Listen only mode. There will be a presentation followed by a question and answer session. At which time, if you would like to ask a question, you will need to press the star one on your telephone keypad. I must advise you that this conference is being recorded today on Wednesday the 28th of January, 2015. I would now like to hand over to your first speaker today, Mr. Nils Vinge. Please go ahead, sir.
Thank you very much. Welcome to this telephone conference on the occasion of H&M's full year results 2014. Our CFO, Jyrki Tervonen, is with me today. We'll be happy to answer your questions after the presentation. You'll find the presentation slides to this telephone conference on hm.com. Please look at the slide 2014 in brief. 2014 was a very good year for H&M. Well-received collections for all group brands and continued global expansion with stores and online increased market share and further strengthened H&M's position. Please turn to the slide, Sales. H&M's fourth quarter spans from September to November. Looking at market conditions in the fourth quarter, autumn 2014 was characterized by unseasonably warm weather in several markets. Available market statistics showed weak development for fashion retail. In this environment, H&M performed well.
Sales including VAT increased by 11% in local currencies and 17% in SEK, amounting to SEK 49.7 billion. For the full year, sales including VAT increased 18% in SEK and 14% in local currencies. Sales developed well in all markets and for all group brands. Sales including VAT amounted to almost SEK 177 billion. Looking at the development in some of H&M's largest markets, please turn to the slide, Sales per market. Germany is still the group's largest market by far. With 440 stores and approximately SEK 35 billion in sales last year, H&M is still growing in Germany. The U.S. is H&M's second largest market. With a strong contribution from online and a total of 51 new stores net, sales increased by 22% in local currency and 26% in SEK.
In the U.K., which is the third largest market of the group, sales were also strong and in neighboring Ireland, very strong. China was H&M's largest expansion market again last year, with a net addition of 86 new stores and the successful launch of shop online. At the end of the year, China had 291 stores. H&M's first store in China opened in 2007. Today, with sales of more than SEK 9 billion in 2014, China is H&M's fifth largest market, having surpassed Sweden in just a few years. Elsewhere, development for H&M was also strong in Southern Europe, with a doubling of sales in Turkey, an increase of 24% in Italy, and a growth of 29% in Greece. With a very good performance last year, H&M continued to gain market share and strengthened its market position further.
To look at results, please turn to the next slide. Gross profit in the fourth quarter increased by 16%, corresponding to a gross margin of 60.4% compared to 60.8% a year earlier. Looking at the market situation for some external factors such as raw material prices, cost inflation, supplier capacity, purchasing currencies, and transportation costs. Combined, the market situation for these factors was slightly negative compared to the corresponding purchasing period the year before, mainly as a result of the increased cost inflation. Markdowns in relation to sales were marginally better than in Q4 2013. The positive effect year-over-year was approximately 20 basis points. For the full year, gross profit increased 17% to SEK 89 billion, corresponding to a gross margin of 58.8% compared to 59.1% in 2013.
Most of the difference is explained by H&M's continued long-term investments in IT and online, the broadening of the product range, and the new fashion brand & Other Stories. Please turn to the slide, SG&A. Cost control in the group remained good. In the fourth quarter, before the allocation to H&M's incentive program, HIP, SG&A increased by 13% in local currencies. The increase is mainly related to the expansion and to continued long-term investments. Looking at costs in comparable stores, costs were slightly higher in Q4 than in the same quarter the year before. SG&A for the full year of 2014 increased by 18% in SEK and 13% in local currencies before. To look at profits, please turn to the next slide. Profit after financial items increased by 7% to SEK 7.8 billion in the fourth quarter. Before the allocation to HIP, profit was SEK 8.1 billion, an increase of 11%.
For the full year, profit after financial items increased by 15% to SEK 25.9 billion. To look at the net profit, please turn to the next slide. Net profit increased 12% to SEK 6.2 billion in the fourth quarter, equaling earnings per share of SEK 3.76, up from SEK 3.35. For the full year, after a tax rate of 22.9%, net profit increased to SEK 20 billion. As a result of the good profit development, SEK 303 million have been allocated to HIP, the incentive program. Earnings per share rose to SEK 12.07 from SEK 10.33, an increase of 17%. For some other key figures, please turn to the slide, key data. Stock in trade as of 30th November amounted to SEK 19.4 billion, an increase of 16% in SEK and 14% in local currencies. The increase is mainly explained by the expansion in stores and online.
As a share of sales, stock in trade was 12.8% compared to 13% the previous year. The level and composition of the stock in trade is considered good, which can be seen in the good sales development in the start of the new year. Cash flow from current operations was SEK 24.2 billion, and investments in terms of CapEx totaled SEK 9.4 billion, an increase from SEK 8 billion in 2013. The increase is explained mainly by the expansion, but also by the long-term investments. For 2015, CapEx is expected to reach approximately SEK 11 billion-SEK 11.5 billion. Liquid funds amounted to SEK 16.7 billion, and the board of directors will propose to the annual general meeting a dividend of SEK 9.75 per share. Return on equity was 41.3%. Before we move over to talk about expansion, a comment on the number of employees.
The H&M Group created 16,000 new jobs net in 2014 alone. Today, we are more than 132,000 employees working at H&M worldwide. That equals an average number of full-time employees of 93,351. Please turn to the next slide. H&M has a strong global presence. With various brands and concepts, H&M offers customers a broad and diverse range of inspiring, good quality fashion in stores and online, and is doing so in a sustainable way. By offering great value for money, H&M is just as appreciated by customers in big cities as in small and medium-sized towns. As a result, H&M is able to grow deeper into each market while also welcoming customers in new countries. Now, please look at the slide, store expansion 2014 to 2015. Today, H&M has more than 3,500 stores in 55 countries, all group brands included.
In 2014, we opened 379 new stores net within our target to grow the number of stores by 10%-15% per year. Two new markets were added during the year: Australia and the Philippines. Customer reception has been very good. Both markets offer great potential for further expansion. For 2015, the plan is to open approximately 400 new stores net. New markets this year will be Taiwan, Peru, Macau, South Africa, and India. The largest expansion will take place in existing markets, led again by China and the U.S. Expansion also continues for the newer brands of the group, including COS, & Other Stories, Monki, Weekday, and Cheap Monday. COS has been very successful since its launch in 2007. In 2014 alone, six new markets and 29 new stores were added, including the first stores in the U.S. and Australia.
By the end of the year, COS had 114 stores in total. Our newest fashion brand, & Other Stories, which was launched in 2013, also had a very good development. H&M is reaching a growing number of customers also via shopping online at hm.com. Please turn to the next slide. Expansion was fast in 2014 with successful launches of H&M online store in four new large markets: France, Italy, Spain, and China. In parallel, we have continued investing in the online store in existing H&M markets in order to further improve the shopping experience for our customers. These initiatives contributed to H&M's good sales development in 2014. Therefore, we are rolling out shop online to nine more new markets in 2015. It will be Belgium, Bulgaria, the Czech Republic, Hungary, Poland, Portugal, Romania, Slovakia, and Switzerland. As part of our long-term initiatives, we're also broadening H&M's product range.
Please turn to the next slide. H&M HOME, H&M Sport, and H&M's extended shoe range are all examples of how we are developing our customer offering in stores and online. In 2015, approximately 100 new H&M HOME departments will open. Around 10 new markets will be added. This year, we're offering customers yet another new concept, H&M Beauty. H&M Beauty will be a new broad concept for makeup, body care, and hair care, with high-quality, value-for-money products in a specially produced design. H&M Beauty will initially be launched in around 900 H&M stores in approximately 40 new markets and online in autumn 2015. Now, before we move on to the Q&A session, some words on current trading. H&M has had a good start to 2014, with strong sales both in December and January.
In December, sales in local currencies increased 15% compared to the same month the year before. For January, sales are estimated to increase by 14% year-on-year. We see great potential for continued global expansion in existing markets as well as in new countries. We continue investing to further strengthen H&M's position and secure future growth. As always, there are external challenges affecting us. The US dollar has recently strengthened significantly against most currencies, including the euro. Although the strengthening of the dollar will mean gradually higher purchasing costs for sourcing to the coming quarters, Q2, Q3, and Q4, H&M will continue making sure to have the best customer offering in each H&M market in terms of fashion, quality, price, and sustainability, which together form the basis of our business concept. With that, we're now happy to take your questions.
Please remember to only ask one question at a time. Thank you.
Thank you. As a reminder, if you would like to ask a question, please press star and one on your telephone keypad and wait for your name to be announced. If you would like to cancel your request, please press the hash key. Your first question comes from the line of Adam Karlsson. Please ask your question.
Happy New Year, guys.
Happy to you.
Your online rollout has really accelerated over the last 12 months or so. I know you won't quantify this for us, could you characterize the development of online versus your expectations, both in terms of sales and profitability?
We are very happy, of course, with both profitability and top-line development, that's the reason why we continue to invest so much and continue the rollout. It's not just the online that we see that we've been talking about multi-channel or seamless shopping, I think that's the interesting thing, that it also it's the total offering that improves, we see also very good development in our stores.
Very good. Just to follow up on that, if I may.
Going forward, aside from the impressive rollout of more geographical markets in terms of online, what are the other main initiatives you're taking for online this year, do you think?
It's a number of new initiatives. First of all, we have gradually broadened the assortment of collections. You can find even more products online. We have improved navigation, so it's even easier, and you get a better customer experience. We have installed features like click and collect. Not click and collect, sorry. Scan and buy we call it. As you know, very often when you come to a store and you find a product you like, it might be sold out in your size or color. With this feature, you can just scan a similar product and immediately see if it's available online and click it and have it shipped home. Very interesting. We have better pictures, more pictures, and the search function has been improved even better. A lot of small details that all in all add to an even better customer experience.
Thank you very much.
Your next question comes from Cédric Lecasble. Please ask your question.
Yes, good afternoon to the team.
Good afternoon.
Two questions, please. The first one on the different components of the gross margin that you see as external factors. Maybe on raw materials, not on U.S. purchasing but on raw materials, could we have an idea of the kind of relief you have, especially on cotton recently, and how you see the year?
Let us start with the cotton then. It's true that cotton prices, spot prices, have been decreasing in the last six months or so. We don't buy cotton as such. We design products, and we have them produced, and it's more about the prices or cost on fabric. Of course, it's much more than just cotton that goes into fabric. There are chemicals and other materials, et cetera. All in all, the prices of fabrics have not decreased as much as the cotton prices. Yes, it's a decrease, but not materially.
Okay, thank you. A follow-up on your online launches. You launch a lot of new countries every year. Could you tell us for a given country, a big country, like the U.S. or China, how long do you see this impact when you launch a new internet site, a new online operations in some country? What's the kind of momentum you have on your phase, and how long does it last? Do you still see in year two, in year three, positive impact from the launch two years ago, something like that? How does it ramp up, to make it simple, what's the kind of ramp-up curve that you see on your online launches from year one to year three?
Right. There is no simple answer because there is a different pattern for every country, and it all depends. What we can see is that the channels, they complete each other, they complement each other. We see when we have both online and the store operations, that the result is very interesting. One plus one equals more than two so to speak.
Even in year two or three, it continues?
Yes.
Yeah. As Nils said earlier, I think to go more and more to the seamless retailing, we can benefit in both channels by using both online and physical stores. I think that's an advantage for a player like H&M who has both physical stores and online. The aim is, of course, to increase the total selling in the group.
You had a sharp acceleration in like-for-like. For the last, let's say, 12, 18 months, would you attribute online as the big responsible for this acceleration?
It's not that simple. Again, I think that the most important is the total offering and the designs and the products, and then of course it helps with online and all the other things that we work with.
Yeah. We have had a good development both in the physical stores as in the online channel. It goes for both, a strong development.
Okay, thank you.
We have a question from Francesco Marmo. Please ask your question. Francesco, your line is open. Please ask your question. We will move on to the next question now, which comes from the line of Simon Irwin. Please ask your question.
Good afternoon, gentlemen.
Hello.
Can you just talk a little bit about the change program? You gave us some indication last year about the impact. I think you said SEK 700 million split between gross margin and OpEx. In terms of the change program for the year ahead, should we expect a similar number, a larger number, or does some of that start to roll off?
Are you referring to those long-term investments that we have discussed during 2014 and the increase of those or?
Indeed. Yes.
Yes. Okay. Yeah. For 2014, the increase in these long-term investments compared to 2013 was approx SEK 840 million or SEK 850 million, and we will have a higher level during 2015 as well. The best estimate we can give at this time is that the long-term investment will increase approx SEK 400 million-SEK 600 million during 2015 compared to 2014.
Okay. That's a net increase on the kind of SEK 840 million, SEK 850 million, is it?
Yes. The long-term will increase SEK 400 million-SEK 600 million compared to 2014.
Okay, thank you. Could I just ask a supplementary, going back to what people are asking on buying and things like that, I think we can all work out the FX that's going on out there. Could you just talk us through what you're seeing in terms of dollar buying conditions? Clearly, there are some elements of costs which your manufacturers say in Bangladesh are not seeing increasing in line with the dollar, et cetera. Would you expect your local currency buying in most of these markets to be up or down for the year ahead?
I think it's very difficult to tell because, again, there are so many different components and depending on what kind of product you talk about. If we talk about these five external factors, that includes the cost inflation, and that will continue to increase, which is something we are for, because this is for sustainability reasons, of course, we want everyone to be able to live on their salary. Of course, we also see that this leads to positive effects in terms of quality and efficiency, et cetera. That's a good thing. We talked about fabrics already that are slightly down, perhaps. We talk about transport costs, which of course should be affected positively by the oil prices, but maybe not as much as you would think because we have also there environmental issues, et cetera.
All in all, very challenging, of course, mainly driven by the strengthening of the US dollar.
Okay. Thank you very much.
Next, we have a question from the line of Richard Chamberlain. Please ask your question.
Thanks. Afternoon, gents.
Afternoon.
Afternoon. Yeah, I just had a question on the Q4 gross margin, please. I wondered if there were any year-end effects worthy of mention. Last year, we had some impact, I think, from flow of goods, currency effects, and a few other factors. Was there anything going on in Q4 that affected the gross margin this year in terms of year-end effects?
Yeah. When it comes to year-end effect, it's mainly connected to shrinkage and the valuation of the stock in trade. Looking on those two main components, the effect compared to last year is more or less neutral. No major effects from the year-end.
Okay, thank you. Just one other one, if I may, on China. It looks like you are seeing a good, strong accelerating trend in total and like-for-like sales there. I just wondered if you can just touch on why you think sales have accelerated. Presumably, that's partly down to shop online, why the sales have accelerated and also whether you've increased your outperformance versus the market in China in the last quarter.
Right. To start with, we've been seeing every year now that we are very happy with development in China, that is the case. I wouldn't say they have accelerated. They've had a positive trend for many years now. Of course, when you look at sales for stores, you might get a different view. We have a good development, and we see still potential to grow many stores. As I said before, it was the largest expansion market in terms of stores in 2014, and it will be also in 2015. We see that our offering is very well received by the Chinese people. Of course, it's a very big population. As you know, middle class in China is growing very rapidly.
The more stores we are opening in different cities, the brand awareness will be stronger and stronger as well. More and more people will know and understand the brand around H&M.
Right. Okay, it's partly a market trend and partly H&M's own performance. It sounds like what's going on in China.
It's a combination of both. We have had a strong development in more or less all our markets. It's not only China, it's all the markets in Europe, North America, et cetera. I think in the end, it's a lot about the assortment and the customer offering we have. I think that's one result of all the investments we have done in our customer offering during the past years in hiring the quality, looking into sustainability, increasing organic cotton. It shows the strength of investing in that in the long term.
Sure. Okay. Thanks very much.
Welcome.
The next question comes from the line of Anne Critchlow. Please ask your question.
Thanks. Good afternoon.
Afternoon.
I've got three questions. Hi. I'll start with the easiest one. Could you just repeat the CapEx guidance, please, for 2015?
I said around SEK 11 billion-11.5 billion.
Thank you. Secondly, how much of the hit cost fell into operating costs as opposed to cost of goods sold in Q4?
90% of the 303, SEK 273 million, I think.
Yeah, in the SG&A, SEK 273 million.
Thanks. That's very helpful. Finally, if we're looking at new store productivity rate, should we be using, say, 75%? The sort of 70%-80% that you used to see. Is that a sensible figure for us to use going forward?
It's a very difficult number to give guidance on. It's in that range more or less, I would say.
That's what you saw last year?
More or less.
Okay. Thank you very much.
The next question comes from the line of Chris Chiarra. Please ask your question.
Good afternoon, guys.
Good afternoon.
Maybe two or three questions, one at a time from me. The first one on prices. You mentioned the FX is adverse, and we can see that. Would you use prices as a means to offset the pressure in your sourcing costs? Would you be willing to increase prices?
I would say we continuously monitor prices in all our markets, not just, I mean, sourcing prices, but also, of course, market prices among competitors. We continuously monitor. Sometimes we adjust up or sometimes down, but we always want to have the best offering in each market, and there is nothing different this time.
Okay. The second one on the long-term investments. You went from incremental investments of SEK 850 million to incremental investments now in this year of SEK 400 million-SEK 600 million. There is a small deceleration there. Could you highlight or could you provide some color on what has dropped from these investments, or in other words, what kind of investments have finished now and you no longer need to repeat? As a follow-up, where do you allocate, then, this extra SEK 400 million-SEK 600 million?
Yeah. It's a mix. They have gone down more or less on all these long-term investments. Maybe not on the online. That, we will continue, as we've stated, that we will roll out nine new online markets. Otherwise, we have taken a lot of these investments during 2014. Still, it's on a high level. Exactly, it's connected to IT projects that we are rolling out. For some of them, we have more or less invested on that level where we want to be. As Nils said, there are still a lot of good business cases to invest in in the future. This is the best estimate we have for this year, and we have a nice pipeline of really strong business cases also. Let's see what's happening. Hopefully, we will continue to have these long-term investments for many, many years to come.
Oh, that is very clear, actually. Thank you for that. Last one from me. Do you have a very long-term number of stores that you plan to open in China, particularly? How many H&M stores do you think that you could have in China, and how many COS stores do you think that you could have eventually in China?
Of course, we have an idea, but we are very pragmatic, and we take it step by step.
It's so difficult to say because then you're just looking into the situation at this moment. Nobody knows what's happening within five, 10 years. Often, if you look back 10, 15 years for a country, then initially we might have been thinking that we will open only 20 stores. Today, we might have 60 stores. It's so difficult to forecast or predict what will happen within 10, 15 years. A big potential, of course, in China, as we see it now.
Fair enough. Do you still keep your guidance of 10%-15% store growth for the foreseeable future?
Yep.
Yes. Cool. Thank you.
Your next question comes from the line of Richard Jaffe. Please ask your question.
Thanks very much. A follow-on to the online businesses as you roll it out, will you be implementing it as a full assortment online immediately, that the full store assortments will be represented online as you move into these countries? A follow-on, as you develop the countries, say, the online business in the U.S., have you been able to expand the assortments to include some of these new categories to be broader in their offerings than the actual stores?
Yes and yes.
Thank you very much.
Of course, as I said before, we are continuously investing, one of the things that we have been broadening the offer as such online, but also adding the new concepts like H&M Sport, and also Beauty will be available online, et cetera, and H&M HOME as well. Also in the U.S., the customers are now able to find more products than they were a year ago.
Yeah, in the long run, the assortment within the online channel can be even over 100% of the assortment in the store.
Makes online very important. Thank you.
Yes.
Your next question comes from the line of Simon Bowler. Please ask your question.
Hi, gents. First up, I wanted to just double-clarify on the long-term investments. You talked about the SEK 400-600 in 2015. Is that an absolute number, or is that the year-on-year increase versus last year, i.e., are we kind of SEK 1.2 billion-SEK 1.4 billion from 2013?
The year-on-year increase. It's the year-on-year increase.
Okay. We're SEK 1.25-SEK 1.45 ahead of where we were two years ago. We should add those numbers together.
Yeah.
Excellent. Thank you. Secondly, I just wanted to check, you made a reference towards seamless retailing when we were talking around online versus stores. Can you just talk, as a reminder, how the logistics of your online and your store operations work in terms of the warehousing, whether you've got any plans to bring those all together under one roof, or how that part of your business is developing?
Yes, we have a very scalable logistics setup with a lot of hubs spread out across the globe. Sometimes they are connected with the stores, retail operations, and sometimes they are not. This is a case by case. When you talk about the micro logistics, they differ quite a lot. Of course, we use a lot of the common things that we can use for both channels. Of course, when we talk about seamless shopping and multi-channels, it's about integrating the channels in a good and efficient way, and we are on a good way to do that.
Right. Okay. Very finally, I was wondering if you might be able to give us any guidance on this depreciation number for the year ahead. Obviously, that's going to ramp up after what we've seen happen to CapEx. I don't know if you might be able to help us out there at all.
Could you please clarify the question?
If you might be able to just give us some guidance on depreciation for the year ahead. Obviously, a number of moving parts and CapEx has been accelerating in recent years.
Can we come back to that question?
Do you mean on the depreciations on a total or more into those intangible assets and long-term investments that we have in the balance sheet, or?
No, I was just meaning just as a kind of total absolute figure, i.e., kind of relative to the SEK 5 billion that you've had in the year just passed.
Yeah. They will most probably increase a little bit due to those intangible assets that we have in the balance sheet of approx SEK 2.1 billion. Now more and more than when we take them in use, we start to depreciate on those. This year, 2014, we depreciated, I think it was SEK 40 million, and for 2015 it will at least be the double, more or less, probably SEK 100 million, relating to those intangible assets.
Right. Okay. All right. Thank you very much.
Your next question comes from the line of Dana Telsey. Please ask your question.
Good morning, good afternoon, everyone.
Good afternoon.
Good afternoon.
As you expand into other categories like beauty, is it just replacing the existing beauty category? Do the new lifestyle categories that you're adding, are they margin enhancing? How do you think of the positioning overall?
I just start with H&M Beauty. We are replacing existing, but also it's a much bigger and broader concept than the existing H&M own beauty concepts as today. We will launch it in 900 stores in around 40 countries and online during autumn 2015. When it comes to margins, no comment. Of course, initially, it's a lot of investments and that's part of the long-term investments, but in the long term, it shouldn't have any impact on the margins as such, I would say. Of course, we see great potential, that's why we invest so much and we have great beliefs in these concepts, each of them. That was beauty. Did you have any more questions? Sorry.
On the other categories, like sport that you've done, home, are they expanding into additional stores and online also?
When it comes to sports, we have sports in a lot of stores, but this extended, the full collection, so to speak, we have in a limited number of stores that we launched in 2014. The outcome has been very positive, of course, now we plan to roll it out in more countries, and online in 2015. Same goes for the extended shoe range, which we launched in the autumn 2014, in just a limited number of stores and limited number of countries. Of course, the outcome of, as we see that this is doing very well, we plan to roll it out in additional stores and countries this year as well. Of course, on online.
Thank you.
You have H&M HOME, which I think I mentioned. We have, today, 104 H&M HOME departments. This year we plan to roll out another 100 new H&M HOME departments in 10 new markets.
Thank you.
You're welcome.
Once again, if you would like to ask a question, please press star and one on your telephone keypad, and wait for your name to be announced. If you would like to cancel your request, please press the hash key. Your next question comes from the line of Omar Saad. Please ask your question.
Thank you. Good afternoon.
Good afternoon.
Two quick questions. The dividend, it's the first time you're suggesting a dividend raise in several years. Kind of wanted to understand the thought process there. Is it a reflection of your confidence in the business now that the global markets maybe are settling down, the global economy is settling down? I just wanted to ask a quick question about the supply chain for the beauty business. Do you have those capabilities in-house, or do you need to partner or joint venture with other operators? Thank you.
Okay. First question about the dividend. That's a proposal from the board of directors to the annual general meeting to be held in the spring this year. The process is, of course, that the board of directors, we will give them a view of how we see 2015 when it comes to our operations, the investment levels, both in CapEx, investing in new stores. We give them a picture of what we foresee for 2015. The board of directors, based on that, according to our dividend policy, will make a proposal. This year, they have been taking the assessment that an increase of SEK 25 million or SEK 950 million-SEK 974 million is a good level considering our cash position, our investments that we plan for during the year. We in the management think that's a realistic and a balanced proposal from the board of directors.
That's very help
When it comes to supply chain regarding H&M Beauty, it's 100% private label. That's all in-house, and we've had it for many years before. We have long-term relationships with very competent suppliers, of course, and we've been developing these new lines together with them. We don't have any own production, just like with the textile, it's all outsourced to external suppliers.
Thank you. Very helpful. Thank you.
Your next question comes from the line of Simon Irwin. Please ask your question.
Hi. Just a quick follow-up on the online. When are you expecting to change the online platform for your heritage online markets in continental Europe and the U.K.? Related to that, you talked a lot about a seamless experience. Will that seamless experience include click and collect?
First question, it's of course in our plan. We have a plan to migrate the existing countries to the new platform. However, we haven't announced it yet, and it's a lot of careful planning because honestly, it's more challenging to migrate existing countries than to open a new one, to be honest. Second question was What was it?
Click and collect.
Click and collect.
Yeah.
Yes. Of course, it's something we're looking into, among many other features, as I mentioned before. There's no plan yet when to launch it or if we should launch it.
Okay. The platform upgrade isn't necessarily in that cost guidance.
It's part of the IT investments, absolutely. Costs we make, yes.
Okay. Thank you very much.
You're welcome.
Your next question comes from the line of Paul Stegers. Please ask your question.
Yeah. Hello, gentlemen. How are you?
Hi.
Good.
I'm fine, thank you.
Good. Quick question. Just pushing you a little bit on the gross margin, if possible, which I know, Nils, you're not going to answer, but maybe would it be prudent to assume that given the move in the dollar and your caution on the COGS, that from that area alone, you should see a gross margin deterioration, which will be higher to what you saw last year? Are there therefore some other offsetting factors, you've talked about markdowns in the fourth quarter last year, that could clearly offset that, i.e., should we be a little bit more cautious this year on gross margins versus to what we saw last year? Is it a similar trend? All else being equal, what's your view on that?
Since you know my answer, I will let Jyrki try to answer it.
Yeah. Unfortunately, I have the same answer as Nils when it comes to forecasting the gross margin and giving it out. I think as we have told you many times, we see that as a very important tool in the tough competition to not reveal exactly or even hint how we are going to work with our customer offering. Sorry.
Okay. Let me follow up with one other one on your operating expenditure. Obviously, this is the second year of big incremental investments, which you've talked about. Are there any other lines of the OpEx that you're seeing potential positive leverage, such as rental costs, good enough for resale? I'm just trying to get a sense of this. Is this just an ongoing investment phase that will continue for the next five years? The gross margin will do what it does, but at what stage should we expect like-for-like OpEx costs to actually give you some leverage, if at all, and assuming like-for-like growth remains decent?
Yeah, when it comes to OpEx, we have a very good cost control. Those investments that is partly going into SG&A, of course, they will generate revenues in the future. Exactly when it starts to turn over to giving a leverage, I think we see a leverage in comparable stores. We see a leverage, especially when we have a good like-for-like development. As we have said, we have been working very good with the like-for-like development in the OpEx. For sure, in the long term, there is an underlying cost inflation in the SG&A and the operating expenses. We need, for sure, a good like-for-like development. Of course, we are looking into finding always a new way of working, trying to find more efficiency in the store operation and all parts of our business.
We are in an intense investment period at the moment, and it will continue during 2015 and most probably also in 2016. As we said, it's fantastic business cases, and we are building up a much even stronger H&M for the long term. I think we have a good control over the profitability and the costs.
Okay. Just to finish up, thank you for that answer. It's probably fair to say that given your EBIT margin has gone down by about 500 basis points, actually slightly more, nearly 600 basis points over the last four or five years. We shouldn't expect too much positive news flow on that front in the next year or two. The top line should remain good, then hopefully, as this big incremental investment phase runs off at the end of 2016, hopefully, maybe then, assuming sales continue, we should see some positive operating margin leverage?
Well, I think we have a lot of positive news looking at the profit development on the bottom line. We increased the profit quite much in money and percentage. I foresee a good development for the future as well.
Okay. Thank you, guys.
Your next question comes from the line of Luke Tomlinson. Please ask your question.
Good afternoon.
Afternoon.
I just want to get some color on what you saw as your competitive advantage over local players. You're entering into a large number of new markets. I just want to see what you saw as your advantage, basically.
Yeah, I think there's not one unique thing or one secret. I think if there's any secret, it's the combination of many different factors, starting, of course, with the business idea and the strong culture of the company.
Okay. Sort of a follow-up process. What's your thought process on deciding which international markets to enter?
It's a very pragmatic approach. We look at the map, and we look at the countries, and we do our homework to see the potential. We learn about the competition and the import regulations, and then we have a roadmap.
Okay. Thank you.
There are no further questions at this time.
Okay, very good. Thank you all very much for participating in this conference call, and welcome back for the first quarter results on the 24th of March. Goodbye.
That does conclude our conference call today. Thank you for participating. You may now disconnect.