Welcome to this call in conjunction with our Q1 report, which was published today at 8 o'clock Central European Time. As previously reported, we will continue with our regular press and telephone conferences for our 6 months and full year reports. For the 1st and third quarter, we will arrange this open call from Media and Financial Markets. There will be no presentation apart from this introduction, but you will be able to ask questions and listen in. And in order to make it clear to the audience, please state your name and company and please ask only one question at a time.
We will be helped by a moderator who will guide us through this call, and I will answer your questions. Please bear in mind that for regulatory reasons, we are not allowed to give certain information. So please welcome with your questions.
And your first question comes from Anders Hansen from Danske Bank. Please go ahead.
Thank you very much. I have two questions actually, Nyns. First of all, on markdowns in Q2. You just say the level end composition is satisfactory on inventories. And can you elaborate a bit on that because sales was weak in Q1 and you had a quite negative start to Q2.
Why no indications of higher markdowns as we saw after the Q4 results?
Well, it's still too early. We have still 2 large months left in the quarter. So there is no it's too early to give indication. When we gave the indication for Q1, we were past December and most of January. That's the big difference.
So if you were to give some sort of gut feel, because it's still a mixed bag in terms of weak sales in March. But on the other hand, you mentioned that you're overall quite pleased with inventories. Would you say there's a substantial risk for much higher markdowns in Q2, if you can comment on that at all?
No. As I said, it's far too early. We are happy with the collections and the customer offering. And as I said, there are 2 big months 2 large months left in the quarter. So it's impossible to speculate about markdowns in Q2.
On the contrary, we have great beliefs for continued success throughout the year.
Okay. Just one short one. You mentioned gradually easing from the U. S. Dollar throughout the year.
Can you talk a bit about Q2 versus Q1?
Yes. As we mentioned, as you all know, the strong dollar has we've started to analyze the strong dollar. And going forward now, the negative impact will ease. And actually, the orders we place today, the dollar is actually slightly weaker than last year. So if the current forex exchange dollar stays at this level, all things equal, it's slightly or in Q4, then it's and neutral slightly positive, the dollar effect.
Okay. Thank you.
Your next question comes from Nicholas Ekman from Carnegie Stockholm. Please go ahead.
Hi, thank you. I'm curious about March sales, if you can say anything more there. I know it's just one individual month, but it's a pretty sharp sales miss versus at least our expectations. You mentioned Easter, you mentioned weather. How big is there any way you can quantify at least the Easter effect in this month?
Because I believe in previous years, you've said that the Easter is doesn't have a tangible impact on an aggregate basis. So any guidance there would be very helpful.
It's always very difficult to look at the Easter effect as such, etcetera, and especially in spring. And if you look historically at our monthly numbers in during the spring, it's very volatile. So for example, in 2013, it was minus 4 percent on the back of 26 percent. And in 2011, it was plus 2 percent also. And that's why we keep saying that you should see the 3 months, March, April May, together aggregated.
But if you look on an aggregate basis, the last 7, 8 months, you've seen quite a severe slowdown in sales compared to the previous 2 years. Is this a sign of a fashion miss? Or what is your interpretation of why your sales have slowed by 6, 7 percentage points versus the sales growth you saw a year prior?
I think it's important to look at the total sales development. And if you look at that in Q1, it was at least I think it was 9% increase in local currencies, and last year, it was 11% in local currencies. So we still grow a lot and more than the market, and we continue to take market share. Then there will always be some periods that are weaker and some that are stronger.
Can you also say something about where you are in your investment phase? You've been talking about an investment phase now for basically 5 years. And 2016 is another year where CapEx is up will be up 15%. Where are you in these investments? Do you see any end?
Is there any kind of guidance you can give us there how far you have come and when we can start to see the positive impact from these investments?
Yes. As I keep saying, we I hope that we will continue to invest for many, many years because there are so many opportunities still out there. And I do think, as we stated in the report, that we start to see a lot of these benefits. For example, the expansion of online, which is very successful. And now we have, at the end of this year, 34 H and M online markets, for example.
And we've also launched new brands like other stores in 2013, which is very successful and growing very well. We have launched H and M Sport in 2014. We've added 20 new markets in 5 years in big markets like India and South Africa, Southern Hemisphere, Australia and Chile, etcetera. We have a large number of flagship stores around the world with extended shoes, beauty last year. So we have delivered a lot of things, and we'll keep continue delivering new things and new brands and new concepts.
But are you disappointed that these investments have not had a greater impact to your sales? Or is this more a sign of a weaker market? Or what's your take?
I think definitely, you have to look at the market conditions as such. And for most competitors, it's a very tough macro in most of our markets. And so that's one thing. And again, double digit growth that we did last year. There's very few other global retailers who do.
And I think it's thanks to all of these investments that we can continue to grow, and we have a lot of growth in front of us. We still grow with 10% to 15% new stores per annum and online markets. And this year, as you know, we've announced for 425 new stores net, and we think we can grow with this pace for many years.
Okay, okay. Thank you very much.
Thank you.
And your next question comes from Erik Karlsson from Boden Helm Capital. Please go ahead.
Thanks for taking my questions, Niels. I just wanted to clarify the U. S. Dollar effect. You say it's better on an orders basis, but could you just help us for Q2 in the P and L?
Is it already a tailwind or less of a headwind then? Or is it still as bad as Q1?
Sorry, you mean the dollar impact or?
The dollar impact Q2 as of the Q1.
It's still a headwind, of course, if you look at the impact of when how the dollar versus most of our currencies was when during the purchasing period for Q2, it was still negative. But as I said, as we start to analyze the high the strong dollar, the negative impact year on year starts to ease. And at the end of the year, it will be neutral or slightly positive.
So in Q2, just to clarify, there would be a headwind, but the headwind is somewhat smaller than Q1?
That's correct, yes.
Very good. One more question here.
I got a comment here from a colleague who visited and said that perhaps I mixed something up. But because sales in Q1 2015 was we increased 15% in local currencies, but we had a pretty strong comparable against last year, so to speak. And for 2015 as a whole, we increased by 11%. Sorry if I mixed it up.
Very good. Thanks for the help with the dollar comment. Just one more question. On current sales, so we should look at March May bunched together. That's clear.
And in the Q1 report here now, you commented that sales were a bit weaker than you expected. Total sales in constant currency grew 9% this quarter. So by inference, the expectation was for a bit more than 9%. Let's call it 10%, 11%, 12%, without going into the decimals here.
Exactly.
But my question then is how are expectations set for Q2?
We don't want to go into details. But of course, I can admit that there were for March, March is a disappointment, and we had higher beliefs. But again, we shouldn't go in a certain single month. But I mean for the full year, we have great beliefs in the customer offering, and we look forward to continue to expand with new stores, new markets, etcetera.
But any reason to believe that the performance in Q2 overall then, March and May, bunch together, should be different from Q1. And I understand the reality will come out different versus the expectation, but just in terms of how you get the expectation internally.
It's I don't want to speculate, and we don't we're not going to give any forecast or anything. But of course, it's always better to have a strong start of the quarter than a weak start.
Very good. And have you seen any material change in April versus March?
It's far too early, and last week was against Easter week last year. So it's very difficult to make any comparisons. But I can say that also, as I said, weather wise, it's been chillier, cooler in most markets. Of course, that's not good for spring garments. We need to have the warm weather to really kick off the selling of the spring garments as always.
Thank you very much.
And your next question comes from Cedric Lucasfilm from Raymond James Paris. Please go ahead.
Yes, good morning. In fact, actually, most of my questions have already been answered. I might have a follow-up on this March, April phasing. Could you tell us what the Easter impact you estimate was negative in for you in March? You mentioned it as a phasing impact on your weak performance in March.
So with the pickup expected probably in April, could you tell us how much it impacted March? And maybe comment on your main markets? Did you have a weak performance in March across the geographies? Or was this or was 1 or 2 of the biggest markets responsible for the disappointment? Thank you very much.
Right. Your first question was about the effect of March, I got that question before, and it's impossible to quantify. And it is complex with Easter because but you could say very simplified that in early Easter, especially if it's cold, is not good. So it's historically for H and M at least, it's been better with the later Easter and combination with warm weather because that really kicks off the sales of the spring collections. And so just because it was in March this year doesn't mean it's going to be positive in April because now we're up against Easter last year, which was in April.
So it becomes a bit complex. When it comes to geography, I'm not going to comment really the month as such because again, it's just the month. But of course, we see that in markets where it's been warmer, we've had better sales.
Okay. Also, this important German market, did you see any inflection over the last month? Would say there's anything happening on this market? Or is it as usual?
Germany is one of it's, of course, still our most important market. And it's one of the few markets where we have kind of market statistics. And if you look at the extinguisher, it's been a very negative trend. And I think the last week of March was minus 16 or something. And of course, since it's we are it's an important market for us, and of course, we're affected by the market conditions.
Thank you, Nils.
And your next question comes from Charlie Muir Sands from Deutsche Bank London. Please go ahead.
Good morning, Niels.
Good morning.
First of all, just wanted to check when were you purchasing the inventory you're hoping to be selling during Q2?
It's I mean, we've discussed this many times before. It's a big spread. So some products we purchase very close to the selling. Could be, in extreme case, couple of weeks before, but some products we purchase could be like 6 months before. So very simplified, the bulk of the purchases are sort of 2 quarters before the reported quarter.
Okay. So when you say that purchases you're making now are have a dollar tailwind, and that means that most of Q4 will be actually positive rather than the neutral that you've more indicated in the statement.
Yes. But then it's not linear. And there are again, I'm very cautious because, as you know, there are so many other factors that influences the gross margin. But if you just isolate the dollar impact, it looks better year on year. But having said that, doesn't mean that margins all of a sudden should improve because we're still on a high level, so to speak, when it comes to the dollar, right?
So it all depends on how we choose to what we choose to do with our customer offering. And of course, other external factors such as raw material, capacity, transports, cost inflation among the suppliers, etcetera.
But that's my follow-up, which is all of those things are pretty good because all of the emerging markets currencies have devalued against the U. S. Dollar by anywhere between 5% 25%. Factories are reporting greater free capacity. Energy costs, of course, are down.
Raw materials costs are down. So on an underlying basis, you should be facing before pricing decisions quite a nice tailwind by the Q4.
Yes. I mean, as I said many times before, these are things outside of our control. Sometimes they are negative and sometimes they are positive. And yes, now we have had a very tough year with a lot of headwinds. And again, this is not H and M specific.
This is for the industry. And you're right. I mean, now it looks like it's getting positive. It's interesting. A year ago, when I stood here, we discussed Q1, which was very strong.
We had a very I think the result was up 30%, 35% or something. But we were very clear with, say, that the high dollar would impact us going forward. And now we are through the worst of that. So yes, you're right.
Great. And nobody's asked yet about operating costs. So if I can ask one follow-up. Can you say whether costs in comparable stores that you've had open for more than a year, whether they are still down? Is all of the cost growth coming from long term projects and new stores?
Right. We have a very tight cost control in the company still. So if you look in comparable stores, costs operating costs are more or less flattish. So the increase is, as you say, referring to expansion, new stores online and the long term investments, additional, yes.
Very much. And your next question comes from Simon Irwin from Credit Suisse London. Please go ahead.
Good morning, Niels. Sorry to go on about this gross margin impact. But if looking at 1Q versus 4Q and 3Q and if we kind of x out what you said about markdown and comments about the change program, It does look as though the underlying impact from a combination of FX and underlying buying conditions has actually improved a little bit in 1Q versus kind of 2Q, so both 3Q and 4Q. I mean, would you agree with that?
Yes. It's I don't want to make it theoretically, the impact was actually slightly more negative for Q1, but that's the theory. So the outcome was, yes, you're right, it was slightly better due to a lot of things, some that we managed to do things even better than we planned. But then, of course, we have other things, external factors that we also benefited from, like we discussed before, transports and raw material prices, etcetera. But of course, also we continuously work with efficiencies and improvements and try to offset without pushing the increased dollar cost to the consumers.
And within your core European markets in particular, what do you think the pricing is doing in springsummer? Or is it very hard to disaggregate that against kind of pretty awful underlying demand trends?
Yes. I think pricing is very interesting because we see some competitors have been raised prices to offset the strong dollar, some who have haven't changed them and some reduced prices. So there's a mix, and we have to relate to all of these, of course. So it's you have to be very as always, have to be very cautious and look at each product by product and market by market. And for us, as you know, we're very long term.
And for us, it's always about having the best customer offering in each market. But then I'm not going to give you any forecast about pricing strategy going forward more than we have very long term.
Yes. And just within 1Q, can you just give us any color as to any particular categories or formats that were either particularly good or bad in the quarter?
In Q1? Yes. When it comes to we don't typically comment on specific categories or so now for competitive reasons, I choose not to comment on that, sorry.
All right.
Thank you very much, Neil.
You're welcome.
And your next question comes from Anne Critchlow from SG London. Please go ahead.
Thank you. Hi, Niels. It's Anne from SG. Good morning. Hi there.
I've got two questions. The first one, sorry if I missed this. But in terms of trading days in March, was Easter a negative because some stores in certain countries were closed due to the Easter holidays?
If you just count trading days, yes, there were less trading days. That's my understanding. But it's again, if you just look at trading days, it could be misleading because it means there even though there are less trading days, there are better shopping on the open days because people are on vacations and go shopping in some countries. In some countries, they go traveling and they don't shop. So it's a very mixed bag.
Okay.
Fair enough. Is it possible to estimate the impact numerically just from the store closures, the days closed?
No. As I said many times before, we don't want to quantify it because it is very complex and it's also very related to temperatures.
All right, fine. And then the second one is more sort of philosophical looking into the future. I mean, if we assume that online continues to grow and maybe you offer free standard delivery and free returns to all customers, complete integration with the stores, a full online offer, Would online then be dilutive to the overall group margin?
I don't want to speculate, but again, I can confirm that we are very happy with our online development and the business. And as we state in the report, it's also very profitable. And I'm not going to comment on free returns or anything. But again, I'd like to repeat, even though we offer free returns sometimes connected to campaigns or certain thresholds that if you buy this, you get free returns or whatever. That's, of course, one way of driving sales and also keeping the profitability.
Because free returns or free shipping, there are no free returns in reality because someone has to pay for it, right? I mean, it's the you pay in terms of higher price hidden in the price or the investors or the owners of the company pay. So we think it's fair to state the costs. And then sometimes, as I said, we combine it with campaigns or something. And we're very happy with our performance in London.
I'd like to repeat that.
Okay. Thanks a lot.
And your next question comes from Chris Chaviaras from Barclays London. Please go ahead.
Good morning, Niels.
Good morning.
I have 3 questions for me, one at a time. Quick, the first one. Why was there a negative store growth in Germany? Is that just a timing issue? Or you don't see Germany as a store growth market?
It's of course, we have a lot of stores in Germany. We have 4 47 stores, and there were 2 closures. And this happens all the time. I mean, for the group, we closed 30 stores in the quarter. And in most cases, it's a relocation.
We there's a contract that we end, and there's a new store across the street or in a new mall or whatever. So as an investor, you shouldn't be sad because typically, we don't close the most profitable stores.
But going forward, in the longer term, you still see some opportunities to open stores in Germany?
Well, absolutely. And please remember, this is Q1 is a small quarter when it comes to openings.
Okay. The second question on the U. S, where you have been doing pretty well for quite some time, but it is also documented that non U. S. Retailers tend to do well in the U.
S. Maybe because of the weakness of players there, the U. S. Players there. Can I ask, given that we've gone into a big conversation on weather and weather variations, Can I confirm the U?
S. Strong sales? Is that mostly attributed to the weather? Or there is something else going on?
I'm glad you mentioned
it because we're quite happy with our performance in the U. S. And I'm sure there are always external factors, but I think the most important thing in that case is actually we have a very strong team in place. The brand is very strong, and we get very good ratings in customer service in the U. S.
Okay. So it's not weather related there?
There might be some, as I said, some external factors. I think March was better when it comes to weather than Europe.
Okay.
Clear. And third one, I guess the investors or anyone who might be Eventually, Eventually, that happens because of your lower price points versus competition. In which case, it would potentially help if you were willing to give what the average basket value is on your online orders globally, don't even specify in different markets. Is it something that you would be willing to give out?
No, because this is very competitive. But I tell you again, repeat that we are very happy. We are profitable. So there are some things we do, obviously, better than some analysts think. I've had this comment many times before that it can't be profitable.
And I repeat, yes, it is because we've been in the business for a long time. We've been doing direct sales since the 80s when we acquired this main order company called Raul's. And we were early with online in 90 8. And we have gradually developed it. So it's become a very successful and integrated part of the business.
And now we soon we will have it in 34 markets, and we continue to invest and to expand it into all our markets. And it looks very good.
Fair. If I look at H and M in the next 5 years, is it most like could you comment on how do you think costs and other stores, how important would costs and other stores might be in the mix? And whether in the next 5 years, there could be an extra banner coming? And I'll finish with that. Sorry, that was the 4th question.
That's fine. No, no, it's I like your question because it's we're very happy, of course, with the performance of costs and stores. And Kost is already now the 2nd largest fashion brand in Sweden by far and with a very strong development and growth. And we have 167 stores, something in 30 more than 30 markets. We continue to expand.
And we also admitted that it's profitable as profitable as H and M, so it's very good. And Stories is also very successful so far and has actually started even better than Kostit at the same time. So in 5 years, I expect I hope that these brands will be even more important for the group and followed by other brands. We have the other brands still that we are also growing like Monkey and Cheap Monday and Weekday. And as you mentioned, at least one other fascia that we are working on.
They also have great beliefs in and see great potential. So very exciting.
Okay. Thank you.
Thank you.
And your next question comes from Richard Chamberlain from RBC Capital Markets. Please go ahead. Thanks. Hi, Niels.
Hi there. Hi.
Hi. Couple for me. Just one on this calendar impact and another one on online. So obviously, seeing some negative calendar impacts in March. I just wanted to confirm, are you expecting Are we expecting a negative for Q2 as a whole in terms of calendar impacts?
Well, typically, the color impacts are volatile on a monthly basis. But for the quarter, typically, it evens out. So I have to be honest, I haven't really looked at it for the quarter as such because there's so many other things that impact the sales like weather and shifts of holidays, etcetera.
Okay. And just on online, I mean, obviously, you've given some color, nice color in the statement about new markets coming on and so on. Also those seem to be, call it, a range extensions online only items, extended sizing, that kind of thing. I mean, why are you introducing online only items? And does that mean the online range is now as big as the range for in some of the larger stores?
Absolutely. And we think this is, of course, the one of the interesting things with multichannel and having the different channels that complement each other. So in the on the online offering, you can have you can add more sizes and more products that you can't have in each stores for physical reasons. I mean, there's a physical restraint in each physical store. So when you combine the channels in a good way, it's, of course, very interesting.
Okay. So pretty soon, we'll be in a position where the online range will actually be wider than the biggest store. Is that right? Or we're not there yet?
I think you could say already that it is wider. But then again, there are some products that we have only in store. So it's not the target is not to have 100% the same things because we yes, there are reasons for having some products only for online and some actually only for stores.
Okay. All
right. Thanks very much.
You're welcome.
And your next question comes from Erik Sandstedt from Handelsbanken Stockholm. Please go ahead.
Hi there, thanks. I came on a bit late, so not sure if you have talked about this already. But in terms of China, you reversed a slowing sales trend there after 4 quarters of decelerating sales growth. Could you talk a little bit more about China and your performance there?
Yes. China and Hong Kong especially is actually just like most of Asia, we think it's quite challenging, to be honest. So we're not I mean, we see that the market in general is tough. And of course, we're not happy with the outperformance in especially in Hong Kong and China. But we still continue, of course, to expand.
And we're we see great potential going forward. But the sales performance of last year or so is, of course, disappointing.
But what's the main reason behind that? Is that the sort of slowing environment? Or is it more company specific?
No. I think the most important reason, of course, is the general macro environment. That's tough. But having said that, there are always things that we could do better and we could improve. And there are things that we have improved, and without them, we wouldn't do as well.
So but primarily external reasons.
Okay. And then do you feel comfortable with the quality of the fashion and the products currently in stores given the weak March sales?
Absolutely.
And why is that? Is that because it's largely calendar effects and weather effects? Or how can you reassure us that the quality is still as good as it has been?
Well, I mean, this is fashion, and there's always changes. And but I mean, the March figures, again, it's very much related to weather and calendar, etcetera. And as I said, we see that in markets where we've had more normal weather, it's been better sales. But having said that, again, always in any season, any quarter, any month, there are things that we wish we could have had more of or less of or whatever.
Perfect. And then finally, you comment in the report that you have had satisfactory sales and profit development in your online business. Could you provide any more color on that? Could you say anything about the share of the business now being online, for example?
The only thing I can share is what we said in the report, and we are very happy because we've had comments that someone said before that our online business is not profitable, etcetera, and that we have invested and nothing is we're not getting anything back from the investments. And this is a clear statement that it's we definitely see things coming good things coming out of our investments, and we're very happy with the online and the development that we have there.
But is it fair to say that it's somewhere between 5% to 10% of your total business in terms of sales?
Again, it doesn't matter because we see the 2 channels integrated and they combine each other. So online drives traffic to the stores and vice versa. So it's not about and then you have returns in store, etcetera. So you might go to the store, get expired, you might order online, you might go to the store and return and buy something in store. What is online and what is offline?
It's not a relevant question anymore really. But it's what the relevant thing is that it is important. It's even more important than before. And I mean the whole e commerce business is growing in general. And of course, we see that happening for H and M as well.
Okay. Thank you.
Thank you.
And your next question comes from Nicholas Firth from SEB Equity Research. Please go ahead.
You managed to join the call.
I've been around. I missed the first four minutes. But so sorry if I repeat one question. But I'd like to start by asking you a little bit on capital management. So you reported now SEK 25,000,000,000 of inland price in at the end of the quarter, up 24%.
And then you have commented a lot on the dollar. I appreciate that, Niels. But could you give us any idea of what you think is a fair estimate of the currency impact on that 24% inventory increase year on year, please?
It's a lot, as we state. And it's first of all, you have this change of invoicing process that it's just about SEK 1,000,000,000 that you have to take into consideration. And then there is still a material U. S. Dollar impact.
So if you apart from that, there is a the level of the inventory is satisfactory as we state.
Perfect. Could I also ask you, it's not by no means mid year mid fiscal year yet, but you guided us on between SEK 13.5 SEK 14.5 billion CapEx for 2016. Is that something you're willing to tighten or comment on at this stage now that perhaps you know a little bit more how this year will roll out?
Yes. But we're still early on in the year, and we have the bulk of the expansion in front of us. I think we only opened like 10% of the planned store openings this year. So I think we stay with that guidance. But you're right, it is a moving target and it could change.
And can I also ask you, you've been kind enough to provide us with the guidance for the extra investment related costs of SEK 600,000,000 for this year? And if I get it right, you charged about SEK 100,000,000 out of that in fiscal Q1. Is there any way you could provide us a little bit more of a feeling for how the remaining costs will sort of be charged versus Q2 to Q4, please?
Yes. We stay with the target or guidance of approximately €600,000,000 for the year. And as we state in the report, it may vary from quarter to quarter. So I have no reason to change that guidance at the moment.
So are you saying then that the best estimate for us is to look at how you charged your P and L in 20 15 and have a similar sort of trajectory of between the quarters for this year as well?
Yes, because there's no other better way to yes, I guess, history is the best proxy, yes.
Okay. And then the final question, if I may. And it will be great if you could comment a bit on from a strategic point of view. Obviously, Niklas Sandstrom is on the board, And I'm reading very interestingly that you're happy and profitable with your e commerce sort of plans and performance so far. And I was just wondering to what extent would you actually say that Nitless has been instrumental or active in sort of setting the strategy online, please, from a Board of Director proposition?
I don't think it's up to me to comment on individuals on the board. But I mean, Mikael is, of course, a very successful entrepreneur, and I think he is a good asset to have on the board, absolutely. But to comment about the online strategy, as I mentioned before, we're very long term. We've been in the direct sales business since the 80s and step by step developed it. And we've been in online business since 90 8 and gradually developed and improved it and learned a lot.
So I wouldn't attribute the success to any specific individual. It's more the team effort of H and M and very long term and very much connected to the long term business idea of H and M.
Thank you very much for taking my questions.
You're welcome. Have a good day.
And your next question comes from Anders Hansen from Danske Bank Stockholm. Please go ahead.
Thanks. I had a follow-up question on pricing. Could you give an update on what you see in average pricing in your in the biggest markets?
You mean our prices or in the
new markets? Not your prices, of course. What's your not the
As I said, it's a mixed bag. So I repeat what I answered before in some markets. Some competitors have raised prices to offset the strong dollar. Some have kept their prices more or less flattish and some have reduced their prices.
And I
think you have the same comment after Q4, but you also, at that point, stated that, but on average, prices are up in the main geographies.
Okay. I don't maybe that is I don't have the surgeon exact because it depends on, again, how you measure. So I don't expect there's a big difference in Q1 from Q4 because, again, it hasn't changed that much in Q1. Is more quarters. So then flattish or slightly up might be the same answer then, but more different.
Okay. Great. Thank you.
And your next question comes from Erik Karlsson from Bodenholm Capital. Please go ahead.
Thanks for taking another question. I wanted to check how you define the online being very profitable. Particularly, can you help us understand how loaded is the cost base when you make that comment? So does that include investment costs, fair share of headquarter costs, etcetera, etcetera? Or is it excluding these?
Because the problem we have as investors is a lot of online businesses tells us they're profitable. But if you that's stripping out a lot of costs, which sort of defeats the purpose of that comment. So how do you define the cost base when you make that comment?
Again, you can we keep to the answer that it is very profitable and we're very happy. Then of course, you can define each line, etcetera, and decide what how should you split cost A, cost B, cost C. But I think one of the advantages we have by having a large store base and a successful and large online business, one of the most visited fashion sites in the world, is that we, of course, we can take make investments that are truly multichannel, and we can split and allocate the costs across the group no matter what channel. So I think that's enough for how much I'm going to go into detail. And I just want to underline that it is profitable because we get these comments that it is not profitable and margin dilutive, which is not true.
Yes. But then it would be very hard to understand if we don't know what the basis is for that when you say it's as profitable or more. If we don't know what's the cost base and definitions are, it's
sort of very hard
to do you think the stores are subsidizing the online in any way?
Again, it becomes a hypothetical discussion in a way because we don't internally, we don't really isolate it like that. We look at it from a customer perspective and from an H and M perspective. And then some things are, of course, more for online and some for the stores. But most of all, it's for H and M and the total customer offering. So it doesn't really make add any value of defining every cost or cent exactly per channel.
So I think the most important thing as an investor is to know that the investments we make make sense and that they deliver and that we are happy and the customers are happy. And we get more and more confirmations from customer service that they're happy and becoming even happier about our offerings, which is also reflected in the sales of online.
Could you
help us understand, Niels, when you guys in top management meet and so on, do you at all look at the separate profitability of the 2 channels? Or that's just not how you guys think, yes? So neither should we.
Well, of course, we follow-up. That's one of the advantages about being a large company with around 4,000 stores and 60 plus markets and a lot of concepts and different there are KPIs on everything and we can benchmark. And we can benchmark and buy it that way, management by exception, so to speak. So if something sticks out, of course, we benchmark and we measure profitability, etcetera, efficiency per channel, per concept, per category, per market, you name it.
Good. Thank you very much,
And your next question comes from Jamie Merriman from Bernstein London. Please go ahead.
Hi, good morning.
Good morning.
I have two questions also about online. And I guess you may have sort of gotten to the first one in your last answer. But I think in the past, you've said explicitly that your online margin is equivalent to your store margin. And I'm just wondering if that's still a statement that you would reaffirm. And then the second one is
Yes. Okay.
And then the second one is, now that you've rolled out the new platform in the UK, have you seen any e commerce growth accelerate since having launched that platform? Thanks.
We are as I touched on in the last call, we're very happy with the transition in the UK. It's always very challenging to make such a transition and of course, a lot of changes. And but we are happy. Most customers are happy. And yes, we see, of course, good things coming out of this.
I wouldn't say accelerate because we did do well already prior to this, but we do with Inventor, and we have been able to improve the customer offering for the U. K. Customers in terms of delivery times, etcetera. So it's promising for the future and other potential transitions that we have.
Okay. Thank you.
Your next question comes from Jeff Ruddle from Morgan Stanley London. Please go ahead.
Yes, good morning, Ils.
Good morning.
I was just going to ask a question about China.
I mean, you've missed on
the call that you haven't been happy with performance in China over the last year or so. But you say that you're still going to open lots of stores there. I was just wondering what drives you to continue with the current store opening rate in a market where presumably you're not getting the returns you were expecting?
Well, we I did say there are things we could or we're not happy with top line, absolutely. But there are other things we're very happy with. For example, the profitability and the potential of the new stores we signed have very good terms and good profitability. So that's
So the new stores you're opening are still generating positive returns, we?
Absolutely.
Okay. That's great. Thank you.
And we have no further questions at this time, Nils.
Okay. Then thank you all for your questions, and I wish you all a good day, and welcome back after our half year report in June. Goodbye.
Ladies and gentlemen, that does conclude today's call. Thank you very much for participating. You may now disconnect.