Thank you for standing by, and welcome to the 6 Month Results for 2013 Conference Call. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. And I would now like to hand the conference over to your speaker today, Niels Singer. Please go ahead, sir.
Thank you. Welcome to this telephone conference on the occasion of H&M's 6 month results for 2013. I have our CFO, Jyrki Tervonen with me and we'll be happy to your questions after the presentation. You will find the presentation slides for this telephone conference on hm.com. Please look at the slide Q2 2013.
It's been a challenging period for fashion retail in many markets. H and M sales grew strongly in Asia, for example, in China, Hong Kong and Japan. But in total, group sales were not satisfactory. This was mainly due to the tough macroeconomic climate that continued to affect market conditions in many countries as well as unfavorable weather in March and large parts of April in several of our large markets. Group sales increased by 5% in local currencies in the Q2.
On comparable units, sales decreased by 4% compared to the same period last year. The continued strengthening of the Swedish krona against most sales countries' currencies led to substantial negative translation effects both on sales and results. Translated into SEK, sales including VAT in Anandu to 36 €900,000,000 Just to illustrate the size of the effects, Sales would have been DKK 1,800,000,000 higher using the same exchange rates as last year. Reported net sales in SEK amounted to $31,600,000,000 in the 2nd quarter, unchanged compared to last year. Gross profit was $19,300,000,000 corresponding to a gross margin of 61.1 percent compared to 61.7% in the Q2 of 2012.
The largest reason for the difference was increased markdowns. The high stocking rate growing into Q2 in combination with unusually cold weather during spring led to higher markdowns than planned. Markdowns in relation to sales had a negative effect on the gross margin of 90 basis points compared to Q2 2012. Meanwhile, the combined effect from external factors such as cotton prices, cost inflation and the U. S.
Dollar was more or less neutral on purchases for the Q2 compared to the corresponding period the year before. If you look at the next slide, you can see how the gross margin has developed since the year 2000. Seen in a longer perspective, the gross margin in the Q2 of this year is still at a good level. Please return to the slide 2nd quarter. Looking at costs, SG and A increased by 5% to DKK 13 300,000,000.
In local currencies, the increase was 10%. The increase was entirely due to the expansion and to our investments in IT and online as well as and other stores, the new fashion brand. Although most of these large and long term investments have not yet generated revenue, we see them as wise and necessary in order to build these in stronger H and M. At the same time, tight cost control is very important and cost control remained good throughout the group also in the past quarter. Costs in comparable stores decreased compared to the Q2 last year.
Operating profit amounted to just above DKK 6,000,000,000 corresponding to an operating margin of 19%. Profit after financial items was €6,100,000,000 compared to €7,000,000,000 last year. Profits were negatively affected by increased markdowns, long term investments and substantial negative currency translation effects. After a tax rate of 24%, net profit amounted to DKK 4,700,000,000 that equals earnings per share of DKK 2.81 compared to DKK 3.15. And now looking at some other key figures.
Please turn to the Slide Q2 data. Stock in trade increased 12% in SEK and 16% in local currencies compared to the same time last year. The increase is mainly explained by the expansion, but also by the fact that sales did not increase as much as we had planned. The inventory level as of the 31st May was higher than planned, mainly due to the cold spring, but the composition of the stocking trade is satisfactory. Cash flow from current operations was DKK 11,200,000,000 up from DKK 10,700,000,000.
The increase is mainly due to lower tax payments early in the year. Investments in terms of CapEx rose to $3,400,000,000 from $2,600,000,000 dollars and consisted mainly of investments in new stores, but also in Knights and Logistics. The financial position of the group remains strong. Liquid funds amounted to €9,100,000,000 compared to 13,500,000,000 dollars Return on equity was 45% compared to 48% last year. And now some words on our expansion.
Please turn to the slide expansion. Our global expansion continues. Earlier this year, we ramped up expansion to around 250 stores net for 2013 from previously planned 325. We have opened more than 1 store per day this spring. We opened 98 stores in the 2nd quarter and we closed 8.
Today, we have more than 2,900 stores globally. We are increasing our presence in Asia, where we now have 200 stores in 6 countries. China is the single largest expansion market of the group, but we're also growing in Japan, South Korea, Singapore, Malaysia and Thailand. We're also expanding with our other brands, Kos, Monkey and Weekday. And we're, of course, looking at more countries in this exciting region.
We have a business model that enables us to grow deeply into each market as well as to expand successfully to new countries. In March, we took our first step to the Southern Hemisphere with the first H and M store in Chile. It was an amazing opening in Santiago de Chile with more than 2,500 customers queuing up at the flagship store in Costanera Center. Thus far, it is one of the best selling stores of the group. We see great potential for H and M to grow in Tampa's part of the world, and we are looking at other markets.
H and M is present in 49 markets across 5 continents. The first stores in Estonia, Lithuania, Serbia and Indonesia will open in the open. And next year, Australia will become a new market for H and M as we will open our 1st store in Melbourne. And we already see a great interest in H and M ahead of launch. Please turn to the next expansion slide.
H and N is also expanding online. In August, H and N will launch shop online in the U. S. In parallel, we continue our work on the rollout of online globally with the aim of adding more online countries in 2014. So we are growing with all our brands and especially with costs, which has had a very good development and is expanding from existing as well as in new markets.
We're also very happy with the fantastic start of our entirely new fashion brand and other stores. Please turn to the next slide. Since the launch on 8th March, customer response has been overwhelmingly positive throughout the spring. During the Q2, Another Stores has opened a total of 7 stores: London, Copenhagen, Stockholm,
Berlin,
Paris, Milan and Barcelona. We're looking forward to continued expansion. For example, the 2nd store in Berlin will open in the autumn. Shoponline at stories.com is available in 10 European markets and is also performing above expectations. The fantastic response by customers clearly shows that the long term work of developing in other stores has been the right thing to do.
In parallel, we are broadening the offering of the H and M stores. Juan, please turn to the next slide. H and M will launch a considerably extended and updated sports concept for women, men and children at the beginning of 2014. The new sports concept will be launched in H and M's existing online market and in selected H and M stores in around 15 countries to begin with. And now we're also delighted that H and M will dress the Swedish Olympic teams, both for the Winter Olympics and Paralympics in Sochi in 2014 and for the Summer Olympics and Paralympics in Rio de Janeiro in 2016.
Our design teams are developing these connections in close cooperation with the group of Swedish Olympians, including gold medal winners such as Trieste Olsamarsa and Anja Paschen. Our customers will also benefit from this R and D cooperation as the close for H and M's updated sports concept will also have been tested by the Olympic athletes. And now before we start the Q and A session, just a few words to summarize. After many years of boom in private consumption up until 2007, the recent years have been clearly tough for fashion retail, including the past 6 months in many of H and M's large markets. Still, we have performed relatively well.
We keep taking market share in most markets and we strengthen our position in customer service. H and M's business model works everywhere and allows us to grow deep into each market. So the potential to expand is huge. We're also making substantial long term investments that will generate large revenue in the future. Our position is strong and we have an attractive offering.
We see that sales in June have started well. Sales increased by 14% in local currencies from the 1st to 17th June compared to the same period last year. And we have strong collections and campaigns for the autumn. And now we're happy to take your questions.
And your first request from Richard Chamberlain from Bank of America. Please ask your question.
Yes, thanks very much. Good afternoon everybody.
Good afternoon.
Afternoon. So the first question I've got please, got 2 questions. First one is on the gross margin. You indicated in the statement that gross margin was down 60 bps, but you had a markdown impact of 90 bps. What was the balance, the plus 30 bps?
Was that coming from mix and pricing? Or is there something else driving that?
Well, as you know, the gross margin is affected by a lot of different factors. We'll say maybe 25, 30 different. So there isn't any 30 bps is really not something material.
Okay. So there was no one major factor then that's moving gross margin positive. Okay. And then second question is just on the current trading number that you gave for the 1st 17 days of June. Have you noticed an increase in the promotional activity so far in June in your major markets?
Well, the sales performance up to 17th June, it's a mixture, of course, of sales and full price selling. When looking at the different markets, we see quite heavy summer sales. And when looking at our own selling, we started the sales period more or less the same week as we did previous years. But coming back to the sales activities in different markets, it's quite big campaigns and reductions that we see.
Okay. So the timing, the calendar timing sounds about the same, but the depth of promotional activity sounds like a bit more than last year. Is that fair?
Yes. That's quite fair. We have started the sales in most of our countries the same week as we did last year. I think it's in certain clean countries, it's maybe delayed 1 week, but more or less the same starting point as last year.
And I'd like to add the depth varies a bit from country to country. What we see is of course aggregated for the group in total.
Right. Okay. So it would be more say here in the U. K. Than it would in Japan by the sounds of it as an example.
Yes. Okay. Okay. Thanks very much.
Your next question from Simon Bowler of Exane. Please ask your question.
Hi, gents. Just wanted to ask a quick on the long term investments you've been making. If I recall correctly at the start of the year, you stated these would be higher this year than they were last And also that the timing of the cost would be quite variable between the quarters. So I was just wondering with increased visibility you now seem to be having halfway through the year whether you can confirm it's still your view that investments will be higher year on year? And also how you expect that to play out between the first half and the second half?
It's still that the long term investment this year will be on a higher level than last year. Exactly how they will fall in Q3, Q4. But no major shifts between first and second half of the year. But on an aggregate level, this year, the investment will be on a high level.
Okay. And then at this stage, do you have any sense on whether these will continue into the next financial year? Or does that depend how they pay out across the second
half? They will continue also during 2014, but we have to come back to the levels when we are in connection with the year end closing.
Okay. Certainly. Thank you.
Your next question from Anne Critchlow of HJ and M. Please ask your question. Good afternoon. It's Anne Critchlow from SG. I had a question on China and Russia because it seems as if these countries are producing the weakest comparable sales figures as far as we can calculate.
Could you comment on those, please?
No, that's not correct. I think it's always difficult when you just look at the revenue increase and the non restored because we expand so much. It depends on what the stores opened in the quarter, etcetera. So now they don't have the weekend. As a matter of fact, China and Russia has a very good development.
Okay. Thank you. And just a quick comment also please on your sourcing. With the focus on Bangladesh, whether your cost of goods sold is likely to rise or whether you'll be shifting sourcing to other regions?
Well, the sourcing is something we always work on. And Bangladesh is one important country and China is still the most important sourcing country. And we always look at new markets, but it's not that we are going from one country to the other. And again, the sourcing there are so many factors in the sourcing where costs, of course, are important, but it's also fashion, it's quality, it's lead times, it's sustainability, etcetera. So but yes, we see an increase of salaries, of course, among the suppliers.
First of all, in China, of course, but also in countries like Bangladesh, where we actively contribute to this because for sustainable reasons, of course, everybody needs to be able to live on those salaries.
Okay. Thank you. Your next question from Eric Carlson of Ako Capital. Please ask your question.
Hello. Thanks for taking my question. I had a question on the online rollout. You indicated you will open several markets next year. Could you just tell us what gives you the increased confidence on that you will be able to accelerate this now?
And which markets do you think are the very most attractive to open online in? Thank you.
Well, this is, of course, one important element in the long term investments, and we are working intensively with preparations for global rollout. So that's why we have more confidence now in announcing that the ambition, at least, is to announce several countries already next year. But we will come back with more information about what markets they will be.
Thank you.
Your next question from Wayne Cooperman of Cobalt. Please ask your question.
Hi. I was just wondering if you comment on what the capital spending plans for this year and next year might be. And given the high dividend, if you would consider cutting the dividend or you'll just spend negative cash flow while you grow?
The CapEx for this year, when we went into this year, we said the capital expenditures will be somewhere between SEK 7,000,000,000 SEK 7,500,000,000. And now it leans more up towards the SEK 7,500,000,000 for this year. And when we 1,000,000,000 for this year. And when it comes to future dividends, that's clearly a question for the Board of Directors and finally a decision to be made in connection with the Annual General Meeting.
I mean, just in theory, Doug, are you guys okay paying out a high dividend and just having negative cash flow after CapEx? Or that's more of a Board question?
As I said, I think all these dividend questions, it's a question for the Board of Directors.
Your next question is from Jamie Merriman of Bernstein. Please ask your question.
Hi, good afternoon. Thanks very much.
Good afternoon. Good afternoon.
My questions are about some of your newer markets or where you're planning to launch. And I was just wondering if you could tell us a little bit about how you're thinking about the Southern Hemisphere collection, maybe what you've done from a personnel perspective to build out that launch? And then also from a distribution perspective, in launching the store in Chile, what distribution capabilities do you have for the region? And have you already also started in Australia along the same lines?
Okay. That was a few questions in one, but I'll try
to answer
as quickly as I can. If I start with the logistic question, since I was Head of Logistics prior to this position, I'm very proud of the logistic setup in the company, which is very, very scalable. And we have a very efficient logistics supply chain. And in South America, we work together with a 3rd party supplier.
Okay.
So it's outsourced. And obviously, if you look at the figures, we have had a great success with the first store in Chile and the customers have really they really appreciate H and M and our collections. And so we have now a solution for how to handle the reverse seasons. But exactly how we do it, I will not tell you, but obviously the customers can drop the season fashion and latest trends. And regarding Australia, we have signed one store in November and it's a fantastic site and we will come back to you about more details later.
Thanks very much.
You're welcome.
Your next question from Charlie Muir Sands of Deutsche Bank. Please ask your question.
Good afternoon.
Good afternoon.
Couple of questions on the gross margin and then on to Just
one at a time.
OpEx, yes. So on the gross margin, I think you've kindly in the past given us some indication as to what you think the outlook for aggregate external factors is. Do you think that they will be neutral or positive as we get into the second half of the year?
Yes. Let us make it clear. When we're talking about these external factors like cotton capacity, salaries, transportation and the currency effects mainly from the U. S. Dollar.
This when we're talking about these external factors, that's more or less what we are saying is spot prices and or market prices. Our prices can, of course, be something else. But for the coming quarters, we aggregate these 4, 5 external factors. The effect on our purchases would be then in Q3 neutral, maybe slightly negative and that also goes for the 4th quarter.
That's great. That's very helpful. And then on the OpEx, the first question is on your comments on same store costs being down year on year. Was that only or overwhelmingly because the volumes and the sales were down? Or is there a cost saving program?
So would they have been down anyway?
We have a really good cost control. It's one major part of our mindset within the group to be really cost conscious. And yes, in the comparable stores in the Q2, they were down in comparable stores, the operating cost. But one has to remember also that most of those operating expenses are more or less fixed on the short term that we can adjust and have some kind of flexibility staffing in the stores. But also there, it differs a lot from market to market.
Some markets, we have to set the schedules for 1 month ahead. Other markets, it's more flexibility. So of course, when having a quarter with a like for like development of minus 4, then it's really, really hard to balance it out in a quarter.
Yes, very clear. I suppose what I'm trying to get to the bottom of is, would is it sensible to assume that you're able to deliver declines in same store costs in the subsequent quarters because of ongoing cost saving initiatives or whether they were down in Q2 purely as a result of the weak revenues?
I think I tried to explain, we are always looking into the cost situation. We don't have any huge cost saving programs going on, except that we are always looking at traveling expenses. That's something that is going on even with the turnover development, which is better than minus 4% and like for like. So doing it both in good times and bad times, then you come out easier in the work.
That's very clear. And if I could just move on to the non like for like OpEx. Is the cost of opening new stores the same as it ever was? And the and therefore, this extra cost growth purely related to strategic initiatives? Or is there an element also of the cost of growth going up?
No. I think it's again, it's you can't give a simple answer on that. But obviously, it's much more costly to open a set up a new store in Chile than having a next store in Germany, right? But as I said, the increase in OpEx is expansion and the long term investments that we are doing.
Great. Thank you. That concludes my questions.
Your next question is from Christodoulos Chavia of Barclays. Please ask your question.
That was a good try. Hi, guys. Chris Ijara from Barclays. Two questions for me, one at a time. So you are talking about the continuation of the investments in fiscal year 2014, but I was interested in finding out the timing where you're going to see revenues going up because you have talked about investments actually yielding to higher sales.
But could you help us maybe with a couple of examples of the investment that you have done? What you expect and the time lag with that? Is it possible? Like I guess you have invested in the online platform, right, which you expect to get benefits as you launch online. Is this the main part?
Or what other parts could consist the revenue growth?
Yes. It's as you mentioned, online is one part which is starting to generate revenues. In August, we are opening the online sales in U. S. And as we said earlier in this conference call, we have the ambition to open several countries, online countries during 2014 that are exactly examples of long term investments that we have done the past 2 years, and now they are starting to generate revenues.
Another example is Another Stories. A third example is the broadening of our existing concepts like the sports concept. But until now, they have, of course, more or less, costed a lot of investment money. But we are so assured that this is the right and wise thing to do for us in the long term. And they will generate big revenues in the future.
That is a fair comment. But do you expect to for you to have to invest more in the online platform as you roll out in the new countries in 2014? Or should we consider that this investment is now done?
I think it will continue. Of course, each market we have to make some adoptions for legislative things. And as I said also, the long term investments for 2014 will continue, but exactly how what level that we have to come back to in connection with the year end. So it's not that we are just making a one time investment. It will continue, but it will be on a reasonable level.
It will be within our CapEx for years. So it's not a dramatic thing.
Okay, okay. That is fair. So my second question then is on the cash and the dividend. And I totally understand that you're not going to say what you're going to do with the dividend. That happens in January.
But you have commented in the past that you do like to above the 50% payout ratio, which is the norm, which you always exceed though, you like to give out to shareholders excessive cash. And your cash has been going down for at least 2 consecutive years now. There was another 30% down year on year this quarter. Is there a level of cash that you consider as non excessive? I.
E. There a threshold where you say that, you know what, we don't want to give more of our existing cash position? Is there such a level?
I think we're looking at a strong financial position. And I think that the most important is when looking at the cash situation is that we will be able to expand 10% to 15% per year and also have the opportunity to take opportunities with the rise up. I think that's the mindset when looking at the cash situation within the group. So I think that says a lot that if we have a long term goal to increase 10 to 15 stores and also to have the flexibility to take opportunities that might come up. So of course, we should have the funds for that.
Okay. Is the EUR 7,000,000,000 to EUR 7,500,000,000 the normal kind of CapEx level going forward, do you think? Should we assume something like that?
We will come back to the level for next year. This year, it most likely will land somewhere between, yes, more or less SEK 7.5 1,000,000,000. But as we said earlier, it's a moving target. It can go up and down. And when it comes to next year, of course, we still remain the expansion, 10 to 15 more stores next year, but we still are not negotiated the major part of them.
So what the capital expenditure will be 2014 that we have to come back to.
That's right. Okay. Thank you very much for that.
Thank you.
Your next question from Simon Irwin of Credit Suisse. Please ask your question.
Good afternoon, gentlemen. Firstly, just could you talk a bit more about LatAm? I mean, obviously, we've had one store opening in Chile and we've seen the numbers which look quite high. But obviously, judging by your comments, you're talking you're planning on opening kind of many more stores in many more markets. Given very high levels of import duties in Latin America, America, how do you price yourself in Chile?
How would you expect to kind of price yourself in other markets? And which other markets are you looking at?
We see definitely a big potential But you're right, I mean, each of the most countries in Latin America have difficult import barriers, etcetera, that we are, of course looking into. So unfortunately, I can't comment on when we will enter and price levels. But for us, it's always about having the best fashion quality, the best price in every market.
Do you
think you might have to source some product locally?
We are open. We're very pragmatic. And we have been sourcing in Latin America and Mexico before. So we don't rule out anything.
Okay. And can you just talk a little bit about your admin expenses, because they're obviously going up relatively fast at the moment while other costs are quite static. Firstly, are they predominantly krona oriented and headquartered kind of based? Or are they in a kind of broader mixture of currencies? And where is that money being spent?
The majority is Swedish based. It's our organization here in Stockholm. And as you know, we have a profit and loss where we have some functions going up in the cost of goods sold like the buying organization, logistics, etcetera. But the rest of the admin departments or functions in Stockholm, they will be there like IT, for instance, part of IT is there. So they are more Swedish crown based.
And so should we continue should we expect to see that continue at a similar level through the rest of this year?
Yes. I think we're looking at both the selling expenses and administrative expenses. We have a good cost control. And it's more or less reflecting the expansion that we have and all these long term investments When we are ramping up the long term investments or when we are building up a new concept, of course, we also need to look into the organization when it comes the administrative part.
Okay. And just one final one. The net interest income, the first half is down a third on the prior year. Are there any kind of
particular features within that?
So, if
you want to listen to the other drain?
No, it's a natural results from the fact that the liquid funds are lower and interest rates are lower.
Right. Thank you.
And your next question from Samantha County of Women's Wear Daily. Please ask your question. Hi, good afternoon.
I just wanted to know in the Q2 in terms of sales, were there any product categories, clothing, accessories, anything that were underperforming? I'm just curious, you talked about the weather, the seasonally cold weather, stock, etcetera, etcetera. But were there any did anything sort of flop or fall flat? Or what kind of feedback are you getting from the shop floor in terms of product and how popular the product has been?
No. We are happy with the collections and we see that it's mostly footfall traffic in the stores that have been weaker due to the weather and a macro.
Okay. But no products in particular that didn't do well. It's a footfall issue.
Absolutely.
Okay. Thank you.
Your next question from Richard Jaffel of Stifel New York. Please go ahead ask your question.
Thanks very much. And two questions. One is U. S. Centric.
How do you plan to build the inventory to support the online business? Will it be all the SKUs that are seen in stores? Or will it be an edited assortment? And then the second question relates to first, first, go ahead.
Yes. As it is right now, we it's the same products in stores and online in the existing eight markets, even though it's still not 100% mirrored in online. But we are working on expanding the offering also online. Today, I think it's just above 50% or something you can find online. And I guess that would be the start in the U.
S. As well. But I think that would develop over time.
And regarding South America and the different seasonality, do you have a separate line when you go into South America and then into Australia? Or is it last season's product being introduced to those markets to adjust for the weather?
We have developed a method of the process to supply the right mix to these markets. And so they can find seasonal products and the latest trends, but we don't go into detail exactly how we've sold it.
I understand. Thank you very much.
You're welcome.
Your next request from Rebecca McFarlane of Santander. Please ask your question. Yes. Hi, good afternoon, Rebecca. A couple of questions, please.
Firstly, on your CapEx, the EUR 7,500,000,000 full year guidance, if that's what we want to call it, implies a flat second half CapEx package despite an increased number of openings. So does that imply that with those sort of some forward CapEx in the first half or that there's some one off CapEx perhaps CapEx of 1 off nature in the first half? Or is it just a question of timing?
I think it's a matter of timing. The target of 7.5 percent is still there. But as Jyrki said, this is, of course, a moving target, could be even lower. This is the best estimation as of today.
Okay. But it's all of sort of a recurrent nature, yes?
Say again, please.
There's no sort of one off CapEx within the target. Okay. And secondly, could you just give us some idea of sort of comment on Bloomberg this morning about negotiating sourcing in renminbi or the eventuality. Could you give us a word or two on that, please?
Yes. Of course, we are looking into this, but there is nothing new to tell the market yet. No, there's nothing besides it.
Okay. But is it sort of an advanced stage or is it?
I don't want to comment. We will see.
Yes, we are looking into that. But as Niels said, nothing no decisions made. But let's see in the future if we start to also use the renminbi. But yes, nothing new to report on that.
All right. Thank you very much.
You're welcome.
Your next question from Niklas Afam from SEB Equities. Please go ahead.
Indeed. Thank you very much. Good afternoon. Two questions, one at a time. Firstly, I'd like to ask you about your performance, say, over the past half year or in the quarter, most recent quarter in terms of like for like.
Do you think you've actually been losing market share in say your key Nordic plus U. K, France markets, which is you think you've actually performed in line with the market or maybe even taking market share?
It's of course always very difficult to specify what is the market. It depends on how you define it. But I mean we have grown in the group with 5% in the 1st 6 months. And most of our markets where we're in have actually had declining markets. So in that perspective, we've taken market shares.
Of course, then there are some markets we've been stronger than others. And then also have to look at if you take the U. K. And the U. S, for example, where we meet very strong development from last year.
Could I also ask you a follow-up question on the like for likes recorded in say now in fiscal Q2 negative 4 ish? How does that break down in terms of footfall conversion rates and maybe price mix?
The main issue is the footfall. Our conversion rates are up and also the average receipts, but the footfall is down. That's mainly a footfall issue.
So once you got the customers in your store, they actually like what they saw? Can I ask you finally on the issue of currencies, given the quite negative translation effects that you've been experiencing now for some time in your P and O in particular, is there any discussion to actually change the currency of reporting at H and M?
No concrete. But of course, we have got the question several times and why don't you report in euros, etcetera. So of course, if we have had the euro based reporting, the development have been quite different during especially looking at the years where the Swedish krona has been strengthening. So I can't remember exactly, but when sometimes when we looked at 2,009, I think it was in Swedish kroner development from 2,009 to 2013 was something like 20%. And if we would have had euro as the reporting currency, I think it was around 50%.
So of course, that's how it goes when Swedish krona is strengthening and vice versa, of course. Okay. No concrete plans to change the reporting currency.
Anderson, thank you very much guys.
You're welcome.
Your next question from Richard Edwards from Citigroup London. Please ask your question.
Yes. Hi. It was a question on the U. S. Store portfolio.
I noticed you shut 7 stores in
the first half, which is more than
any of your other markets. I just wondered what drove those closures? Any themes you could pick out of that?
Yes. These were most of them were old stores and not so profitable. And in some cases, they were we had a better store across the street or in the same mall or whatever. So yes, no problem.
Should we still assume store openings for the year on a net basis? And if so, sort of give us rough sense of how many stores you might open this year in the States?
Well, we definitely we see a lot of store openings in the second half in the U. S. So we said that the U. S. Will it looks to be the 2nd largest expansion market this year.
And maybe I should add, just closing down stores, it's quite normal for us. If we find a better location, as Neil said, or we need more square meters or another reason. So it will always be a rotation in closing down some stores when it's coming up better locations.
Okay. Thank
you. Your next question from Dana Telsey of Telsey Advisory Group. Please go ahead.
Good morning, everyone. As you think about pricing and the components of the gross margin, how is inflation, raw material costs impacting future pricing going forward? And does it adjust regionally? Thank you.
Well, as Jyrki said before, if you look at all the if you aggregate the external factors as we follow, which includes also raw material like company capacity, batteries, transport, etcetera, They are roughly in the neutral or slightly negative for Q3 and Q4 as we see it today. But again, this is before we negotiate and before we work with improvements, efficiency gains, etcetera. So this is prevailing market prices and stock prices.
And just one other quick thing. On the newer concepts that you have versus the core H and M and online, qualitatively, do you see the returns of the business changing at all with online coming into the mix and how that contributes to the bottom line? Thank you.
We are very excited about online and the opportunities that creates for us. And for us, we see it not just as another channel. We see it as we talk about the seamless hopping and the multichannel. And that's why we are investing so much in this. It's one thing to just set up a pure online store, but we are really looking to make it integrated with the retail store, the physical stores.
And so from a marginal perspective, we don't see I mean, if you look at the online operations we have already in 8 markets in Europe, they're very successful and profitability is on par with the
recent operations.
Thank you.
Your next question is from Paul Rosington of HSBC. Please ask your question.
Good afternoon, gents. Good afternoon. Good afternoon.
I just got a question about your expansion profile from a store perspective. It just appears that you do not materially even though the U. S. And China might be your biggest markets of expansion from a single or 2 territories per store, you're not materially diluting your exposure to those core European markets, which are A, most challenging and B, where we might expect you to face the biggest threat from increasing competition. Is there some time frame or a target you're aiming for to reduce your exposure to the U.
K. Via sorry to Europe via expansion in some of these Asian or American markets? Can you give us any time line or percentage target of revenues somewhere?
No time line and no percentage target for revenues. But I mean this is very pragmatic that we see. Remember, we still have a huge potential to grow in Europe. And I think that's one of the strengths of the company and the business model that we can still expand in what you call mature markets perhaps. So we have a business model that works in big cities, smaller cities and midsized cities as well as shopping malls.
So there's a lot of potential for us to grow for many years in Europe. And on top of that, we can grow in new markets in the U. S. And Asia, etcetera. And of course, if you look at the opening so far this year, around 20% or something, 20%, 30% is actually happening in Asia and Russia and those some people call it emerging markets.
For us they're all new markets.
Okay. Thank you. You're welcome.
Your next question from Omar Saad from ISI Group. Please ask your question.
Thank you. Hi. I was wondering if you could discuss any changes that you're seeing either globally or regionally in the evolution of the competitive landscape. Are you seeing a lot of new entrants, whether it's bricks and mortars, fashion retailers or online fashion retailers? And are they having an impact in the marketplace?
We have to always be on our toes and try to improve things. And that's why continuous improvements is one very important value of the company. And we see, of course, obviously, online retailers coming to the market as well as new bricks and mortar players. But at the same time, we also see competitors going out of business. So I think all in all, I mean, it remains a very tough and competitive market and we can never relax.
But we see a lot of opportunities and we have great confidence in what we do.
Thank you.
And there are no further requests at this time. Please continue.
Okay. Thank you all very much for participating in this conference call, and welcome back for the 9 month results on the 26th September. Goodbye.
That concludes the conference for today. Thank you for participating. You may disconnect.