decade during the 50’s, in 1952 they opened their second store in

Stockholm, but their growth rate pace was still low. In 1964 they opened their third store in

Norway, but their growth rate was still too slow for Persson. Four years later, in 1968, in

order to increase the company’s net profits, Erling Persson decided to diversify Hennes target

market and acquired Mauritz Widforss, a hunting and fishing equipment store. With this new

1 Case written by Erola Palau, Madelaine Rosas, Sebastian Prieto and Magdalena Paula

Brück; and supervised by professor Oriol Amat, UPF Barcelona School of Management,

2020.

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acquisition the company name was changed to Hennes and Mauritz (H&M) and started

selling not only women cloth, but also for men and children.

After rebranding themselves as H&M, the company had a major increment in popularity and

sales. Thanks to their nonstop success, in 1974, the company was listed on the Stockholm

Stock Exchange and two years later (1976) they opened their first store outside Scandinavia

in London, UK. By the end of the 70’s (in 1977), H&M had another product extension, they

added cosmetics in all their stores, allowing them to get in the beauty market and start

targeting teenagers.

Thanks to their new success, during the 1980-1999, H&M opened three new stores in three

different countries, Germany, the Netherlands, and France. Persson wanted to keep

expanding the H&M brand across Europe, but instead of opening more stores he decided to

make a Catalog and send the merchandise by mail. In order to do this, H&M made their

second acquisition by acquiring the mail order company Rowells. With this new acquisition,

H&M and Rowells (operating as an independent company) started mailing orders all across

Sweden, Norway, Finland, and Denmark. By 1998 H&M decided to get in online industry by

buying the domain hm.com (their current webpage).

The 2000s (2000 -2009) was the most profitable decade so far. H&M opened its first store

outside of Europe on March 31, 2000 in New York City, United States. From there, in 2004

they started collaborating with famous designers like Roberto Cavalli or Karl Lagerfeld,

which impulse the growth of their online presence. Between 2007-2009 their first store in

Asia opened in Hong Kong, after the success they opened another store in Shanghai and

Tokyo. By 2009 they had 3 more stores in strategic places: Russia, Beijing, and Lebanon.

Also, by the end of this decade H&M launched H&M Home, which impulse sales even more.

Initially the merchandise was distributed through the company's online catalog; currently,

there are now H&M Home stores located internationally.

In the last decade (2010-2019), the company expanded more in Europe, Asia and Middle

East. Thanks to their continuous growth, H&M got a recognition by Interbrand, Omnicom

(branding management company), they ranked the company as the 21st most valuable global

brand; during this period the company was worth $12-16 billion. After this recognition, in

2012 the company decided to expand into the Latin American market and opened their first

store in Mexico, and then Chile. And in 2013, they launched their online shopping website in

the United States (same domain) as a strategy to expand their sales in the American continent

by online shopping.

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Currently, the company has 16 subsidiaries oriented in the sale of clothing, accessories,

footwear, cosmetics, and home textiles. The most relevant ones are COS, Cheap Monday,

Monki. COS is focused on designs of shoes, belts, and jewelry for men and women: Cheap

Monday is focused on the Denim collections, accessories, glasses, underwear, and shoes; and

Monki provides graphic design fashion for young women.

Moreover, they keep investing in their “sustainability initiatives”, in 2017 a total of 57% of

their cotton products came from sustainable sources, 2018 was 95%. H&M continues’

growing, and according to Karl-Johan Persson, current CEO of H&M (grandson of Erling

Persson – founder of H&M), they are working on opening 335 new stores by 2020, mainly

outside of Europe and the US. Simultaneously, with the continuous growth of the online

market, H&M opened online in four new markets in 2018 and today has 47 online markets. In

2019 Mexico was added as an online market, as well as Egypt via franchise.

3. COMPETITORS

Some of H&M’s main competitors are the big fast-fashion retailers Zara, Forever 21 and

Uniqlo, but also companies including Gap Inc, Macy’s, Abercrombie & Fitch Company or

Topshop. Additionally, the impact of the digital competitors became more due to e-

commerce, speaking about online platforms like ASOS, Zalando or FashionNova.

Regarding the corporate strategy, H&M is well known for its attractive pricing whilst

offering the customer up-to-date fashion - great design that is available to everyone. Likewise

its main competitors are operating towards these objectives and follow a distribution through

mix channels as e-commerce and retail chains.

ZARA: is a Spanish fashion brand, forming the largest company in the Inditex group and

operating in America, Europe, Asia and Africa in approximately 3000 stores. As well as

H&M, it offers fashion for women, men and children as well as beauty products and home

products to the customer. Secondly, Zara is the world’s leading apparel retailer, with a

continuously high revenues (~69 billion in 2018) and online sales around 3.2 billion. It stands

out with its low inventory/”shelf life”, giving the customer a feeling of exclusivity and at the

same time reducing the risk of poor sales, and also with the speed the company generates

trendy fashion, just in the moment when the customer wants it.

FOREVER 21: the American company recently announced bankruptcy caused by failing to

adapt to the shift to e-commerce into its existing business model. As well as H&M and Zara,

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the company operates as a fast fashion retailer in clothing for women, men and children,

accessories, beauty products, etc. The company’s decrease in sales in 2018 was estimated

around 20% - 25% and it showed a debt around $500 million.

UNIQLO: is a Japanese subsidiary of Fast Retailing Co., Ltd. operating in the clothing

apparel industry. Its business model describes a vertical integration combining planning,

design, production, distribution and retail. The basic design with high quality and comfort is

significant for its clothing. What is more, Uniqlo did not miss to implement the digitalization

in the retail industry and plans to expand its e-commerce by differentiation and exclusive

online offers for the customer.

ASOS: is a British competitor of H&M operating as an online fashion and cosmetics retailer,

specialized on the needs of the “twenty-somethings”. Its business model is based on the

interdependent customers, namely consumers and fashion companies. One strength of the

firm is offering the consumer a variety of brands. Overall, ASOS registers continuously

increasing revenues with an annual total revenue in 2019 of 2,733,500 (GBP).

As one can see, the increasing competition for H&M comes from the e-commerce. Therefore,

H&M already managed successfully to implement the business model of its digital

competitors (ASOS, FashionNova) by adapting to the customer needs and offering digital

service/retail next to its physical stores.

With regard to the emphasis of customer needs, in 2018/2019 H&M had a shift in its business

vision and strategy, underlining the increasing customer awareness in sustainability.

Therefore, H&M follows a long-term approach giving the consumer a renewable fashion

whilst being a fair and equal firm.

Another outstanding market leading advantage in contrast to the majority of H&M’s

competitors is the “buy-now, pay-later payment” which was facilitated by the partnership

with the Swedish Bank “Klarna”. This payment method should increase the revenue by

attracting consumers with more flexibility in payment (within 30 days) and improve the

shopping experience from fall 2019 on.

All in all, H&M seems to be very well prepared in facing future challenges regarding the

increasing impact of digitalization in the fast-fashion industry and the changes in customer

demand by restructuring its business vision and strategy as well as improving the customer

experience by providing smoother and more comfortable purchase processes. Consequently,

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H&M shows that it is able to see huge potential for growth and turn it into a company’s

benefit by performing as a fast-paced and innovative business in contrast to the majority of its

competitors.

4. SWOT OF THE FAST FASHION INDUSTRY ANALYSIS

STRENGTHS

- Fast profits: a fast fashion retailer can show great growth in its first years of business

if it manages to embrace the current trend in the market. They can even turn into

important industry players in just a few years based on offering the right product at

the right time. Fast fashion trends are all about who gets it first.

- Easy recovery: thanks to the fast-changing trends in this industry, recovering from a

failed project or in this case, line or collection, can be easier than in other industries.

You can make up for the losses of one period with the launch of a different collection.

The production process of fast-fashion manufacturers takes 4 months compared to the

traditional industry’s 21 months (Caro, Martinez, 2015).

- Developing countries’ economies: some companies have helped third-world countries

to improve the economic conditions of their workers. Cambodia almost doubled its

minimum wage in 2014 when they increased it to USD$170/month, all thanks to

Zara’s pressure over their exceedingly low salaries.

- Social media boost: thanks to new features in known social media apps like Instagram

the process of browsing and buying has become almost the same. Fast fashion brands

can benefit from the facilities of showing their products on social media (with the help

of influencers) and enabling the buying experience without having to leave the app.

This user-friendly concept has turned out to be effective and develops a new way to

increase sales.

WEAKNESSES

- Short production time: part of the success of fast fashion is having the latest trend or

runway piece imitation available the fastest you can. This means that your production

process will have to be accelerated to keep up with the scheduled times.

- Environmental damage: most fast fashion clothes are based on trends that usually

don’t last long and this causes people to throw away their clothes after a few uses.

This generates a dangerous cycle that can benefit the industry because consumers will

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always want the latest trend but aggravates the carbon footprint caused by this mass

constant productions and damages the environment. From 1992 to 2002 the life cycle

of consumer products shortened 50% (Gina-Marie Cheeseman, 2016).

- Low-quality association: thanks to some brands using low-quality materials for their

products, fast fashion has long been associated with poorly produced clothes that

won’t last long.

OPPORTUNITIES

- Environmental-friendly practices: investment in new technologies that help reduce the

environmental impact of the fast fashion industry and develop clothing lines that are

easy to recycle or reuse.

- Recycle programs: in order to reduce the impact their products are generating every

time they’re thrown away; companies could develop recycle programs that would

incentivize consumers to return their clothes so that it can be reutilized and expand

their life cycles. Donations of clothes to charities have increased by 2.3% annually in

the last few years (Cotton, 2018). Step by step, people are getting more inclined to

this kind of action.

- Educate the consumers: campaigns that encourage consumers to take the correct care

of their clothes, teaching them the best practices to maintain the garment in good

condition for a longer time while also reducing their environmental impact.

THREATS

- Rise of vintage fashion: second-hand clothing has enormously increased its yearly

demand for the last few years. The consumers have seen this concept as a response to

the disadvantages of fast fashion and have turned this market into a threatening

competitor. It is expected that by 2029 the vintage fashion industry will be valued at

$64 billion in the USA, opposed to fast-fashion forecasted $44 billion (GlobalData,

2019).

- New generations’ mindset: it has been proved that millennials have a more negative

perception of fast fashion than past generations but they’re still a big part of this

industry. Generation Z, on the other hand, is considered to have a further adverse

response to the concept of fast fashion and to the overall belief of brand loyalty.

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5. PRESENT SITUATION OF THE COMPANY

DISTRIBUTION

With the recent transformation from traditional to digital shopping habits, Hennes & Mauritz

Group has integrated physical stores and digital distribution channels to reach customers

worldwide. They are using an omnichannel distribution strategy which allows them to offer

convenience and accessibility, an easy shopping experience, a global presence and unique

proximity to customers. Moreover, H&M offers a rather direct distribution due to not

working with many intermediaries – only designers and fabric factories.

Digitally, customers can shop not only on the website but also on the H&M mobile app and

through social media platforms. For products ordered online, H&M offers quick services such

as “click and collect”, which allows customers to pick-up their online order in their nearest

store. They also offer easy return services and they are aiming to cut delivery time for all

online purchases. As for physical shops, in 2018 the company operated almost 5000 stores

worldwide and is present in 69 countries.

CUSTOMERS

Hennes & Mauritz targets customers who are fashionable, see shopping as a social activity

and do not aim to invest a large amount of money in clothing - so they target customers in the

working class. They offer relatively high quality at the lowest possible price for men, women

and children. However, the main target consists of women between the ages of 16 and 35

years old who are constantly updating their closets with affordable clothing. Customer loyalty

is low.

6. CHALLENGES

- ADAPTING TO THE NEW BUSINESS TRENDS

H&M has been able to maintain a profitable company for over twenty years with their low-

cost fashion trend. However, due to adaptation problems and the late entry into the online

retailing industry, the company has been facing challenges in regards to sales. By taking a

look at their financials, between 2009 and 2010, we will not be able to notice a direct impact

in the company’s Profit and Loss revenue line, nor in the net profit line. In fact, we can see a

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continuous grow on sales during the years. Nevertheless, even though sales were growing by

15% average each year, it is getting harder for the company to keep up with this growth.

In order to stay relevant and competitive, H&M decided to invest in developing their website

by incorporating a proper IT department. The goal of this strategic decision was to develop a

proper digital store and also start using digital marketing in order to promote sales. The

upgraded website was launched in 2010, but by then some competitors had developed

“loyalty” from their customers already. For instance, ASOS (one of their biggest online

competitors) entered the ecommerce industry in the year 2000, ten years before H&M.

Another major disadvantage that H&M had when they joined the ecommerce industry was

that they were not giving the website enough relevance as a sales tool, which let to poor

design and poor experience in general for buyers. Evidently, this mistake had a major impact

on sales because the target customer of H&M are people that shop as a social activity.

Therefore, this group is looking for a good experience and efficient. However, between the

slow response of the website, bad customer service, and delay on the purchase delivery,

customers were not satisfied at the moment.

- STAYING COMPETITIVE

As stated above, H&M has been reporting a continuous EBIT growth of 15% average. But,

by 2017, the company had to acknowledge that this constant growth was no longer possible at

the current time. At the end of the fourth quarter of 2017, H&M stated its biggest sales drop

ever; the company only had 3% growth that year. Consequently, at the beginning of 2018,

H&M notified a major decrease of 62% in their operating profits. This decline was mainly

due to a decay of the brand. Their products are no longer the cheapest in the market, and the

quality has also weakened.

As a solution strategy, the company decided to increase the production of merchandise and

open more stores in order to sell more. Their goal was to attract customers by giving them the

feeling that they will always have the product that they need, but this strategy backfired. The

company was opening stores at the same rate as the sales were increasing, which means that

they were proportionally earning money and spending it. The factor that H&M did not take

into consideration was that people were not consuming as they used to. Therefore, the

company started facing inventory problems (Exhibit 1), which lead to around $4 billion worth

of unsold clothing in stock.

Meanwhile, their competitor Zara was doing the opposite. Their strategy was the creation of

an artificial scarceness in stores, in order to control inventory and increase sales. This

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approach was a success, having an increase of 8% on net sales for two consecutive years

(2016 and 2017). At the same time, H&M had a growth of 0% in 2016 and -1% in 2017.

- SUSTAINABILITY

It is safe to say that customers are losing interest in buying from H&M. Consumer (especially

Millennials) are becoming more conscious about preserving the environment and they are not

supporting companies that are going against this. In 2010 the company decided to start

changing their sales strategy by becoming a member of Better Cotton and looking to become

a more sustainable brand. By 2013 the company launched their first recycling program in

2013, where it allowed people to drop off the clothes that they no longer wanted (no matter

the brand) at any H&M around the world, and by doing this, the customer will receive a 15%

discount on brand new merchandise. After receiving the donations, the store staff will be

deciding which clothes can be sold as second-hand clothing or used for the production of

other textile products. The goal of this campaign is to create a “environmentally conscious”

brand.

Despite the fact that H&M is one of the few fast fashion companies promoting this business

approach, the market did not perceive it in that way. Moreover, even though H&M was

investing a lot of money in changing the consumer perception of the brand, the company was

still using not eco-friendly materials and it is still performing under an unsustainable fast-

fashion business model. This issue is generating challenges for the company in regards to

sales growth, because the people are perceiving this movement as a greenwashing distraction.

Another issue that is affecting their sustainability credibility as a company is that H&M has

been accused of burning tons of unsold (but usable) clothes in 2017. After the accusations

H&M expressed that this practice is very rare, but it happens when garments cannot be reused

due to mold or chemical safety matters.

In order to fight this negative perception, H&M Group is working on a plan aiming that by

2030 their products would be 100% climate positive. So far only 35% of their products are

from recycled and sustainable sources.

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Figure 1. H&M Inventory vs Sellout Rate

QUESTIONS TO ANSWER:

1. What are H&M’s main qualitative strengths and weaknesses?

2. Write an analysis of their main financial strengths and weaknesses.

3. Construct a cause and effect diagram for the company.

4. What would be your recommendations for H&M?

5. Demonstrate the viability of your recommendations.

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APPENDIX Balance Sheets (000 euros)

Average sector

% (2016)

Average sector

with profits %

(2016)

2018 % 2017 % 2016 % 2015 % 2014 %

Non-current assets 34% 11% 5.544.239 48% 5.122.161 48% 4.912.552 49% 4.374.602 47% 3.545.862 43%

Intangible assets 13% 0% 932.018 8% 709.922 7% 548.197 5% 446.942 5% 319.663 4%

Fixed assets 15% 7% 4.112.490 36% 4.013.582 37% 3.966.971 39% 3.580.099 38% 2.908.263 36%

Other fixed assets 6% 4% 499.732 4% 398.657 4% 397.384 4% 347.561 4% 317.936 4%

Current assets 66% 89% 5.966.933 52% 5.619.096 52% 5.194.187 51% 4.945.797 53% 4.612.664 57%

Inventory 24% 17% 3.655.299 32% 3.398.108 32% 3.253.300 32% 2.697.184 29% 2.093.997 26%

Accounts receivable 15% 42% 613.303 5% 533.928 5% 500.421 5% 436.732 5% 394.884 5%

Other current assets: 27% 30% 1.698.332 15% 1.687.059 16% 1.440.466 14% 1.811.880 19% 2.123.783 26%

- Cash & cash equivalent 12% 14% 1.123.112 10% 979.557 9% 968.444 10% 1.406.537 15% 1.520.719 19%

Total Assets 100% 100% 11.511.172 100% 10.741.256 100% 10.106.739 100% 9.320.399 100% 8.158.526 100%

Net Equity 49% 57% 5.673.315 49% 6.018.962 56% 6.278.176 62% 6.304.871 68% 5.563.990 68%

Share capital 6% 5% 20.059 0,17% 20.865 0,19% 21.223 0,21% 22.483 0,24% 22.34 0,27%

Reserves 43% 52% 5.653.256 60% 5.998.097 56% 6.256.953 62% 6.282.388 67% 5.541.651 68%

Non-current Liabilities 14% 1% 1.552.879 13% 617.49 6% 578.032 6% 524.274 6% 403.41 5%

Long term loans 7% 0% 985.509 9% 0 0% 0 0% 0 0% 0 0%

Other long term liabilities 7% 1% 567.37 5% 617.49 6% 578.032 6% 524.274 6% 403.41 5%

Long term provisions 5% 1% n.a. n.a. n.a. 524.274 6% 403.41 5%

Current Liabilities 37% 42% 4.284.978 37% 4.104.805 38% 3.250.532 32% 2.491.254 27% 2.191.126 27%

Short term loans 8% 1% 886.958 8% 982.278 9% 212.02 2% 0 0% 0 0%

Account payable and other

short term operating debts 16% 34% 2.739.076 24% 2.395.267 22% 2.293.980 23% 1.839.577 20% 1.595.401 20%

Other current liabilities 13% 7%

Short term accruals 0% 0% 658.944 6% 727.259 7% 744.531 7% 651.677 7% 595.726 7%

Total Equity and Liabilities 100% 100% 11.511.172 100% 10.741.256 100% 10.106.739 100% 9.320.399 100% 8.158.526 100%

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Income Statements (000 euros)

Average sector

(2016)

Average sector with

profits (2016) 2018 % 2017 % 2016 % 2015 % 2014 %

Revenues 100% 100% 20,388,506 100% 20,160,040 100% 19,712,032 100% 19,643,839 100% 16,341,015 100%

COGS 71% 72% 9,643,162 47% 9,264,764 46% 8,826,314 45% 8,438,571 43% 6,730,727 41%

Gross margin 29% 28% 10,745,343 53% 10,895,276 54% 10,885,718 55% 11,205,268 57% 9,610,607 59%

Other Operating

Expenses 24% 14% 9,244,017 45% 8,821,958 44% 8,443,283 43% 8,279,019 42% 6,849,657 42%

OPERATING

RESULT (EBIT) 5% 14% 1,501,327 7% 2,073,318 10% 2,442,435 12% 2,926,249 15% 2,760,951 17%

Interest Income 1% 2% 28,296 0% 28,324 0% 22,965 0% 33,670 0% 35,398 0%

Interest Expense 1% 3% 14,148 0% 4,133 0% 820 0% 1,086 0% 1,727 0%

Earnings before

taxes (EBT) 5% 13% 1,515,475 7% 2,097,509 10% 2,464,581 13% 2,958,833 15% 2,794,622 17%

Income Tax 2% 3% 289,451 1% 466,192 2% 553,939 3% 689,040 4% 638,786 4%

NET INCOME 3% 10% 1,226,024 6% 1,631,318 8% 1,910,642 10% 2,269,792 12% 2,155,836 13%

Ratios

Average sector

% (2016)

Average sector with profits %

(2016)

2018 2017 2016 2015 2014

DEBT AND CAPITALIZATION

Debt = Liability / Assets 0.51 0.43 0.51 0.44 0.38 0.32 0.32

Debt Quality = Current Liabilities / Total Liabilities 0.72 0.97 0.73 0.87 0.85 0.83 0.84

Repayment Capacity = Cash flow /Loans 1.12 5.6 2.32 2.21 11.49 0 0

Cost of debt = Financial Expenses / Loans 0.04 0.02 0.016 0.004 0.004 0 0

Financial Expenses= Financial Expenses / Sales 0.017 0.03 0.0007 0.0002 0.00004 0.0001 0.0001

LIQUIDITY

Liquidity = Current Assets / Current Liabilities 1.79 2.13 1.39 1.37 1.6 1.99 2.11

Treasury = Debtors + Cash / Current Liabilities 0.74 1.34 0.41 0.37 0.45 0.74 0.87

Acid Test = Cash / Current Liabilities 0.33 0.33 0.26 0.24 0.3 0.56 0.69

Z (UPF) = -3,9 + 1,28 CA/CL+ 6,1 E/A+ 6,5 NI/A+ 4,8 NI/E 2.27 6.73

2.62 3.56 4.62 6.08 6.53

Working Capital (real) (euros)= Current assets – Current liabilities

N/A N/A 1,681,955 1,514,291 1,943,655 2,454,543 2,421,538

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Operating Working Capital (euros)= Operating current assets – Operating current liabilities

N/A N/A 1,106,735 806,789 1,471,633 2,049,200 1,818,474

Operating CA = Inventory + Clients + Other operating CA + Minimum cash required

N/A N/A 5,391,713 4,911,593 4,722,165 4,540,454 4,009,600

Operating CL= Suppliers + Other operating CL + Accruals N/A N/A

4,284,978 4,104,805 3,250,532 2,491,254 2,191,126

Working Capital Deficit (euros) N/A N/A 575,219 707,502 472,022 405,343 603,064

ASSETS MANAGEMENT

Non-current assets turnover = Sales / Non-current assets 2.71 28.99 3.68 3.94 4.01 4.49 4.61

Current assets turnover = Sales / Current aassets 1.38 3.42 3.42 3.59 3.8 3.97 3.54

TERMS

Inventories days =Stocks / Daily cost of sales 239 29 138 134 135 117 114

Days receivable (days) = Clients / Daily Sales 61 50 11 10 9 8 9

Days payables (days) = Suppliers / Daily cost of sales 162 57 104 94 95 80 87

SALES

Sales growth = Last year’s sales / Previous year sales 5.20% 12.55% 1.13% 2.27% 0.35% 20.21% 13.10%

PROFITABILITY, SELF-FINANCING AND GROWTH

Return on assets = EBIT/ Assets 0.08 0.39 0.13 0.19 0.24 0.31 0.34

Return on equity = Net Income / Equity 0.11 0.52 0.22 0.27 0.3 0.36 0.39

Cash flow / Sales 0.09 0.21 0.1 0.11 0.12 0.13 0.16

Cash flow / Assets 0.09 0.05 0.18 0.2 0.24 0.28 0.32

Dividends / Net profit N/A N/A -1.27 -1 -0.87 -0.77 -0.79

Dividends / Net equity N/A N/A -0.28 -0.27 -0.26 -0.28 -0.3

BREAKDOWN OF PROFITABILITY

ROE = 0.11 0.49 0.22 0.27 0.3 0.36 0.39

EBIT/Sales 0.09 0.13 0.07 0.1 0.12 0.15 0.17

Sales /Assets 0.92 3.06 1.77 1.88 1.95 2.11 2

(Assets/Equity) x (EBT/EBIT) 1.94 1.66 2.05 1.81 1.62 1.49 1.48

Net Profit/EBT 0.69 0.76 0.81 0.78 0.78 0.77 0.77

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Stock Exchange ratios

Source: Annual report 2018, H&M.