H&M PDF

Annual report 2018
Contents
H&M Group in brief 4
Comments by our CEO 6
Our brands 10
H&M 11
COS 12
Weekday 12
Monki 13
H&M Home 13
& Other Stories 14
Afound 14
ARKET 15
Cheap Monday 15
Markets and expansion 16
Five year summary 18
The H&M share 19
Corporate governance report including the board of directors 20
Auditor’s statement on the corporate governance report 34
Administration report including sustainability report 36
Financial reports 46
Group income statement 46
Consolidated statement of comprehensive income 46
Group balance sheet 48
Group changes in equity 50
Group cash flow statement 51
Parent company income statement 52
Parent company statement of comprehensive income 52
Parent company balance sheet 53
Parent company changes in equity 54
Parent company cash flow statement 55
Notes to the financial statement 56
Signing of the annual report 74
Auditor’s report 75
Calendar and contact details 78
H & M Hennes & Mauritz AB’s annual accounts and consolidated

accounts for the financial year 2017/2018 comprise pages 36–74.
H&M Conscious Exclusive, spring 2019. The collection is made of sustainable,

innovative materials including Piñatex®, made from cellulosic fibres extracted
from pineapple leaves, BLOOM™ Foam, a plant-based flexible foam using algae
biomass and Orange Fiber®, a silk-like fabric made from citrus juice by-products
and one of the previous winners of H&M Foundation’s Global Change Award.
See more at about.hm.com.
H&M GROUP IN BRIEF
H&M Group
We are a family of brands with a shared ambition to make great design available to everyone
in a sustainable way. Together we offer fashion, design and experiences that enable people
around the world to be inspired and to express their own personal style.
Our
values
We are one team
We believe in people
Entrepreneurial spirit
Constant improvement
Cost-conscious
Straightforward and
open-minded
Keep it simple
The H&M group is characterised

by the same entrepreneurial spirit
and values-driven way of working
that have defined our corporate
culture since the days of our founder,
Erling Persson. In the H&M group we
want everyone to be themselves,
and respect others for who they are.
Together our shared values create
an open and down to earth culture
where everything is possible.
More about how we strive for diversity and
inclusion on pages 44–45 and at about.hm.com.
4
H&M GROUP IN BRIEF
Our transformation work

Changing consumer behaviour and technological innovation will continue to transform
how and when people shop. We are building a business with the flexibility to respond to this
constant evolution. The H&M group is taking advantage of the opportunities created by the Our
digitalisation of our industry to meet customers’ new expectations. We are integrating
the physical stores with the online stores, and we are exploring the strength of our global brands
brand in combination with local relevance and more personalised communication. Our brands all have their own unique
Read more about our strategic focus areas on pages 6–8. identity. Together they offer a wealth
of styles and trends in fashion, beauty,
accessories and homewares as well as
cafés focusing on modern, healthy food.
The H&M group includes the brands
H&M, COS, Weekday, Cheap Monday,
Our sustainability strategy Monki, H&M Home, & Other Stories,
ARKET and Afound.
The H&M group wants to lead the change towards a circular, fair and equal fashion industry.
See our brands on pages 10–15.
We are using our size to drive transparency throughout the value chain. With a long-term
approach we can promote innovations for a circular economy. One of our goals is to
be climate positive across the value chain by 2040.
Read more about our sustainability work on pages 42–45 and at sustainability.hm.com.
47 Cotton from
95%
online markets
including 4 new sustainable sources
We aim for 100 percent sustainable
markets in 2018 cotton in our brands’ own assortments 59%
by the year 2020. In 2018 we reached
95 percent, an increase from 59 percent
in 2017. This is an important step 43%
towards our overall materials goal:
34%
Our markets to use only recycled or other
sustainably sourced materials by 2030.
We are expanding online, through In 2018 the share of sustainable 22%
physical stores and digital marketplaces. materials increased to 57 percent
The global roll-out of online continues, from 35 percent in 2017.
with the ambition to offer online in all our Read more about our sustainable materials on
71 markets and in other markets too. page 43 and at sustainability.hm.com.
See market overview on pages 16–17.
2014 2015 2016 2017 2018
210 Online sales +21%

billion Swedish kronor
in local currencies in 2018
in net sales in 2018
1947
Erling Persson opens the womenswear store Hennes with the idea of making fashion available and affordable for everyone. This store
in Västerås, Sweden, would soon be followed by more. Today the H&M group inspires people around the world to dress their personal style.
Continue the journey through our history at about.hm.com.
5
COMMENTS By OU R CEO
Comments by our CEO

2018 was challenging for the H&M group, but the year ended with positive signals
showing that we are on the right track. Our transformation work is now continuing at full speed
to make us even better for our customers.
The rapid transformation of fashion retail group’s brands. As part of this, we have given our customers even better
continues, and 2018 was a challenging prices and quality. Increased full-price sales, more returning customers
year for us as well as for the industry. and greater customer satisfaction all confirm that these improvements
Digitalisation is rapidly changing consumer are appreciated.
behaviour. Competition is intense, with
the arrival of new players and business 95% sustainable cotton in 2018
models, and customers’ expectations are We have also added value for our customers through our sustainability
changing. With more and more shopping initiatives, such as increasing the use of sustainable materials in our rang-
taking place online the retail landscape es. By 2020 a full 100 percent of the cotton used by our own brands is to
is being reshaped, also changing the role come from sustainable sources. In 2018 a total of 95 percent of our cot-
of stores. Against this backdrop we ton came from sustainable sources – up from 59 percent in 2017. This is
accelerated the H&M group’s transfor- an important step towards our overall materials goal: to use only recycled
CEO Karl-Johan Persson.
mation during the year to ensure long- or otherwise sustainably produced materials by 2030. We also aim to be
term positive development for the company. climate positive throughout the value chain by 2040.
After a difficult first half, the group’s transformation work started to
take effect and we ended 2018 with clear signals that we are on course.
We built momentum through the year with sales growth of 3 percent in
local currencies for the full year and 6 percent in the fourth quarter. Online
sales developed well, increasing by 21 percent over the full year.
MORE FULL-PRICE SALES

Sales in the fourth quarter were driven by more full-price sales and lower
markdowns. This is one of a number of signs that customers appreciate
the improvements we are making to the product assortment regarding
design, quality, price and sustainability. While inventory levels were up
year-on-year, the inventory situation improved in the fourth quarter com-
pared with the third quarter – in terms of both level and composition.
This sequential development is a result both of stronger collections and
of the improvements of our buying and logistics processes.
As we look back, we can see that we did not reach the goals we set
for the year. While we are obviously not content with that, it must be
viewed in the light of the rapid transformation of the industry and an
even tougher market than we had anticipated, as well as issues in con-
nection with the implementation of logistics systems during the year in
some important markets which led to higher costs. To secure upcoming
transitions of logistics systems and the replacement of the online plat-
form in Germany, there were additional costs in the fourth quarter. While
this had a negative impact on earnings, it will lead to a range of improve-
ments for our customers.
The H&M group is increasing the use of recycled
STRATEGIC FOCUS AREAS and otherwise sustainably sourced materials.
We are driving the transformation in a number of focus areas that we see
as strategically important for taking the H&M group to a new level. These
focus areas are: create the best customer offering; make sure we have
a fast, efficient and flexible product flow; secure a stable and scalable
infrastructure – our tech foundation; and adding growth by expanding
through stores, online and through digital marketplaces. Our size and our long-term approach mean we can support innovative
We are making progress in all these focus areas and I would like to sustainable solutions, including the development of new textile fibres,
take this opportunity to thank all our colleagues in the H&M group for collaborating with partners to help make the innovations scalable. We
such amazing commitment and great teamwork. It is very important that also use our size and position to drive increased transparency through-
we keep up the fast pace of change that characterised our work in 2018. out the value chain, which is increasingly important to today’s customers.
Our sustainability work is rooted in our values-driven way of working
CREATE THE BEST CUSTOMER OFFERING and is an integral part of the H&M group’s business. We are therefore
By far the most important aspect of our work to create the best customer very happy that the Ethisphere Institute has named the H&M group as
offering is to constantly improve the product assortment for all the one of the 2019 World’s Most Ethical Companies.
6
An inspiring and convenient shopping experience INVESTMENTS IN OUR TECH FOUNDATION

We are also improving the shopping experience for our customers, both Our investments in IT and our tech infrastructure continued in parallel
online and in physical stores. H&M is testing out various changes to en- with this. In January 2019 we completed the transition to our new online
hance the store experience. Again, the positive response from custom- platform globally when we successfully replaced the platform in
ers can be seen in higher levels of customer satisfaction and increased Germany, our biggest and most important market. This means that all
sales. In parallel with evaluating these tests as they are carried out, we H&M’s online markets are now on the new platform, enabling further
are gradually rolling out the best-working solutions as we upgrade stores improvements to the shopping experience for our customers.
and open new stores. We are also implementing new logistics systems, and this remains to
be done in a number of markets. In 2018 problems arose in connection
with the implementation of new logistics systems in the US, France, Italy
and Belgium, which had a negative impact on the group’s results. Apply-
ing the lessons learned, we increased investments in the fourth quarter
to secure upcoming transitions in 2019.
With the transformation now well under way, capital expenditure will
reduce in 2019. At the same time, digital investments will continue to
increase as a share of capex. We will continue to invest so that we can
accelerate the development of customer-facing technologies and be
innovative with technology wherever the customers are.
NEW GROWTH
We continue to grow. Store expansion will focus on growth markets and
in 2019 we plan to open a total of around 335 new stores, 240 of which
will be H&M stores. These will be mainly in markets outside Europe and
the US. Alongside this we are intensifying the optimisation of our store
Mobiles are key when integrating physical stores with online shopping.
Visual Search is one of the digital services now available in many markets. portfolio, which involves closures, renegotiations, rebuilds and adjust-
ments to store area to ensure we have the right store portfolio in each
market. The shift in the industry is also opening up for improved lease
terms and the H&M group has opportunity to renegotiate nearly 1,000
store leases in 2019. We will be closing around 160 stores during the year,
H&M is one of the most visited fashion sites in the world. We have up- resulting in a net addition of approximately 175 new stores for the group.
graded hm.com and H&M’s mobile app, improving navigation and prod- In parallel with greater integration of stores and online, H&M opened
uct presentation. We are introducing more payment options, shortening online in four new markets in 2018 and today has 47 online markets. In
delivery times and adding new digital services that make shopping easy 2019 Mexico will be added as an online market, as well as Egypt via fran-
and convenient. The global integration of physical stores and online con- chise. Work is continuing at full speed to roll out online globally to all
tinues. More and more markets are offering online returns in store and H&M’s existing markets in the future and to other markets as well.
Click & Collect. Services like Scan & Buy, In-store Mode and Find in Store In China, which is one of our biggest markets, H&M was launched on
let customers move seamlessly between channels. Tmall in spring 2018 to a fantastic reception. Monki and H&M Home are
also on Tmall, where COS too opened in 2018 with a very successful
H&M Club doubles its membership launch during the autumn. As the world’s largest e-commerce platform,
Another part of our improved customer offering is the further Tmall is an important complement to our own channels since it makes
development of H&M Club, the digital loyalty programme that is being
made available to more and more customers. In 2018 the number of
members doubled from 15 million people to more than 30 million. We
are aiming for a big increase again in 2019 as H&M Club is launched in
another seven markets.
FAST, EFFICIENT AND FLEXIBLE PRODUCT FLOW

We are also continuing to invest in the supply chain. In the fourth quarter
we opened three new fulfilment centres with a total logistics area of
around 230,000 square metres: in Kamen in Germany and in Stryków
and Bolesławiec in Poland. We also automated the fulfilment centre in
Poznań in Poland. This increased capacity will resolve the capacity con-
straints that slowed us down in some markets in 2018. These invest-
ments will also allow for a broader range of products and faster deliveries
in a number of markets, including Germany.
We will also add new logistics centres in 2019: in the latter part of the
year we plan to open a new logistics centre in Madrid and another just
north of London. We have also started a project to establish a high-tech
logistics centre on the US West Coast in 2020.
Artificial intelligence (AI) is increasingly important in supporting the
operations, ensuring a fast and flexible product flow. Thanks to our verti-
cally integrated business model we are able to build an AI model with al-
gorithms designed to address the entire product flow: from trend detec-
tion to quantification, allocation, pricing and personalisation. We are also
developing our internal processes by differentiating our buying accord-
ing to product type. It means we can be more precise in our buying and
Successful launch of H&M on Tmall
cut our leadtimes; this, too, enabling increased sales, lower markdowns in China in spring 2018.
and less capital tied up.
7
INITIATIVES FOR AN IMPROVED CUSTOMER EXPERIENCE

Enhancing the customer experience is an important part of the H&M
group’s transformation work. Various improvements have been made
throughout the supply chain – from product development to the shop-
ping experience, as well as the integration of physical stores and online,
to give customers a seamless and inspiring shopping experience.
Some examples of digital services as well as tests and initiatives in

stores are presented below:
– Upgrading of hm.com and the H&M app, where improvements are
at various stages of progress and encompass navigation, product
presentation and payment options. Mobiles are key to the increased
Afound was launched in June 2018. A close-knit team
ready to welcome customers at the opening of the first store integration of digital and physical channels.
on Drottninggatan in Stockholm.
Visual Search is available in 29 markets and uses image
recognition to help customers move directly from inspira-
VISUAL
SEARCH
tion to purchase by making recommendations based on
pictures that the customer has taken or been inspired by.
Scan & Buy is available in all 47 online markets. The cus-
our brands accessible to even more customers. We are also evaluating tomer scans the QR code on an item in store to find the
SCAN-AND -
other marketplaces around the world to see whether they fit in with our BUY size and colour they want online.
long-term strategy.
Find in Store is now available in 18 markets. This func-
DEVELOPING NEW BRANDS tion lets customers use their mobile to find an item they
We continue to grow through our other brands in the H&M group: COS,
FIND - IN - have seen online in the right size and at the right store.
STORE
Weekday, Monki, & Other Stories, H&M Home and ARKET, as well as our More markets will be added in 2019.
latest initiative Afound, which had a very successful launch in Sweden in In-Store-Mode is available in Sweden, Denmark, UK and
June 2018. Afound is a new type of outlet offering hundreds of well- Ireland. This mobile service shows customers which
known fashion and lifestyle brands at a reduced price – both external IN - STORE- items are in the store they are currently in as well as online.
MODE
brands and the H&M group’s own. To be launched in more markets in 2019.
Several of our brands are already globally established and yet are just
Click & Collect is available in 7 markets where custom-
at the beginning of an exciting journey. Each brand continues to develop,
ers can pick up the products bought online in store.
and we see good growth opportunities for all of them. As always, it is a CLICK &
COLLECT A further 10 or so markets are planned for 2019.
matter of prioritising where we invest. At the end of 2018 we communi-
cated that we will be closing down Cheap Monday in 2019. Cheap Monday Online returns in store is available in 15 markets.
has a traditional wholesale business model, which is a model that has ONLINE Continued roll-out of this service is planned to several
RETURNS IN
faced major challenges due to the ongoing shift in the industry. Closing it STORE more markets in 2019.
down is part of our transformation work in which we are prioritising and
– Next day delivery is offered in 11 markets including Germany, the US,
focusing on our core business.
UK and Sweden. Same day delivery is being evaluated in certain of
these markets with planned launch in a further 6 or 7 markets in 2019.
LOOKING AHEAD
New consumer behaviours and rapid technological development will – Perfect fit is an app that H&M is testing in Sweden in 2019. The app
continue to transform how and when people shop. We are building a allows customers to create a digital avatar based on selfies taken on
business with the flexibility to respond to this constant and rapid evolu- their mobile, allowing the customer to try items on virtually to find
tion. The H&M group has the long-term perspective and financial the right size and fit when shopping online.
strength to take advantage of the opportunities that are arising. We have – In partnership with Google, in 2018 H&M Home developed a voice
further to go and there will continue to be challenges ahead. It is a vola- app – H&M Home Gift Guide. The first of its kind, it allows custom-
tile market that is becoming increasingly complex, with competition ers to make a purchase entirely through the voice app.
becoming more and more intense. The transformation that we and the
industry are going through is humbling, but the progress we have made – Global expansion of RFID (Radio Frequency Identification), with
within our strategic focus areas gives us the confidence to move ahead continued roll-out from 12 markets in 2018 to more markets in 2019.
at full speed. RFID technology means items with a digital price tag can be located
quickly, to get precise information on an item’s availability.
– 3D technology is now used in the design process for several product
groups, enabling streamlining of the process and less material being
used. New technology, training and a physical 3D studio have been
implemented.
– H&M has created Take Care, currently in stores in the UK, France,
Sweden and Norway. Take Care provides everything customers
Karl-Johan Persson, CEO
need to repair, remake and freshen up their clothes, shoes and
H & M Hennes & Mauritz AB
accessories.
The H&M group collects old clothes and home textiles,
from any brand and in any condition, for reuse and recy-
GARMENT
COLLECTING
cling. In 2018 customers brought in 20,649 tonnes of
textiles to stores globally – up from 17,771 tonnes in 2017.
8
OUR BRANDS
Our brands
The H&M group’s brands each have their own unique identity. Together they offer
customers around the world a wealth of styles and trends in fashion and design.
The H&M group includes the brands H&M, COS, Weekday, Monki, Cheap this is reflected in increased use of recycled and other sustainably
Monday, H&M Home, & Other Stories, ARKET and the latest addition produced materials in the garments.
Afound, which is a new type of outlet with stores and a digital market- Increased digitalisation in society is rapidly changing customers’
place. Afound was very positively received at its launch in Sweden in expectations, creating new consumer behaviours and shopping patterns.
June 2018. To keep the brands relevant in a fast-changing world the H&M group is
Each brand within the H&M group has its own profile and unique iden- taking advantage of its size and local presence in combination with the
tity, so they complement each other well. Together they offer customers opportunities created by the digitalisation of the fashion retail industry.
a great variety of styles and trends at various price points in fashion, Physical and digital channels are being integrated to make it easy for
beauty, accessories and interiors, as well as cafés with a focus on modern, customers to move between stores and online. New technology, advanced
healthy food. analytics and automated processes are helping to enhance the customer
All the brands share the same passion for design, quality and best price, experience. AI is being used to support decision making and complement
along with the ambition to operate in a sustainable way. Sustainability the creative process, for example, as well as in other areas. The H&M
and increased transparency are of great importance to today’s engaged group is developing an AI model designed to address several areas includ-
and conscious customers. The H&M group has a circular approach, and ing trend detection, quantification, allocation, pricing and personalisation.
10
OUR BRANDS
H&M is present in 71 markets – 47 of which also offer online sales –

and has collections for women, men, teenagers, children and babies.
H&M is a fashion brand, offering

the latest styles and inspiration for
all — always. Customers will find
everything from fashion pieces
and unique designer collaborations
to affordable wardrobe essentials,
complete-the-look accessories
and motivational workout wear.
All seasons, all styles, all welcome!
But H&M is more than just fashion.
With price, quality and sustain-
ability deeply rooted in its DNA,
H&M Club is attracting more and more customers. Today this digital loyalty programme
is in 16 markets, with a further seven planned for 2019. H&M is not only a possibility
for everyone to explore their
personal style, it also offers a
chance to create a more sustain-
able fashion future. Visit hm.com
for more information or follow
@HM for daily inspiration.
hm.com
Image recognition is one example of H&M’s digital functions

– as is #HMxME, which lets customers share their best-loved H&M pieces.
In more and more markets the H&M app can also be used in store
as a digital shopping tool.
H&M is testing out various enhancements to the store experience and ways of creating
a modern, inspiring store feel, such as at H&M Hammersmith in London.
11
OUR BRANDS
COS offers reinvented classics and less capsule menswear collection,

wardrobe essentials for women, through choreography by Wayne
men and children. Designed to McGregor during the Pitti Uomo
live beyond the season, the collec- event in Florence.
tions merge lasting quality with COS’ expansion continued in
timeless design. Committed to 2018 with its first stores in Russia
supporting the world of art and and, via franchise, Thailand, Leba-
design through collaboration, COS non and Saudi Arabia. It also
partners with established and opened online in China, where
emerging artists, studios and gal- COS was also very well received
leries globally, creating unique on the e-commerce platform
brand projects alongside the sea- Tmall. COS is offered online in 21
sonal fashion collections. In 2018 markets globally and in 270 stores
COS presented Soma, a season- in 41 markets.
cosstores.com
Weekday is a Swedish denim and fashion brand influenced by youth

culture and street style. Founded in 2002, Weekday currently ships to
18 markets and has 38 stores in 10 countries, offering a unique retail
experience and a curated mix of women’s and men’s assortments as
well as a small selection of external brands. Weekday has been part of
the H&M group since 2008.
weekday.com
12
OUR BRANDS
In summer 2018 the collaboration Monki x HoloMe

tested human holograms in augmented reality, accessible
through a smartphone or tablet, allowing the user to view
the garments in detail and experience the holograms as
being present in the room.
H&M Home is a design-driven inte-

rior brand, offering fashion-forward
decor and accessories for every
room and style. The assortment
ranges from high-quality bedlinen
and timeless dinnerware to stylish
textiles, furniture and lamps; with
contemporary style and attention
to detail at its core. By merging
modern design and quality with
affordable prices, H&M Home ena-
bles interior lovers across the world
to create their dream homes.
In 2018 H&M Home also opened H&M Home was launched online
standalone stores, including in as a home textile concept in 2009.
Hamburg, Germany.
The assortment has been extended
October 2018 saw the launch of All the Feels, a campaign that opened up
the conversation about the effects social media use can have on young throughout the years and rolled out
people’s mental health. in many markets. Today, H&M Home
is available mainly in shop-in-shops
in H&M stores and online, and is
Monki is a storytelling brand that offers great fashion at competitive also expanding through standalone
prices, aiming to be kind to the world and the people in it. The brand H&M Home stores.
mixes Scandinavian cool with creative street style and is all about
being brave, friendly and fun while empowering young women to stand hm.com/home
up for themselves – and others. Besides shopping online in 19 markets,
customers can experience Monki in 127 stores in 16 markets.
monki.com
13
OUR BRANDS
& Other Stories offers a wide & Other Stories is present with
range of shoes, bags, accessories, 70 stores in 17 markets in Europe,
beauty products, stationery and the US and Asia along with an
ready-to-wear for women. In online store at stories.com in 15
design ateliers in Paris, Stockholm markets. In 2018 & Other Stories
and Los Angeles, & Other Stories launched a new product category
creates collections with great – Hair care, inspired by Los Angeles.
attention to detail and quality. New markets were Kuwait via fran-
Successfully launched in 2013, chise and Austria.
stories.com
Afound is a new type of outlet that

offers hundreds of well-known
fashion and lifestyle brands for
women, men and kids – always
at a reduced price. With physical
stores and a digital marketplace,
Afound presents a hand-picked
and curated assortment in many
price segments to suit your per-
sonal style.
Afound was launched in June
2018 with its first store in Stock-
holm and online in Sweden. During
the year four more stores opened,
in a total of four Swedish cities.
afound.com
14
OUR BRANDS
ARKET is a modern-day market

offering essential products for
men, women, children and the
home. ARKET’s mission is to de-
mocratise quality through widely
accessible, well-made, durable
products, designed to be used
and loved for a long time. ARKET
opened its first store on Regent
Street, London in August 2017 as
well as online in 18 European mar-
kets. Today ARKET has 16 stores
in the UK, Sweden, Germany, Den-
mark, Belgium and Netherlands.
The head office and design studio
is located at Maria Skolgata 83 in
Stockholm.
arket.com
Most ARKET stores include a café, based on

the New Nordic Food Manifesto.
Information at arket.com tells customers the factory

in which the product was made.
Skinny jeans have been Cheap retailers. This traditional wholesale

Monday’s trademark since the business model has faced major
brand started in 2004 when its first challenges due to the ongoing ex-
fit ‘Tight’ hit the market. During the tensive change of the fashion retail
years, the brand has offered a full industry. As a result, Cheap Monday
range of denim and collections for will be closed down in 2019. See
men and women, which have been also page 36.
offered mainly through selected
15
M A R K E T S A N D E X PA N S I O N
Market count per brand
BRAND NEW STORES NUMBER OF NUMBER OF NUMBER OF

(NET) DURING STORES MARKETS MARKETS
THE YEAR 30 NOV 2018 WITH STORES WITH ONLINE
145 4,433 71 47
39 270 41 21
5 38 10 18
*
-2 1 1 18
8 127 16 19
** 8 8 50 40
10 70 17 15
11 16 6 18
5 5 1 1
* Cheap Monday will be closed down in 2019. Se also page 36.

** H&M Home is present with shop-in-shops in 362 H&M stores and has 8 standalone stores.
In the 2017/2018 financial year H&M opened online in four new markets: a new store market for COS and Monki, and Kuwait for & Other Stories
in India and via franchise in Kuwait, Saudi Arabia and the United Arab and Monki. & Other Stories opened its first store in Austria, while
Emirates, where H&M Home also became available online. Today H&M Weekday opened in Finland and ARKET opened stores in the Nether-
is online in 47 markets. The year saw the opening of the first H&M stores lands and Sweden.
in Ukraine and Uruguay. H&M Home was launched in Ukraine, Chile and For 2019 the first H&M stores in Bosnia-Herzegovina and Belarus are
Iceland, and via franchise in Morocco. planned, and via franchise in Tunisia. In 2019 COS, Weekday and Monki will
In China H&M was also successfully launched on Tmall, as an addition open stores in Iceland. COS will also open in Lithuania, while Luxembourg
to H&M’s own online presence and existing stores in China. H&M Home becomes a new store market for Weekday and & Other Stories. In total,
and COS were also launched on Tmall in 2018. COS also opened online at around 175 new stores net are planned for the H&M group in 2019.
cosstores.com in China. The online expansion will continue during the year as H&M opens online
COS’ first store in Russia opened in 2018, while Thailand and Lebanon in Mexico and via franchise in Egypt. Norway will become a new online
were added via franchise. Likewise via franchise Saudi Arabia became market for COS, Weekday, Monki, & Other Stories and ARKET in 2019.
16
M A R K E T S A N D E X PA N S I O N
Market overview
MARKET NET NET NEW NUMBER MARKET NET NET NEW NUMBER
SALES SALES STORES OF SALES SALES STORES OF
2018 2017 (NET) STORES 2018 2017 (NET) STORES
(SEK M) (SEK M) DURING 30 NOV (SEK M) (SEK M) DURING 30 NOV
THE YEAR 2018 THE YEAR 2018
Germany* 32,367 30,959 5 468 Portugal* 1,179 1,075 32
USA* 24,798 26,330 42 578 Malaysia* 1,177 1,109 3 47
UK* 13,760 12,622 12 304 Ireland* 1,104 961 24
France* 11,311 11,383 -3 237 Philippines* 1,007 926 2 34
China* 10,743 9,484 24 530 South Africa 842 780 6 23
Sweden* 8,404 8,236 3 175 Singapore* 801 899 -1 12
Italy* 7,630 7,525 4 179 Peru 763 725 3 11
Spain* 7,373 6,816 -3 172 Slovakia* 750 616 3 25
Netherlands* 6,465 6,191 -1 144 Croatia* 719 685 1 16
Russia* 5,737 4,915 5 139 Bulgaria* 635 581 1 21
Poland* 5,285 4,402 11 186 Taiwan* 627 742 12
Switzerland* 5,145 5,471 100 Slovenia* 488 452 -1 12
Denmark* 5,045 4,639 3 113 Serbia 423 363 1 13
Norway* 4,964 4,900 2 130 Luxembourg* 406 408 10
Austria* 4,901 4,666 2 88 Colombia 405 188 1 4
Japan* 4,573 4,469 9 91 Estonia* 381 350 2 12
Canada* 4,569 4,291 3 94 Latvia* 356 326 8
Belgium* 3,815 3,726 -1 96 Lithuania* 351 324 9
Mexico 2,854 1,988 8 45 New Zealand 284 183 1 4
Turkey* 2,852 2,962 -2 68 Vietnam 271 63 4 6
Finland* 2,412 2,295 3 67 Kazakhstan 203 158 3
Romania* 2,299 1,979 56 Iceland 192 76 1 3
Australia 2,283 2,383 12 44 Macau* 120 135 2
South Korea* 1,957 1,807 5 46 Georgia 102 7 1 2
Greece* 1,718 1,576 35 Puerto Rico* 80 91 2
Hungary* 1,646 1,402 2 47 Cyprus* 79 80 1
Czech Republic* 1,610 1,341 2 52 Uruguay 64 1 1
Hong Kong* 1,502 1,663 -2 26 Ukraine 57 2 2
Chile 1,488 1,250 5 13 Franchise** 5,620 4,938 36 255
India* 1,408 1,092 12 39 Total 210,400 200,004 229 4,968
* Market with online sales.

** United Arab Emirates*, Kuwait*, Qatar, Saudi Arabia*, Egypt, Bahrain, Oman, Lebanon, Israel, Morocco, Jordan, Thailand and Indonesia.
17
FivE yEAR SummARy
Five year summary
1 DECEMBER – 30 NOVEMBER
FINANCIAL YEAR 2018 2017 2016 2015 2014
Net sales, SEK m 210,400 200,004 192,267 180,861 151,419

Change from previous year in SEK, % +5 +4 +6 +19 +18
Change from previous year in local currencies, % +3 +3 +7 +11 +14
Operating profit, SEK m 15,493 20,569 23,823 26,942 25,583

Operating margin, % 7.4 10.3 12.4 14.9 16.9
Depreciation and amortisation for the year, SEK m 9,671 8,488 7,605 6,399 5,045
Profit after financial items, SEK m 15,639 20,809 24,039 27,242 25,895
Profit after tax, SEK m 12,652 16,184 18,636 20,898 19,976
Cash and cash equivalents and short-term investments, SEK m 11,590 9,718 9,446 12,950 16,693
Stock-in-trade, SEK m 37,721 33,712 31,732 24,833 19,403
Equity, SEK m 58,546 59,713 61,236 58,049 51,556
Number of shares, thousands* 1,655,072 1,655,072 1,655,072 1,655,072 1,655,072

Earnings per share, SEK* 7.64 9.78 11.26 12.63 12.07
Shareholders’ equity per share, SEK* 35.37 36.08 37.00 35.07 31.15
Cash flow from current operations per share, SEK* 12.86 13.04 14.36 14.54 14.60
Dividend per share, SEK 9.75** 9.75 9.75 9.75 9.75
Return on equity, % 21.4 26.8 31.2 38.1 41.3

Return on capital employed, % 21.2 31.0 39.2 49.3 53.1
Share of risk-bearing capital, % 53.5 61.0 67.1 72.7 72.5
Equity/assets ratio, % 49.3 56.0 62.1 67.6 68.2
Total number of stores 4,968 4,739 4,351 3,924 3,511
Average number of employees 123,283 120,191 114,586 104,634 93,351
* Before and after dilution.

** Proposed by the board of directors.
For definition of key figures see page 72.
18
ThE h&m ShARE
The H&M share
KEY RATIOS PER SHARE 2018 2017 2016 2015 2014
Shareholders’ equity per share, SEK 35.37 36.08 37.00 35.07 31.15
Earnings per share, SEK 7.64 9.78 11.26 12.63 12.07
Change from previous year, % -22 -13 -11 +5 +17
Dividend per share, SEK 9.75* 9.75 9.75 9.75 9.75
Share price on 30 November, SEK 167.64 197.10 267.90 323.50 319.40
P/E ratio 22 20 24 26 26
* Proposed by the board of directors.
DISTRIBUTION OF SHARES, 30 NOVEMBER 2018

AVERAGE SHARES PER
SHAREHOLDING NO. OF SHAREHOLDERS % NO. OF SHARES % SHAREHOLDER
1–500 198,037 80.7 25,150,181 1.5 127

501–1,000 22,491 9.2 17,766,768 1.1 790
1,001–5,000 19,830 8.1 44,111,097 2.7 2,224
5,001–10,000 2,530 1.0 18,437,742 1.1 7,288
10,001–15,000 745 0.3 9,372,248 0.6 12,580
15,001–20,000 468 0.2 8,321,183 0.5 17,780
20,001– 1,326 0.5 1,531,912,781 92.5 1,155,289
Total 245,427 100.0 1,655,072,000 100.0 6,744
PRINCIPAL SHAREHOLDERS, 30 NOVEMBER 2018 NO. OF SHARES % OF VOTING RIGHTS % OF TOTAL SHARES
The Stefan Persson family and related companies 769,332,211 74.0 46.5
State Street Bank and Trust 116,884,962 3.4 7.1
The Lottie Tham family and related companies 88,880,400 2.6 5.4
Swedbank Robur Fonder 34,164,694 1.0 2.1
Alecta Pensionsförsäkring 32,308,000 1.0 2.0
The Fourth Swedish National Pension Fund (AP4) 22,522,252 0.7 1.4
Nordea investment Funds 20,108,830 0.6 1.2
Clearstream Banking S.A. 19,991,163 0.6 1.2
AMF – Försäkring och Fonder 19,803,353 0.6 1.2
Livförsäkringsbolaget Skandia 15,678,099 0.5 0.9
Development of the h&m share price in SEK over the past 10 years.
400
300
200
100
0 SOuRCE CiSiON/miLLiSTREAm
Jan 1, 2009 2011 2013 2015 2017 Jan 1, 2019
For more information see the investor relations section at about.hm.com.
19
C O R P O R AT E G Ov E R N A N C E R E P O R T 2 0 1 8
Corporate governance report 2018

H & M Hennes & Mauritz AB
Good and sound corporate governance ensures that companies are managed as sustainably, responsibly
and efficiently as possible in the interests of the shareholders. It is a matter of complying with external regulations
and doing the right thing. In the H&M group, our values and global policies and guidelines are important tools in
our approach to the world around us. Our Code of Ethics, which is signed by all our employees who have business
relationships and by all business partners, clearly states our approach to doing business. Acting consistently and with
a strong ethical compass is of great importance, because we operate in many different markets that have different
challenges and where the laws, environmental requirements and social conditions may differ.
H & M Hennes & Mauritz AB is a Swedish public limited company. H&M’s Today, H&M is present in more than 70 retail markets and around 20
class B share is listed on Nasdaq Stockholm. H&M applies the Swedish production markets. As a global company, it is of the utmost importance
Corporate Governance Code (the Code) and has prepared this corporate that we always act ethically, transparently and responsibly at every stage
governance report in accordance with the Annual Accounts Act and the – from doing business with our suppliers to meeting with customers.
Code. H&M has applied the Code since 2005. The report was prepared Through good purchasing routines and close cooperation with our
by the company’s board of directors and has been reviewed by the suppliers, our products should always be produced with the greatest
company’s auditors. possible consideration for people and the environment. Our risk manage-
ment and internal control work ensure that we work purposefully in every
The H&M group is governed by both external regulations and internal part of the organisation, and the board of directors and auditing commit-
control documents. tee receive regular feedback from the organisation concerning how the
internal control work is being conducted. Every year a thorough review is
Examples of external regulations that affect H&M: carried out of the company’s risks, both operational and financial, with
— Swedish Companies Act well-defined action plans to minimise risk. A more long-term risk analysis
— Accounting legislation including the Swedish Bookkeeping Act is also performed, to provide supporting documentation for long-term
and Annual Accounts Act commercial decisions.
— EU Market Abuse Regulation (596/2014/EU) Responsibility for management and control is shared between the
— Nasdaq Stockholm Rules for issuers shareholders, board, auditing committee and CEO. The board’s work plan
— Swedish Corporate Governance Code (the Code), which is available states how the work is to be distributed between the board, the auditing
at corporategovernanceboard.se. The Code is based on the principle committee and the CEO, with the board having the ultimate responsibility
of “comply or explain”, which means that companies applying the Code for the company’s organisation and administration and the CEO taking
may deviate from individual rules provided they give an explanation of care of the ongoing management of the business, with regular feedback
the deviation, describe the chosen alternative and provide the reasons to the board.
for the deviation. The board of directors has seven members elected by the annual
general meeting (AGM), two employee representatives and two deputies
Examples of internal control documents: for these. Overall, the board has 11 members – seven women and four men.
— Articles of association The composition of the board is characterised by breadth and
— The board’s work plan including instructions for the CEO diversity, and the various competencies of the board members com-
and auditing committee plement each other well, providing experience within areas such as
— The h&m Way retailing, entrepreneurship, fashion, digitalisation, sustainability and com-
— Code of Ethics munication which forms a good basis for valuable discussions with the
— Code of Conduct: Sustainability Commitment CEO and management.
(formerly Code of Conduct) During the year the board held seven board meetings, including
— insider Policy a statutory meeting in conjunction with the AGM. As in previous years,
— Financial Policy there was a very high level of attendance by board members. The CEO,
— Communications Policy CFO and chief accountant also attend all the meetings. Generally, one
— human Rights Policy or two functions/departments are invited to each meeting to give a
— Tax Policy status presentation concerning what their particular function is working
— Whistleblowing Policy on; for example, every six months the head of sustainability provides an
— Other policies, guidelines and manuals update on the company’s sustainability work, making reference to key
indicators and targets. These presentations act as a complement to the
h&m’s corporate governance is governed by values, since it is based CEO’s status reports and provide opportunity for more in-depth discus-
both on external regulations and on our values – which, in brief, can sions concerning specific areas of the operations. At each board meeting
be described as a sound, simple, straightforward, cost-conscious, the chair of the auditing committee also gives an account of the matters
entrepreneurial corporate culture that focuses on teamwork, our belief addressed by the auditing committee at its most recent meeting within
in people and constant improvement. Sustainability work is well inte- areas such as accounting, auditing, tax, internal control, risks, as well
grated into every part of the business and forms a natural part of our as various new regulations and legislation.
employees’ everyday life.
20
h&m has chosen to have the corporate governance report The H&M group’s corporate
as a separate document to the annual report in accordance
with chapter 6 § 8 of the Swedish Annual Accounts Act.
governance structure
The information that must be provided under chapter 6 § 6 The h&m group’s corporate governance structure encompasses
items 3–6 of the Annual Accounts Act is included in the shareholders, the board of directors, the auditing committee, the CEO,
administration report on page 39 of h&m’s annual report the nomination committee, auditors, the executive management team,
for 2018 and is therefore not included in this corporate brands, employees and employee organisations – see the illustration
governance report. In accordance with chapter 6 § 9 of the below. The illustration summarises the group’s corporate governance
Annual Accounts Act, the company’s auditors have issued structure. H&M’s shareholders ultimately decide the company’s direc-
a statement on the corporate governance report that can tion, since the shareholders at the general meeting appoint the board
be found on page 34. of directors and the chairman of the board. Proposals for the compos-
ition of the board, board fees and the election of auditors are prepared
in advance within the nomination committee. The board in turn appoints
the CEO to take care of day-to-day administration. The CEO appoints
In 2018 H&M deviated from the Code members of the executive management team within the H&M group’s
on the following point: matrix organisation. The board includes two employee representatives
and two deputies for these, who are appointed by their respective
2.4 The fact that Stefan Persson, the chairman of the employee organisations. The board appoints an auditing committee
board, also chairs the nomination committee. The from among its members, which deals with accounting and auditing
nomination committee is unanimous that, as the matters on an ongoing basis and which is the main channel of commu-
chairman of the board and the largest shareholder nication between the board and the auditors. Each year the auditors
in h&m, Stefan Persson is the natural choice to report to the board and the annual general meeting on their scrutiny.
chair H&M’s nomination committee.
1. SHAREHOLDERS
and ANNuAL
GENERAL MEETING
Read more about h&m’s corporate governance at
about.hm.com/corporategovernance.
2. NOMINATION
Among other things, you will find here: 3. AUDITORS
COmmiTTEE
— Previous corporate governance reports
— Articles of association
4. BOARD
— information on the nomination committee, board of OF DiRECTORS
directors, CEO, auditors, auditing committee, guidelines
and policies, executive management team etc.
5. AUDITING 6. EMPLOYEE
— Information and material from previous AGMs COmmiTTEE ORGANISATIONS
— Risks and uncertainties
7. CEO
8. BRANDS:
h&m, COS,
& Other Stories,
9. EXECUTIvE
monki, Cheap monday,
Weekday, MANAGEMENT
h&m home, ARKET,
Afound
mATRiX
ORGANISATION
– see page 28
REPORTS TO/PROviDES iNFORmATiON

APPOiNTS/ELECTS/PROPOSES
21
1. SHAREHOLDERS AND ANNUAL GENERAL MEETING — The board members and the CEO were discharged from liability
It is H&M’s shareholders who have the final decision on the company’s for the 2016/2017 financial year.
governance by voting at the general meeting to adopt the articles of — The number of board members elected by the meeting to serve until
association, which decide what the business will focus on, and to appoint the next AGM was set at seven, with no deputies.
the board of directors and its chairman, whose task it is to administer — The following ordinary board members were re-elected: Stina Berg-
H&M’s affairs on behalf of the shareholders. The shareholders at the gen- fors, Anders Dahlvig, Lena Patriksson Keller, Stefan Persson, Christian
eral meeting also elect auditors, decide on the principles of the nomina- Sievert, Erica Wiking Häger and Niklas Zennström. Stefan Persson
tion committee and select the members of this committee. was re-elected as chairman of the board.
— The AGM approved the proposal from the nomination committee,
The general meeting is thus the company’s highest decision-making body based on the number of board members, that the total board fees
and is the forum in which shareholders exercise their right to decide on of SEK 5,890,000 were to be distributed as follows: chairman of the
the company’s affairs. H&M’s ordinary general meeting (annual general board SEK 1,700,000; board members elected by the AGM SEK
meeting) is held once a year, in late April or early May. 615,000; members of the auditing committee an extra SEK 150,000;
The date and venue are announced in h&m’s nine-month report as and the chairman of the auditing committee an extra SEK 200,000.
well as on about.hm.com. The notice of the meeting is published in full — The AGM resolved to appoint Ernst & Young AB as auditors until the
usually five weeks before the meeting in Post- och Inrikes Tidningar and close of the 2019 AGM. The auditors’ fees are to be paid based on
on about.hm.com, with an advertisement placed in Dagens Nyheter approved invoices.
and Svenska Dagbladet. Shareholders registered directly in the register — The proposed principles for the nomination committee were approved
of shareholders who have given notice of their attendance on time are and members of the nomination committee were elected.
entitled to participate in the meeting and vote for the total number of — The proposed guidelines for remuneration to senior executives
shares that they hold. Shareholders who cannot be present in person were approved.
may be represented by proxy.
votes and capital represented at h&m’s annual general meeting
Shareholders wishing to have a particular matter considered by the
meeting may submit a written request to the board at least seven weeks YEAR % OF VOTES % OF CAPITAL
before the meeting. H&M’s email address is also given for those share-
2014 84.2 67.5
holders who wish to submit their questions to H&M in advance. All the
material belonging to the meeting, including the minutes of the meeting, 2015 82.4 63.7
is available on the website in both Swedish and English. Extraordinary gen- 2016 83.3 65.5
eral meetings can also be held where there is a particular need to do so. 2017 83.7 66.6
2018 82.3 63.6
Shareholders’ decision-making powers
Among other things, the general meeting makes decisions concerning:
— The election of board members and the chairman of the board Number of shareholders and ownership structure
— Board fees including the compensation paid to members for work At the end of the financial year H&M had 245,427 shareholders. The total
on the auditing committee number of shares in H&M is 1,655,072,000, of which 194,400,000 are
— Discharge of the members of the board and the CEO from liability class A shares (ten votes per share) and 1,460,672,000 are class B shares
— Amendments to the articles of association (one vote per share).
— The election of the auditor H&M’s largest shareholder is Stefan Persson and family, who via
— The adoption of the income statement and balance sheet Ramsbury Invest AB hold all the class A shares, which represent 57.1 per-
— The distribution of the earnings for the past financial year cent of the votes, as well as 538,531,922 class B shares, representing 15.8
— The election of members of the nomination committee and percent of the votes. This means that as of 30 November 2018, Stefan
establishment of principles for the nomination committee Persson and family via Ramsbury Invest AB represent 72.9 percent of the
— Guidelines for remuneration to senior executives votes and 44.3 percent of the total number of shares. Ramsbury Invest
AB is thus the parent company of H & M Hennes & Mauritz AB.
Annual general meeting 2018
H&M’s annual general meeting 2018 was held on 8 May in the Erling Annual general meeting 2019
Persson Hall, Aula Medica, Karolinska Institutet in Solna. A total of 1,164 H&M’s annual general meeting 2019 will be held on Tuesday, 7 May 2019
shareholders were represented at the meeting, representing 82.3 per- in the Erling Persson Hall, Aula Medica, Karolinska Institutet in Solna.
cent of the votes and 63.6 percent of the capital. H&M’s board of direc- To register to attend the 2019 AGM, see page 78 of H&M’s annual
tors, executive management and nomination committee as well as the report for 2018 or visit about.hm.com/agm.
company’s auditors attended the meeting.
2. NOMINATION COMMITTEE
The main resolutions passed were the following: The nomination committee prepares information that will be used as
— The lawyer Sven Unger was elected as chairman of the meeting. a basis for decisions at the general meeting concerning election of the
— Balance sheets and income statements for the parent company and board of directors, the chairman of the board, the auditors and the
for the group were adopted. chairman of the annual general meeting, fees to the board and auditors,
— A dividend to shareholders of SEK 9.75 per share was approved. It was as well as principles for the nomination committee. The nomination com-
resolved that the dividend would be paid in two instalments during the mittee’s proposal for the composition of the board is characterised by
year: SEK 4.90 per share with a record date of 11 May 2018, to be paid diversity and breadth as regards expertise, experience, background and
out on 16 May 2018, and SEK 4.85 per share with a record date of gender balance. It also takes into consideration the H&M group’s stage
13 November 2018, to be paid out on 16 November 2018. of development and future focus.
22
Before each general meeting the nomination committee’s report is available background, and by gender balance. The nomination committee aims
to read as a separate document at about.hm.com/corporategovernance. for gender balance and h&m’s board has had a good gender balance
The composition of the nomination committee is based on the principles for many years. The board members proposed, and subsequently
for the nomination committee adopted at the 2018 annual general meet- elected, consisted of three women and four men (corresponding to 43
ing. The nomination committee below is based on the principle that the percent and 57 percent respectively, excluding employee representa-
nomination committee is to consist of the chairman of the board plus tives). The board thus achieves the ambition communicated by the
four others nominated by the four largest shareholders in terms of voting Swedish Corporate Governance Board, which wants owners to speed
rights, as recorded in the register of shareholders, other than the share- up developments towards a share of around 40 percent for the less well
holder that the chairman of the board may represent. represented gender on the boards of major listed companies by 2020.
Changes in the register of shareholders showed during the autumn To achieve continued gender balance, h&m’s nomination committee
that AMF and AMF Fonder were no longer among the five largest share- discusses this each year and identifies future board candidates with
holders in the H&M group, which meant that AMF’s representative relevant backgrounds and experience on a continuous basis.
Anders Oscarsson, who had been elected to the committee at the 2018 It was felt that the proposed composition of the board more than
AGM, left H&M’s nomination committee in October 2018. In accordance satisfies the requirements made of expertise and experience, taking into
with the principles for the nomination committee established by the account the company’s operations and future development. The pro-
annual general meeting, a new member was appointed to the nomination posed composition was also considered to meet the applicable require-
committee: Thomas Wuolikainen of Fjärde AP-fonden (Fourth Swedish ments well in respect of the independence of board members, their
National Pension Fund), which is now one of the five largest shareholders stock market experience and their expertise in accounting and auditing.
in H&M according to the register of shareholders. Thus the nomination
committee consists of: Work of the nomination committee in preparation for the 2019 AGM
Since the 2018 AGM the nomination committee has held two meetings
— Stefan Persson, chairman of the board so far at which minutes were taken and has also been in contact at other
— Lottie Tham times. In early autumn 2018 a thorough evaluation of the composition
— Liselott Ledin, Alecta and work of the board was carried out, based on interviews with the
— Jan Andersson, Swedbank Robur Fonder members elected by the AGM. The evaluation shows that the board
— Thomas Wuolikainen, Fjärde AP-fonden (Fourth Swedish functioned well over the course of the year and provides a basis for the
National Pension Fund) nomination committee’s work on proposing the composition of the
board to the 2019 annual general meeting.
The nomination committee meets the requirements of the Code regard- The nomination committee thus discusses the size of the board, its
ing the independence of members. Stefan Persson is the nomination composition as regards expertise and experience, among other things,
committee’s chairman. This deviates from section 2.4 of the Swedish the election of a chairman for the AGM, fees for board members and the
Corporate Governance Code. The 2018 AGM resolved that unless the election of auditors. No fees were paid to the nomination committee’s
members of the nomination committee agree otherwise, the chairman of chairman or to any other member of the nomination committee. The nom-
the nomination committee shall be the member representing the largest ination committee’s work in preparation for the next AGM is not yet com-
shareholder. The nomination committee has found no reason to decide plete and more information will be presented before and at the 2019 AGM.
otherwise. The nomination committee was unanimous that in view of
H&M’s ownership structure, Stefan Persson in his capacity as chairman 3. AUDITORS
of the board and principal shareholder is the natural choice to chair The auditors, who are independent and appointed by the shareholders
H&M’s nomination committee. at the AGM, scrutinise H&M’s annual report, consolidated financial state-
ments, accounts, sustainability report and corporate governance report,
Work of the nomination committee in preparation and examine whether these have been prepared in accordance with
for the 2018 AGM including description of diversity policy current laws and recommendations. The auditors also scrutinise the
for the board of directors management of the H&M group by the board and CEO, and review
The nomination committee elected at the 2017 AGM presented its pro- compliance with the guidelines on remuneration to senior executives
posals for the 2018 AGM. The proposal for the composition of the board adopted by the AGM.
was to re-elect Stina Bergfors, Anders Dahlvig, Lena Patriksson Keller,
Stefan Persson, Christian Sievert, Erica Wiking Häger and Niklas Zennström. At the 2018 AGM the accounting firm Ernst & Young AB was elected
The starting point for the nomination committee’s work ahead of as auditor of H&M for a one-year period of office, i.e. until the end
the 2018 AGM was to supplement the board of directors with a further of the 2019 AGM. Authorised public accountant Åsa Lundvall from
member. The nomination committee had also noted that this was a Ernst & Young holds the main responsibility for the audit.
wish expressed by Aktiespararna (the Swedish Shareholders’ Associa- As previously, the 2018 AGM resolved that the auditors’ fees should
tion) at the 2017 AGM. In this process the nomination committee studied be paid based on invoices submitted and approved. The fees invoiced by
a number of different skills profiles based on the group’s expected the auditors over the past two financial years are reported in note 9 of
challenges in a medium-term perspective. After thorough discussions, the annual report for 2018.
however, the nomination committee decided not to nominate a new Ernst & Young AB (EY) is a member of a global network used for
member at the present time. auditing assignments for most of the group’s companies and meets h&m’s
The nomination committee judged that the proposed composition requirements with respect to competence and geographical coverage.
of the board accorded well with section 4.1 of the Swedish Corporate The auditors’ independent status is guaranteed partly by legislation and
Governance Code, which the nomination committee has applied as professional ethics rules, partly by the accounting firm’s internal guide-
its diversity policy. The aim of the policy is that the proposed board is lines and partly by the fact that non-auditing assignments must be
characterised by diversity and breadth of expertise, experience and approved in advance by the auditing committee. Åsa Lundvall is an
23
COMPOSITION OF THE BOARD AND ATTENDANCE IN 2018
YEAR BOARD AUDITING SHARE- SHARES HELD BY

NAME ELECTED INDEPENDENT 1) INDEPENDENT 2) FEES (SEK) 3) MEETINGS 4) COMMITTEE HOLDING RELATED PARTIES
194,400,000 5)
Stefan Persson, chairman 1979 No No 1,675,000 7/7 554,909,767 6)
Stina Bergfors 2016 yes yes 600,000 7/7 6,000 9,000 7)
Anders Dahlvig 2010 yes yes 750,000 7/7 4/4 17,510
Lena Patriksson Keller 2014 yes yes 600,000 7/7 1,200 and 9,450 8)
Christian Sievert 2010 yes No 9) 800,000 7/7 4/4 81,000 19,000 and 2,400 10)
Erica Wiking häger 2016 yes yes 750,000 7/7 4/4 750 11)
Niklas Zennström 2014 yes yes 600,000 6/7 72,700
Ingrid Godin
employee rep. 2012 7/7 60
Alexandra Rosenqvist
employee rep. 2015 7/7
Rita hansson 12)
deputy employee rep. 2014 6/7 300

margareta Welinder
deputy employee rep. 2007 6/7
1) Independent of the company and company management in accordance with the Swedish 8) 1,200 shares are owned through Lena Patriksson Keller’s private company verdani Holding
Corporate Governance Code. AB. 9,450 shares held by spouse and children.
2) Independent of major shareholders in the company in accordance with the Swedish 9) Christian Sievert is not considered independent of Ramsbury Invest AB since Ramsbury
Corporate Governance Code. Invest AB is a major shareholder in a company of which Christian Sievert is CEO.
3) Fees as resolved at the 2017 annual general meeting. This means that the fees related to 10) Shares held by related parties: 19,000 shares held through Christian Sievert’s company
the period until the next AGM, i.e. for the period 10 May 2017 to 8 May 2018. The amounts Whitechris Industri AB and 2,400 shares held by spouse and children. Additional
were paid out after the 2018 AGM. information: in addition to Christian Sievert’s shareholding shown above, Christian Sievert
holds 9,000 H&M shares via a pension plan.
4) Attendance via technology is equated with attendance in person.
11) 750 shares are owned through Erica Wiking Häger’s company Erica Wiking Häger
5) Class A shares owned through Ramsbury Invest AB. Advokataktiebolag.
6) Class B shares owned through Ramsbury Invest AB as of 18 February 2019. 12) Rita Hansson retired in December 2018.
7) Shares held by spouse.
There are no outstanding share or share price related incentive programmes for the board of directors.
authorised public accountant who conducts auditing assignments for 4. BOARD OF DIRECTORS
companies such as ATG, DGC One, Systemair and Swedavia. The task of the board of directors is to manage H&M’s affairs in the inter-
The auditors attend all meetings of the auditing committee, and as in ests of the company and all its shareholders. This means that the board has
previous years, the chief auditor Åsa Lundvall also took part in the board the overall responsibility for H&M’s administration. This takes place in a
meeting held in January 2018 in order to notify the board of the scope, long-term, sustainable way with a focus on the customer offering and growth.
focus, significant considerations and conclusions of the audit of the 2017
financial year. In addition to this involvement, the auditor meets regularly In addition to laws and recommendations, H&M’s board work is regulated
with the chairman of the board, the chairman and other members of the by the board’s work plan, which contains rules on the distribution of work
auditing committee, the executive management and other key individu- between the board, its committees and the CEO and on financial report-
als. The auditor also takes part in the AGM, reporting the conclusions ing, investments and financing. The work plan, which also includes a
drawn from the audit. work plan for the auditing committee, is updated when needed but is
Alongside its mandate as elected auditor, Ey has also carried out established at least once a year.
related tasks such as verification of the sustainability report. In addition,
EY has assisted with other consulting services, primarily tax advice. EY Composition of H&M’s board and independence of its members
has internal processes to ensure its independence before these tasks The board members are elected by the shareholders at the annual
are begun. The auditing committee also has a process for approving non- general meeting for the period up until the next AGM.
auditing services in advance, before such assignments are begun. The Since the 2018 AGM the board has consisted of seven ordinary
auditing committee evaluates the auditor annually to gain assurance that members elected by the AGM and no deputies. There are also two
the auditor’s objectivity and independence cannot be questioned. employee representatives, with two deputies for these positions. The
board is comprised of seven women and four men. Only the employee
representatives are employed by the company. Since the 2018 AGM the
board has comprised the following members elected by the meeting:
24
Stefan Persson (chairman), Stina Bergfors, Anders Dahlvig, Lena Patriks- The industry is undergoing significant structural changes and rapid
son Keller, Christian Sievert, Erica Wiking Häger and Niklas Zennström. shifts in technology as a result of the increased digitalisation of society.
Ingrid Godin and Alexandra Rosenqvist are the regular employee repre- This creates great opportunities, but also puts demands on the organisa-
sentatives, with Rita Hansson and Margareta Welinder as their deputies. tion. The board therefore discusses the significance of this shift, with more
For more facts about H&M’s board members, see pages 32–33. and more shopping taking place online, and the transformation that the
The board members are to devote the time and attention that their h&m group is undergoing in order to respond to these changed circum-
assignment for H&M requires. New board members receive introductory stances. Among other things, it discusses future growth plans, how the
training which, among other things, includes meetings with the heads organisation should adapt to the new situation and which investments
of various functions. need to be made in order to be able to offer customers a shopping expe-
The composition of h&m’s board during the year met the independ- rience that is as complete and seamless as possible. The board receives
ence requirements set out in sections 4.4 and 4.5 of the Code. This ongoing updates on these projects, which might involve developing the
means that the majority of the board members elected by the general customer offering to enable a faster and more flexible product flow with
meeting are independent of the company and company management. quicker and more varied delivery options, the handling of returns, changes
The majority of the board members are also independent of the com- of platform, AI and advanced analytics, mobile payment solutions etc.
pany’s major shareholders. The long-term investments being made aim to ensure the group’s future
expansion and position.
Number of board meetings The group’s integrated sustainability work is very important and is
During the financial year H&M normally holds six regular board meetings, discussed regularly by the board. Every six months, the head of sustain-
one of which is the statutory board meeting. Extraordinary board meet- ability provides an update on the group’s sustainability work with refer-
ings are held when the need arises. The CEO attends all board meetings, ence to key indicators and targets, such as compliance with the Code
except on the occasion of the board meeting when the CEO’s terms of of Conduct, sustainable materials, climate impact, anti-corruption, etc.
employment are being discussed. The CEO reports to the board on the At each board meeting the chairman of the auditing committee
operational work within the group and ensures that the board is given reports to the board on what the auditing committee discussed at its
relevant and objective information on which to base its decisions. latest meeting. This primarily concerns areas such as accounting,
The CFO and chief accountant also attend the board meetings in auditing, tax, customs duties, internal control, risk, various new regula-
order to provide financial information. The board is assisted by a secre- tions and new legislation such as GDPR etc. The overall risk assessment,
tary who is not a member of the board. involving the very largest risks – in both the short and the long term – is
During the 2018 financial year seven board meetings were held. then also discussed at subsequent board meetings. At four of the year’s
The level of attendance at board meetings is high, with each member’s meetings the board goes through quarterly reports before they are
attendance shown in the table on page 24. published and at the January meeting the board discusses the annual
report, with the auditor also reporting on the year’s audit.
Work of the board in 2018 During the year the board takes various decisions, for example
H&M’s board meetings are generally structured as follows, which is then regarding the expansion and investment plan, the proposed dividend,
supplemented by one or more business presentations, e.g. by heads of which was SEK 9.75 per share for the 2018 financial year, as proposed to
functions or country managers. the 2019 AGM, the payment of the dividend in two instalments during
the year, guidelines for remuneration of senior executives and the finan-
The following areas are usually reviewed at each board meeting: cial reports etc.
— minutes of the previous meeting At the board meeting held on 30 January 2018 the board of directors
— CEO’s status report decided that the growth target of the H&M group to increase sales in
— Report by CFO local currencies by 10–15 percent per year with continued high profit-
— Strategic matters ability remains a long-term target.
— Feedback from latest auditing committee meeting Since H&M does not have a separate review function (internal audit)
— Financial reporting, such as interim report and annual report for work on internal control, but has instead established its own model
— Any other business for managing the company’s risk and internal control (see pages 27–29),
once a year the board assesses the need for a separate internal audit
In 2018 CEO Karl-Johan Persson provided information on – among other function. This year the board again reached the conclusion that the pre-
things – the strategic plan in response to the great transition that is taking sent model for monitoring internal control is working in a satisfactory way.
place in the industry. The customer offering, digital development, optimi- Before the 2018 annual general meeting the board carried out an
sation of the store portfolio, expansion and the integration of stores and assessment of the application of the guidelines for remuneration to senior
online and future store development, sales, costs, earnings and the status executives that were adopted by the 2017 AGM. The results of this assess-
of each brand, sustainability, external factors and development opportu- ment were published on the website in good time before the 2018 AGM.
nities are examples of matters discussed. The CEO also provided ongoing h&m has no remuneration committee, since the board of directors
information on purchasing, production, the stock-in-trade, marketing deems it more appropriate for the entire board to carry out the tasks of
and PR activities, organisational changes, the broadening of the product a remuneration committee. It is the board that prepares the proposed
range, and new initiatives and the development of new brands. During the guidelines for remuneration to senior executives that are presented at
year 375 new stores net were opened, with Ukraine and Uruguay as new the AGMs, and it is the board that decides on the CEO’s salary in accord-
H&M store markets for 2018, and 146 stores were closed, resulting in a ance with the guidelines adopted at the last AGM. The board continually
net addition of 229 new stores. The following new online markets were assesses the CEO’s work and once a year discusses this matter sepa-
opened during the year: India and, via franchise, Kuwait, Saudi Arabia and rately in conjunction with the setting of the CEO’s remuneration for the
the United Arab Emirates. The plan is to roll out the online store to all coming year. No member of executive management is present when
existing store markets and to other markets as well. this is discussed.
25
5. AUDITING COMMITTEE to be approved in advance. H&M also uses consulting services from
The auditing committee monitors the company’s financial reporting, other accounting firms and tax advisors.
which among other things involves monitoring the effectiveness of the
company’s internal control and risk management. Its work includes hand- 6. EMPLOYEE ORGANISATIONS
ling auditing issues and financial reports published by the company. The Under Swedish law, the employees have the right to appoint employee
auditors attend the meetings of the auditing committee to report on their representatives with deputies to the company’s board. These are
scrutiny of the group’s annual report and financial statements, including appointed via employee organisations (trade unions). The trade unions
the consolidated financial statements. appoint two board members and two deputies to the board of H&M.
The auditing committee also reviews and monitors the impartiality 7. CEO
and independence of the auditor, and regulates which assignments the The CEO is appointed by the board of directors and is responsible for
accounting firm may conduct for H&M in addition to the audit. The audit- the daily management of the company as directed by the board. This
ing committee receives a written assurance of independence from the means that, among other things, the CEO must focus in particular on
auditor stating which services the accounting firm has provided to H&M recruitment of senior executives, buying and logistics matters, the
during the financial year in addition to the audit. The auditing committee customer offering, pricing strategy, sales and profitability, sustainability
also assists the nomination committee with any proposals to the AGM matters, marketing, expansion, development of the store network and
concerning the election of auditors. of online sales, and digital development. The CEO reports to the board
h&m’s auditing committee is made up of three board members, on the h&m group’s development and makes the necessary preparations
two of whom have expertise in accounting or auditing while the third has for taking decisions on investments, expansion, etc. The role of CEO
expertise in commercial law. All the members are independent of the includes contact with the financial market, the media and the authorities.
company and its management. The majority of the members are also Karl-Johan Persson, born in 1975, has been the chief executive officer
independent of the company’s major shareholders. The auditing com- of H & M Hennes & Mauritz AB since 1 July 2009.
mittee is appointed annually by the board of directors at the statutory Before taking over as CEO, Karl-Johan Persson held an operational
board meeting held in conjunction with the AGM. Since the statutory role within H&M from 2005, including working as head of expansion,
meeting held in conjunction with the 2018 AGM, the auditing committee business development as well as brand and new business. Since 2000
has consisted of chairman Christian Sievert and members Anders Karl-Johan Persson has been a member of the boards of h&m’s subsidi-
Dahlvig and Erica Wiking Häger. The committee held four meetings at aries in Denmark, Germany, the US and the UK. From 2006 until 2009 he
which minutes were taken during the 2017/2018 financial year. was also a member of the board of H & M Hennes & Mauritz AB.
Ey attended the auditing committee meetings and reported on the From 2001 until 2004 Karl-Johan Persson was CEO of European
auditing assignments. The meetings were also attended by CFO Jyrki Network. Karl-Johan Persson holds a BA in business administration from
Tervonen and chief accountant Anders Jonasson, among others. The the European Business School in London. Karl-Johan Persson currently
committee’s meetings are minuted and the minutes are then distributed has external board assignments for, among others, the Swedish Cham-
to the board members. ber of Commerce in the UK, Ramsbury Invest AB and the GoodCause
Foundation. Since 2013 Karl-Johan Persson has also been a member of
During the year the auditing committee addressed the following matters, the board of the H&M Foundation.
among others: Karl-Johan Persson is a shareholder in Ramsbury invest AB, and also
— The company’s financial reporting, including interim reports, the personally holds 12,136,289 class B shares in H&M.
corporate governance report and annual report.
— Compliance with the group’s internal control and risk management pro- 8, 9. ORGANISATION AND MANAGEMENT
cesses and review of the overall risk analysis for the group – both finan- The H&M group has a multi-brand matrix organisation with well-defined
cial risk and operational risk – with well-defined action plans to minimise brands: h&m, COS, & Other Stories, monki, Weekday, Cheap monday*,
risk. Among other things, the work relating to the new General Data Pro- H&M Home, ARKET and Afound. Each brand has its own organisation
tection Regulation (GDPR) that entered into force in 2018 was discussed. and managing director, and all the brands have their own local sales
— In addition, the following functions gave presentations/provided infor- organisations. Centrally, there are also a number of group functions that
mation on their work: expansion/construction, security, accounting/tax, support each brand in order to capitalise on the benefits within these
logistics, business development, IT and HR. shared areas, so that each brand and country works purposefully accord-
— The transfer pricing model and tax matters. A status update regarding ing to central policies and guidelines. The CEO is responsible for day-to-
tax matters is given at each meeting, which is partly related to the day management of the h&m group and appoints the members of the
OECD’s BEPS project that deals with, among other things, how and executive management team, which is made up of the CEO plus nine
where profits in multinational companies are to be taxed. others – six of whom are women. The executive management team is
— In addition, customs matters were discussed in view of the fact that made up of the CEO, CFO, the two people with responsibility for the H&M
this is becoming an increasingly pressing matter for multinationals brand, the head of New Business (which includes COS, & Other Stories,
due to increased protectionism in certain countries. Monki, Weekday, Cheap Monday*, H&M Home, ARKET and Afound), the
— Ey informed the committee of the audit plan, the scope of the audit heads of the business development, hR, sustainability and communica-
and the results of scrutiny carried out. tions functions, and the COO, who has responsibility for the functions
— in addition, Ey provided information on current regulatory develop- advanced analytics and AI, expansion, IT, logistics and production. Those
ments in the areas of accounting and auditing. responsible for the other group functions are appointed by the CFO. The
— Review of the auditors’ independence and impartiality. The auditing matrix organisation provides a good combination of central and local
committee finds that it is clear which assignments EY takes on in addi- perspectives on leadership and entrepreneurship.
tion to auditing and sees no reason to question the accounting firm’s The local sales organisations are responsible for daily shop/retail
impartiality. A process has been established for non-auditing services operations in their country, giving them a collective responsibility for all
26
Way”, which briefly describes and brings together what H&M stands for
CEO Karl-Johan Persson and provides a basis for how employees are to act in relation to each
CFO Jyrki Tervonen other and the outside world. It also refers to the group’s main policies.
GROUP FUNCTIONS BRANDS h&m’s internal control structure is based on:

Accounting Anders Jonasson H&M Fredrik Olsson — The division of work between the board of directors, the auditing
Business development madeleine Persson committee and the CEO, which is clearly described in the board’s for-
Daniel Claesson mal work plan. The executive management team and the auditing com-
New Business Anna Attemark
Communications Kristina Stenvinkel
COS marie honda mittee report regularly to the board based on established routines.
Controlling Fredrik Nilsén — The company’s organisation and way of carrying on business, in which
& Other Stories Sanna Lindberg
HR helena Thybell roles and the division of responsibility are clearly defined.
Monki Jennie Dahlin hansson
IT morten halvorsen — values and guidelines, as well as policies and manuals; of these, the
Weekday David Thörewik
Legal Fredrik Björkstedt Code of Ethics, the financial policy, the insider policy, the commu-
Cheap Monday Peter Klagsmark
Security Cenneth Cederholm
nications policy and the store instructions are examples of important
H&M Home Anders Sjöblom overall policies.
Sustainability Anna Gedda
ARKET Lea Rytz Goldman — Awareness among the employees of the importance of maintaining
COO helena helmersson
Afound Stina Westerstad, acting effective control over financial reporting.
Advanced analytics & AI
Arti Zeighami
— Control activities, checks and balances, analysis, reporting.
Expansion Katja Ahola
The H&M group has a matrix organisation (see page 28), which means
IT morten halvorsen
that those responsible for the joint group functions are responsible for
Logistics Patrik Berntsson
the efficiency of work within their function at each brand (the horizontal
Production David Sävman arrows). Each brand has its own organisation and managing director,
and all the brands have their own local sales organisations.
internal control is evaluated annually by the relevant group function,
the support functions in their country working according to instructions which checks that its function in each country is working according to
from the central group functions. the prescribed policies and guidelines. The stores are in turn checked by
internal store auditors.
Internal control All the companies within the H&M group – apart from Weekday Brands,
which is engaged in wholesale operations – have the same structure and
The board of directors is responsible for the company’s internal control, accounting system with the same chart of accounts. This simplifies the
the overall aim of which is to safeguard the company’s assets and thereby creation of appropriate routines and control systems, which in turn facili-
its shareholders’ investment. Internal control and risk management are tates internal control and comparisons between the various companies.
part of the board’s and the management’s control and follow-up respons- There are detailed instructions for the store staff that control daily work
ibilities, the purpose of which is to ensure that the business is managed in the stores. Many other guidelines and manuals are also available within
in the most appropriate and effective manner possible, to ensure reliable the group. In most cases these are drawn up in the central departments
financial reporting and to ensure compliance with applicable laws and at the head office in Stockholm and then communicated to the respec-
regulations. This description of H&M’s internal control and risk manage- tive departments in the country offices. Each central department regu-
ment for financial reporting has been prepared in accordance with chap- larly reviews its guidelines and manuals to see which need updating and
ter 6 § 6 of the Swedish Annual Accounts Act and section 7.4 of the whether new guidelines need to be developed.
Swedish Corporate Governance Code.
H&M uses the COSO framework as a basis for internal control over RISK ASSESSMENT
financial reporting. The COSO framework, which is issued by the Com- H&M carries out regular risk analysis for both operational and financial
mittee of Sponsoring Organizations of the Treadway Commission, is made risks. At the end of each financial year the analysis is updated in respect
up of the following five components: control environment, risk assessment, of the main operational risks – in the short and long term – and also the
control activities, information and communication as well as monitoring. risks within financial reporting. This is carried out in two group-wide
documents, based on the probability and impact of each risk.
CONTROL ENVIRONMENT As in previous years, at the end of 2018 each central function reviewed
The control environment forms the basis of internal control, because it its main risks, assessed these and identified the systems, methods and
includes the culture that the board and management communicate and controls that are in place to minimise any impact of the risks. This infor-
by which they work. The control environment is made up primarily of mation was compiled at group level, after which the functions together
ethical values and integrity, expertise, management philosophy, organisa- prepared the general risk analysis mentioned above with a view to getting
tional structure, responsibility and authority, policies and guidelines, as an overall picture of the group’s main risks – thereby shedding light on
well as routines. the mitigation plans that are in place to manage these risks. The risk anal-
Of particular importance is that management documents such as yses for operational risks and for the risks within financial reporting were
internal policies, guidelines and manuals exist in significant areas and that then dealt with in the auditing committee and thereafter discussed by
these provide the employees with solid guidance. Within H&M there the board.
exists above all the Code of Ethics; an ethical policy that permeates the For a description of h&m’s operational risks, see the administration
entire company, since it describes the way in which the employees report on pages 37–38. For risks within financial reporting, see the
should act within the company and in business relations with suppliers.
For a number of years the group has had a document called “The h&m * Cheap Monday will be closed down in 2019.
27
Matrix organisation of the H&M group
BOARD OF
DiRECTORS
AUDITING
COmmiTTEE
CEO
CFO
BRANDS GROUP FUNCTIONS**
ACCOUNTING
h&m
Design/Buying Country 1, 2, 3 etc. PR/marketing
COmmuNiCATiONS
NEW BuSiNESS*
COS CONTROLLING
hR
& OThER STORiES

LEGAL
mONKi
BuSiNESS DEvELOPmENT
SECuRiTy
WEEKDAy
SuSTAiNABiLiTy
COO
ChEAP mONDAy***
Design/Buying Wholesale Country PR/marketing ADvANCED ANALyTiCS & Ai

1, 2, 3 etc.
h&m hOmE
EXPANSiON
ARKET iT
LOGISTICS
AFOuND
PRODuCTiON
* New Business has overall responsibility for producing, refining ** In alphabetical order. *** Cheap Monday will be closed down in 2019.
and supporting the H&M group’s newer brands.
28
administration report on pages 38–39 and note 2, Financial risks, on Within the production organisation there is a firm and regular control
pages 58–59 of H&M’s annual report for 2018. and monitoring process for the internal routines that are brought
To limit the risks there are appropriate policies and guidelines as well together in the Routine Handbook for Production. These routines are
as processes and controls within the business. about how H&M ensures that the company does business in an ethical
and transparent way. Most of these routines are monitored on a monthly
CONTROL ACTIVITIES basis at regional level and every other month at global level.
There are a number of control activities built into every process to ensure Internal store auditors perform annual checks at the stores with the
that the business is run effectively and that financial reporting provides aim of determining the strengths and weaknesses of the stores and
a true picture at each reporting date. The control activities, which aim to how any shortcomings can be corrected. Follow-up and feedback with
prevent, find and correct inaccuracies and non-compliance, are at all lev- respect to any non-compliances found during the assessment of inter-
els and in all parts of the organisation. Within H&M the control activities nal control constitute a central part of internal control work.
include effective control and analysis of sales statistics, account recon- The board of directors and the auditing committee continuously
ciliation, monthly accounts and financial reports. evaluate the information provided by the executive management team,
During the year ongoing internal control of the iT department is also including information on internal control. The auditing committee’s task
carried out, to ensure that the work and processes are being performed of monitoring the efficiency of internal control by the management team
in accordance with guidelines set. This also includes systems relating to is of particular interest to the board. This work includes checking that
financial reporting. These financial systems are also reviewed by an steps are taken with respect to any shortcomings detected and sugges-
external party in cooperation with those responsible for systems and tions made during the assessment by the central departments and internal
system areas within H&M. store auditors, as well as by external auditors. The work on internal con-
trol maintains awareness of the importance of effective internal control
INFORMATION AND COMMUNICATION within the group and ensures that continuous improvements are made.
Policies and guidelines are of particular importance for accurate
accounting, reporting and provision of information, and also define the INTERNAL AUDIT
control activities to be carried out. In accordance with section 7.4 of the Swedish Corporate Governance
H&M’s policies and guidelines are updated on an ongoing basis. This Code, during the year the board assessed the need for a specific internal
takes place primarily within each central function and is communicated audit department. The board concluded that H&M’s present model of
to the sales countries by email and via the intranet, as well as at meetings. monitoring internal control is the most appropriate for the company. In the
h&m has a communications policy providing guidelines for communi- board’s opinion, this model – which is applied by the central departments
cation with external parties. The purpose of the policy is to ensure that such as accounting, communications, security, logistics, production etc.
all disclosure obligations are met and that the information provided is in the subsidiaries – and the work carried out by internal store auditors
accurate and complete. are well in line with the work performed in other companies by an internal
audit department. It was therefore deemed that there was no need for
Financial communication is provided via: an internal audit department.
— h&m’s annual report The issue of a specific internal audit department will be reviewed
— interim reports, the full-year report and quarterly sales reports again in 2019.
— Press releases on events and circumstances that may impact
the share price Stockholm, February 2019
— H&M’s website about.hm.com
The Board of Directors
MONITORING
In 2018 the group functions/central departments assessed internal More information on H&M’s corporate governance work can be found
control within their respective functions in the sales countries based in the section on corporate governance at about.hm.com. The next four
partly on general issues and partly on department-specific issues, using pages contain information about the board members.
the COSO model.
The work resulted in a plan of action for each central department
defining the areas that ought to be improved in order to further strengthen
internal control, not only in respect of each country but also for the cen-
tral function. The functions also followed up on the assessments made
in the previous year. The way in which H&M assesses internal control is
considered to be firmly established within the organisation. It is an aid
and an instrument that the central functions can use to ensure that their
respective departments in the sales countries are working in a uniform
and desirable way. The assessment of internal control also allows each
sales country to provide valuable and constructive feedback to the
central function regarding where there is room for improvement at cen-
tral level. An important part of the internal control work is the feedback
to the country management (country manager and country controller)
which the central function provides based on the results of the evalua-
tion in each country. This is done with a view to transparency and to
ensuring that the countries adopt best practice.
29
ANDERS DAHLVIG LENA PATRIKSSON KELLER RITA HANSSON

Board member and member of Board member Deputy employee representative
the auditing committee
STEFAN PERSSON STINA BERGFORS

Chairman of the board Board member
30
MARGARETA WELINDER INGRID GODIN CHRISTIAN SIEVERT

Deputy employee representative Employee representative Board member and chairman of
NIKLAS ZENNSTRÖM ERICA WIKING HÄGER ALEXANDRA ROSENQVIST

Board member Board member and member of Employee representative
31
About the board members
STEFAN PERSSON ANDERS DAHLVIG

Chairman of the board. Born 1947. Board member and member of the auditing committee. Born 1957.
Primary occupation Primary occupation

Chairman of the board of H&M. Board assignments.
Other significant board assignments Other significant board assignments

member of the board of mSAB and board assignments Chairman of inter iKEA holding Bv and member of the boards
in family-owned companies. of Kingfisher plc, Oriflame SA, Axel Johnson AB, Resurs Bank AB
and Pret A Manger.
Education
Stockholm University and Lund University, 1969 –1973. Education
MSc in business administration, Lund University, 1980 and MA
Professional experience from the University of California, Santa Barbara, 1982.
1976 –1982 Country manager for H&M in the UK and responsible
for H&M’s expansion abroad. Professional experience
1982 –1998 CEO of H&M. 1983 –1993 various roles within IKEA in Sweden, Germany,
1998 – Chairman of the board of H&M. Switzerland and Belgium.
1993 –1997 Managing director of IKEA UK.
1997 –1999 vice president of IKEA Europe.
STINA BERGFORS 1999 – 2009 President and CEO of IKEA.
Board member. Born 1972.
Primary occupation LENA PATRIKSSON KELLER

Founder of the digital media company United Screens, where Stina Board member. Born 1969.
works on strategic matters and business development.
Primary occupation
Other significant board assignments Executive Chairman at branding and communications agency
Member of the board of INGKA Holding Bv. Stina is also involved Patriksson Communication AB.
in the Prince Daniel Fellowship at the Royal Swedish Academy
of Engineering Sciences (IvA). Other significant board assignments
member of the board of Elite hotels; chairman of the board of the
Education industry organisation Association of Swedish Fashion Brands (ASFB).
mSc in business administration and honorary doctorate from Lena is also involved in the Prince Daniel Fellowship at the Royal
Luleå University of Technology. Swedish Academy of Engineering Sciences (IvA).
Professional experience Education

2000 – 2004 Media strategist OMD Nordics. Design and marketing at Parsons School of Design in New York
2005 – 2008 CEO of Carat Sverige AB. and at the American University in London.
2008 – 2013 Country director for Google and YouTube in Sweden.
2014 – Founder and CEO, followed by business development Professional experience
at United Screens. 1993 –1996 Buying & product development at H&M.
1996 –1998 Global communications manager, J.Lindeberg.
1999 – CEO and later executive chairman, Patriksson
Communication AB.
32
CHRISTIAN SIEVERT NIKLAS ZENNSTRÖM

Board member and chairman of the auditing committee. Born 1969. Board member. Born 1966.
Primary occupation Primary occupation

CEO of investment company AB Max Sievert. CEO of venture capital company Atomico, which focuses on fast-growing
tech companies, and involved in Zennström Philanthropies, which sup-
Other significant board assignments ports organisations particularly associated with climate change, social
Member of the board of AB Max Sievert and of the boards entrepreneurship, the Baltic Sea environment and human rights.
of portfolio companies of AB Max Sievert; also member of the
board of AB Anders Löfberg. Other significant board assignments
member of the boards of Atomico, Zennström Philanthropies, Farmdrop,
Education Rovio, Orbital Systems and Lilium.
mSc in business administration from the School of Economics,
Stockholm, 1994. Education
Dual degrees in business administration and engineering physics from
Professional experience Uppsala University.
1994 –1997 Consultant, Bain & Company, Stockholm
and San Francisco. Professional experience
1997 – 2003 Investment manager and partner, Segulah. 1991 –1994 Product manager, Tele2 AB, Stockholm.
2003 – 2013 CEO/managing partner at Segulah. 1994 –1996 Director of access network, Unisource voice Services AB,
2013 – 2014 Partner, Segulah. Stockholm.
2014 – CEO of investment company AB Max Sievert. 1996 –1997 Director of internet services, Tele2 Danmark A/S,
Copenhagen.
1997 – 2000 Director of internet services, Tele2 Europe ASA,
ERICA WIKING HÄGER Luxembourg/Amsterdam.
Board member and member of the auditing committee. Born 1970. 2000 – 2002 CEO and founder, Kazaa, Amsterdam.
2001 – 2003 CEO and founder, Joltid, Amsterdam.
Primary occupation 2002 – 2007 CEO and founder, Skype, London.
Partner at the law firm Mannheimer Swartling since 2009 and chair of 2007 – CEO and founder, Atomico, London.
Mannheimer Swartling’s Corporate Sustainability & Risk Management
practice group. Erica is an advisor on commercial law focusing on human INGRID GODIN
rights, working conditions, the environment and anti-corruption, and is a Employee representative, on the H&M board since 2012.
member of the Swedish Bar Association, the New York State Bar Asso- Born 1959.
ciation and the International Association for Privacy Professionals (IAPP).
ALEXANDRA ROSENQVIST
Other significant board assignments Employee representative, on the H&M board since 2015.
Member of the board of Stockholm Chamber of Commerce. Born 1976.
Education RITA HANSSON

Master of Laws from Uppsala University, LL.M. from Harvard Deputy employee representative, on the H&M board since 2014.
Law School in the US and supplementary studies at the University Born 1951.
of Oklahoma in the uS and Ruprecht-Karls-universität heidelberg
in Germany. MARGARETA WELINDER
Deputy employee representative, on the H&M board since 2007.
Professional experience Born 1962.
1994 –1995 Acting lecturer in civil law, Uppsala University.
1995 –1997 District court service, Sollentuna District Court.
1997 –1998 Law clerk, Svea Court of Appeal.
1999 – 2000 Corporate counsel, Corechange Inc., Boston, USA.
2000 – 2008 Associate, Mannheimer Swartling.
2009 – Partner, Mannheimer Swartling.
33
A u D i TO R ’ S S TAT E m E N T
AUDITOR’S STATEMENT ON THE CORPORATE

GOVERNANCE REPORT
To the Annual General Meeting of H & M Hennes & Mauritz AB (publ),
corporate identity number 556042-7220
Assignment and division of responsibility

We have reviewed the corporate governance report for the financial
year 1 December 2017 to 30 November 2018. The corporate governance
report is the responsibility of the board of directors, which is responsible
for the report being prepared in accordance with the Swedish Annual
Accounts Act. Our responsibility is to express an opinion on the corpo-
rate governance report based on our review.
Orientation and scope of review

Our review was conducted in accordance with RevU 16, Auditor’s review
of the corporate governance report. This means that we planned and
performed the audit in order to obtain a reasonable degree of assurance
that the corporate governance report is free from material misstatement.
An audit includes examining, on a test basis, evidence supporting the
information in the corporate governance report. We believe that our
audit provides a reasonable basis for our opinion set out below.
Opinion
in our opinion, a corporate governance report has been prepared
and its content is consistent with the annual accounts and the
consolidated accounts.
Stockholm, 18 February 2019
Ernst & young AB
Åsa Lundvall
Authorised Public Accountant
34
A D m i N i S T R AT i O N R E P O R T
Administration report
The board of directors and the chief executive officer of H & M Hennes of the opportunities arising, the h&m group has been making digital
& Mauritz AB (publ), 556042-7220, domiciled in Stockholm, Sweden, investments for several years, developing among other things online
hereby submit their annual report and consolidated accounts for the shopping, new platforms, a more efficient supply chain including new
financial year 1 December 2017 to 30 November 2018, hereinafter logistics systems, new technology and advanced analytics, and inte-
referred to as the 2018 financial year. grating the online store with the physical stores. In 2018, which remained
characterised by the shift in the industry, the h&m group continued to
BUSINESS increase online sales, optimise the store portfolio and integrate the
The h&m group is a customer-focused, creative and responsible fashion digital and physical channels in order to create a shopping experience
and design company guided right from its beginnings in 1947 by strong that is as easy and convenient as possible. These initiatives are part of
values based on a fundamental respect for the individual and a belief in the H&M group’s ongoing transformation work to secure the long-term
people’s ability to use their initiative. The business consists mainly of development of the H&M group.
sales of clothing, accessories, footwear, cosmetics, home textiles and
homeware to consumers. The group has nine brands – H&M and H&M Strategic focus areas
home, COS, & Other Stories, monki, Weekday, Cheap monday*, ARKET The action plan for this transformation work is based on the company’s
and also Afound, which was launched in Sweden in June 2018. Each of the strategic focus areas: to ensure the best customer offering, a fast, effi-
group’s brands has its own unique profile and identity, and they comple- cient and flexible product flow, a stable and scalable tech infrastructure,
ment each other well. Together they offer customers a variety of trends and adding growth. In general terms this means, in view of the extensive
and styles at various price points within fashion, beauty, accessories and shift in the industry, driving change in order to be relevant to the cus-
homeware, as well as cafés with an offering that includes modern, healthy tomer at all times. Improvements are therefore being made to the prod-
food. All the brands share the same passion for fashion, design, quality uct range with the aim of ensuring products with the best combination
and best price and all aim to act in a sustainable way. For each brand there of design, quality, sustainability and price. The shopping experience is
is a design and buying function, in which teams of people from differing also being improved. In a number of stores H&M is also testing – among
backgrounds and with diverse experiences and skills work together to other things – new store looks to adapt the experience to the local cus-
produce a relevant and inspiring product range for their particular customers. For the online store improvements are being made to product
tomer group. H&M’s design and buying function creates its collections presentation, navigation, payment options and deliveries. At the same
centrally in Stockholm, while COS – for example – has its design and time, the global integration of online and the physical stores continues
buying function in London. Afound departs from this model, however, at full speed in order to offer customers a seamless experience regard-
since it is a marketplace for discounted products from other brands. less of channel.
With a hand-picked, curated offering in different price segments, Afound To create the best customer experience the H&M group is utilising
is a new type of outlet offering fashion and homeware from hundreds of the company’s global presence and economies of scale, combined with
well-known brands – both external brands and the H&M group’s own. new technology and advanced analytics, to support its creative work and
business processes. This requires a fast, flexible product flow covering
Earnings and financial position the entire supply chain including logistics systems, processes and ware-
The profit for the year and financial position are commented on in con- houses, as well as artificial intelligence (AI). For example, new fulfillment
nection with the income statement and balance sheet on pages 47–49. centres have been taken into use to increase capacity and enable faster
deliveries to customers. In parallel with this the H&M group is continuing
An industry in transition
Increased digitalisation in society is creating new customer behaviours * As communicated previously, Cheap Monday will be closed down in 2019. As part of
and changing customer expectations at a rapid pace. More and more the H&M group’s transformation work to meet the big changes that the fashion industry
is experiencing, the company is prioritising and focusing on the core business. Cheap
shopping is taking place online, generally from a mobile, which is also Monday has a traditional wholesale business model, which is a model that has faced
changing the role of the physical stores since the entire retail landscape major challenges due to the shift in the industry. The H&M group has therefore decided
is being reshaped. To meet this shift in the industry and take advantage to close down Cheap Monday’s operations.
FIVE YEAR SUMMARY
FINANCIAL YEAR 2018 2017 2016 2015 2014
Net sales, SEK m 210,400 200,004 192,267 180,861 151,419

Operating profit, SEK m 15,493 20,569 23,823 26,942 25,583
Operating margin, % 7.4 10.3 12.4 14.9 16.9
Cash flow from current operations per share, SEK 12.86 13.04 14.36 14.54 14.60
Return on equity, % 21.4 26.8 31.2 38.1 41.3
Equity/assets ratio, % 49.3 56.0 62.1 67.6 68.2
Average number of employees 123,283 120,191 114,586 104,634 93,351
For definitions of key figures see page 72.
36
to develop an AI model with algorithms that can address the entire The H&M group’s growth target to increase sales in local currencies
product flow: from trend detection to quantification, allocation, pricing by 10–15 percent per year with continued high profitability remains
and personalisation. The H&M group is also using RFID (Radio Frequency a long-term target.
Identification), a technology that allows items with digital price tags to
be located quickly. This technology, which allows precise information on Employees
the availability of an item, is being rolled out to more and more h&m The h&m group’s business is to be characterised by a fundamental
stores and markets. respect for the individual, where everyone is of equal value. This applies
to everything from fair wages, reasonable working hours and freedom of
Expansion association to the opportunity to grow and develop within the company.
The H&M group is continuing to expand online, through physical stores The company’s values, which have been in place since the days of H&M’s
and digital marketplaces. The group’s sales are made in leased store founder, Erling Persson, are based partly on the ability of the employees
premises, online and via external platforms. Online sales already make to use their common sense to take responsibility and use their initiative.
up a significant proportion of total sales in a number of markets, and for Diversity among employees as regards age, gender, ethnicity etc. is a
the group as a whole online accounted for 14.5 percent of total sales for valuable asset for the company.
2018. Work is continuing at full speed to roll out online globally to all H&M has grown significantly since its beginnings in 1947 and today
existing markets and to other markets as well. In the 2018 financial year has a presence in 71 markets, as well as 19 production offices in 17 mar-
H&M opened online in a further four new markets: India, Kuwait, Saudi kets. At the end of the year the group had approximately 177,000 employ-
Arabia and the United Arab Emirates – the last three via franchise part- ees. The average number of employees in the group, converted into
ners. In China H&M was successfully launched on Alibaba’s e-commerce full-time positions, was 123,283 (120,191), of which 10,839 (10,100) are
platform Tmall, as an addition to H&M’s own online presence and existing employed in Sweden.
stores in China. H&M Home and COS were also launched on Tmall during Of the average number of employees, around 74 percent are women
the year. Today H&M is online in 47 markets. In 2019 the online expansion and 26 percent men. Of the positions of responsibility within the com-
will continue into Mexico and, via franchise, Egypt. pany, such as store managers and country managers, women hold 72
COS and Monki are online in 21 and 19 markets respectively, while percent and men 28 percent of the positions.
Weekday, Cheap monday and ARKET have an online offering in 18 mar-
kets and & Other Stories is online in 15 markets. Afound’s digital market- EVENTS AFTER THE CLOSING DATE
place is available in Sweden. No significant events have occurred since the end of the reporting period.
Intensified store optimisation RISKS AND UNCERTAINTIES

In 2018 the group opened 336 (446) stores and closed 143 (89) stores, ex- Some risks may be due to events in the outside world and affect a certain
cluding franchise stores, resulting in a net increase of 193 (357) new stores. sector or market, while others are associated with the group’s own busi-
A total of 39 (33) franchise stores were opened and 3 (2) were closed. ness. The H&M group carries out regular risk analysis for both operational
The total number of physical stores at the end of the 2018 financial year and financial risks. Operational risks are mainly associated with the busi-
was 4,968 – including 4,433 H&M stores, 270 COS stores, 127 Monki ness and the external risks that affect the group. Some can be managed
stores, 70 & Other Stories stores, 38 Weekday stores, 1 Cheap Monday through internal procedures, and in some cases the group can influence
store, 16 ARKET stores and 5 Afound stores. Of the group’s total number the likelihood of a risk-related event occurring. Other risks are determined
of stores, 255 (219) were operated by franchise partners. H&M Home is to a greater extent by external factors. If a risk-related event is beyond
in 362 H&M stores and has 8 standalone H&M Home stores in 50 mar- the company’s control, work is aimed at mitigating the consequences.
kets, and is online in 40 H&M markets. There are risks and uncertainties affecting the h&m group that are
During 2018 Uruguay and Ukraine became new store markets for H&M related to the shift in the industry, fashion, weather conditions, macro-
and the response from customers was very positive. At the end of the economics and geopolitical events, sustainability issues, foreign curren-
financial year the group had 71 sales markets, of which 13 are operated cies, taxes and various regulations, but also in connection with expansion
by franchise partners. New H&M store markets in 2019 will be Bosnia- into new markets, the launch of new concepts and how the brand is
Herzegovina, Belarus and – via a franchise partner – Tunisia. managed. A description of the H&M group’s operational and financial
The shift in the industry is opening up for improved lease terms and risks is given in the section operational risk, with more detailed informa-
the H&M group has opportunity to renegotiate nearly 1,000 store leases tion concerning financial risks being given in note 2, Financial risks.
in 2019. For the 2019 financial year around 335 (375) new stores are The h&m group’s approach to risk management and internal control
planned to open, of which around 240 will be H&M stores. Around 95 of is described in more detail on pages 20–33 of the corporate governance
the year’s store openings will be COS, & Other Stories, Monki, Weekday, report. The description includes how the H&M group works according to
ARKET and Afound stores. In 2019 three standalone H&M Home stores the COSO framework, which is issued by the Committee of Sponsoring
are planned to open. Of the new H&M stores that open in 2019, around Organizations of the Treadway Commission and has five components:
25 will have an H&M Home shop-in-shop. The majority of the H&M store Control Environment, Risk Assessment, Control Activities, information
openings will be in markets outside of Europe and the US. and Communication, as well as Monitoring Activities.
In total, approximately 160 (146) store closures are planned within the
group, which is part of the intensified store optimisation being carried OPERATIONAL RISK
out that also includes renegotiations, rebuilds and adjustment of store Major shift in the industry
space to ensure that the store portfolio is the best fit for each market. Society is being increasingly influenced by growing digitalisation, as a
The net addition of new stores will thus amount to approximately 175 result of which many sectors such as the retail trade are undergoing sig-
(229) for the 2019 financial year. In Europe more H&M stores will be nificant structural changes – a shift in the industry, with rapidly changing
closed than opened, resulting in around 50 fewer H&M stores in Europe customer behaviour. The H&M group sees many opportunities arising
at the end of the 2019 financial year compared with the end of 2018. from this shift since the group has the capacity and the resources to
37
seize these, but there are also risks for those that are not fast and agile markets, which may lead to instability for suppliers and in manufacturing
enough during this transitional period. Since more and more shopping is and deliveries.
taking place online, mainly via mobiles, the shift is bringing challenges for The group therefore needs to monitor such changes closely and have
physical retail stores throughout the sector. The H&M group is therefore strategies in place to deal with fluctuations as advantageously as possible
integrating its physical stores more and more with its online store, to for both the company and external stakeholders.
make the shopping experience as convenient and easy for the customer For a description of risks related to sustainability see the sustainability
as possible. This shift also means that the competitive landscape is being report on pages 42–45.
redefined, with new operators coming in and profitability in the industry
being squeezed by the fierce competition. FINANCIAL RISKS
Foreign currencies
Reputational risk Nearly half of the group’s sales are made in euros, while the most signifi-
As one of the world’s leading fashion companies H&M attracts great cant currencies for the group’s purchasing are the US dollar and the euro.
interest and is constantly in the spotlight. To safeguard and manage the Fluctuation in the US dollar’s exchange rate against the euro is the single
brands it is important that the h&m group continues to be developed largest foreign currency transaction exposure for the group. Large and
and run according to its strong values, which are characterised by high rapid exchange rate fluctuations, particularly as regards the USD as a
business ethics. sourcing currency, may also have a significant effect on purchasing costs
it is of the utmost importance that the h&m group lives according to – even if this may be regarded as relatively competition-neutral over time.
the high aims set out in its policies and guidelines on business ethics and To hedge flows of goods in foreign currencies and thereby reduce the
has good knowledge, insight and procedures in respect of the production effects of future exchange rate fluctuations, payments for the group’s
of its products. Should the H&M group fail in this regard there is a risk flows of goods – i.e. the group’s purchases of goods and in the majority
that the group’s reputation and brands could be damaged. Accurate, trans- of cases also the corresponding foreign currency inflows from the sales
parent and reliable communication can prevent occurrences of reputa- companies to the central company H & M Hennes & Mauritz GBC AB –
tional risk, and can also help mitigate the consequences of any incidents. are hedged under forward contracts on an ongoing basis.
In addition to the effects of transaction exposure, translation effects
Fashion also impact the group’s results. These effects arise due to changes in
Operating in the fashion industry is a risk in itself. Fashion has a limited exchange rates between the local currencies of the various foreign sales
shelf-life and there is always a risk that some part of the collections will companies and the Swedish krona compared to the same period the
not be sufficiently commercial, i.e. will not be well received by customers. previous year. The underlying profit/loss in a market may be unchanged
Fashion purchases are often emotional and may therefore be negatively in the local currency, but when converted into SEK may increase if the
affected by unforeseen geopolitical and macroeconomic events. Swedish krona has weakened or decrease if the Swedish krona has
Within each concept it is important to have the right volumes and the strengthened.
right balance in the mix between fashion basics and the latest trends. In Translation effects also arise in respect of the group’s net assets on
summary, each collection must achieve the best combination of fashion, consolidation of the foreign sales companies’ balance sheets. No exchange
quality, price and sustainability. rate hedging (known as equity hedging) is carried out for this risk. For
To optimise fashion precision, the h&m group buys items on an ongo- more information on currency hedging see note 2, Financial risks.
ing basis throughout the season. Fashion is becoming increasingly global,
but shopping patterns vary between different markets and sales chan- Trade intervention
nels. The start of a season and the length of that season can vary from Purchasing costs may be affected by decisions at a national level on
country to country, for example. Delivery dates and product volumes for export/import subsidies, customs duties (see more below), textile quotas,
the various markets and channels are therefore adjusted accordingly. embargoes etc. The effects primarily impact customers and companies
in individual markets. Global companies with operations in many coun-
Weather tries are affected to a lesser extent, and among global corporations trade
The h&m group’s products are purchased for sale based on normal interventions may be regarded as largely competition-neutral. In the
weather patterns. Deviations from normal weather conditions affect sales. event of a major trade war between two countries this would affect not
This is particularly true at the transition between two seasons, such as the just sourcing costs but generally also the entire flow of goods from pro-
transition from summer to autumn or from autumn to winter. If the autumn duction to the customer, which the companies would need to mitigate.
is warmer than usual it may have a negative effect on sales of weather- Related party customs valuation continues to attract attention at a
related garments in particular, such as outerwear and chunky knitwear. global, regional and national level, from both authorities and importers
such as the H&M group. It will therefore continue to be important for the
Negative macroeconomic changes and geopolitical risks h&m group to proactively monitor and manage future developments in
One or more markets may be affected by events that have a negative this area. The fact is that customs authorities around the world are not
effect on the macroeconomic situation or geopolitical environment in taking a consistent approach to the assessment of pricing between
the country. These changed macroeconomic or geopolitical circum- related parties, despite the fact that the rules on customs valuation are
stances, such as political instability and sudden negative events in one or based on the same global customs valuation rules.
more countries, may result in rapid changes in the business environment
and in economic downturn, which is likely to change consumer purchas- Taxes
ing behaviour and thus negatively impact the group’s sales. For multinational companies today’s global environment involves com-
Uncertainties also exist concerning how external factors such as for- plex tax risks, such as the risk of double taxation and tax disputes. As a
eign currencies (see the following section), raw materials prices, trans- large global company, the h&m group closely monitors developments in
port costs and suppliers’ capacity will affect buying costs for the group’s the field of tax. The H&M group is present in many countries and through
products. There are also risks associated with social tensions in sourcing its operations contributes to the community via various taxes and levies
38
such as corporate tax, customs duties, income taxes and indirectly via The annual general meeting held on 8 May 2018 adopted the following
vAT on the clothes sold to consumers. guidelines for remuneration of senior executives. The guidelines basically
The H&M group complies with national and international tax legisla- accorded with the guidelines adopted at the 2017 annual general meeting.
tion, and always pays taxes and levies in accordance with local laws and In addition to the CEO, the board’s proposed new guidelines for senior
regulations in the countries where the H&M group operates. The H&M executives cover members of the executive management team and those
group’s tax policy, which can be found at about.hm.com, reflects and responsible for other group functions; overall, this amounts to nearly 20
supports H&M’s business. The H&M group follows the OECD Transfer individuals. The guidelines are based on industry comparisons.
Pricing Guidelines, which means that profits are allocated and taxed Senior executives shall be compensated at what are considered by
where the value is created. The H&M group is ISO certified for direct the company to be competitive market rates. The criteria used to set
taxation and transfer pricing. levels of compensation shall be based partly on the significance of the
The H&M group works continually to ensure that its tax strategy is duties performed and partly on the employee’s skills, experience and
designed to limit any distortion arising from differences in tax legislation performance. Over time, the largest portion of the total remuneration
in different parts of the world. shall consist of the fixed salary. The forms of compensation shall motivate
The OECD guidelines on transfer pricing can be interpreted in various senior executives to do their utmost to ensure the good financial and
ways, and consequently tax authorities in different countries may ques- sustainable development of the H&M group.
tion the outcome of h&m’s transfer pricing model even though the
model complies with the OECD guidelines. This may mean a risk of tax The total annual remuneration may consist of the following components:
disputes in the group in the event that the H&M group and the local tax — fixed basic salary
authorities interpret the guidelines differently. — short-term variable remuneration
— long-term variable remuneration
ARTICLES OF ASSOCIATION, ANNUAL GENERAL MEETING — pension benefits
According to the h&m group’s articles of association, the h&m group’s — other benefits
board is to consist of at least three but no more than twelve members
elected by the AGM and no more than the same number of deputies. Fixed basic salary
The annual general meeting decides the exact number of board mem- Senior executives shall have a fixed basic cash salary that is at a market
bers, and which individuals are to be elected to the board. Board mem- level based on each position’s significance for the company as a whole.
bers are elected for the period until the end of the next annual general The basic salary shall reflect the individual’s area of responsibility, skills
meeting. The annual general meeting also decides on amendments and experience and requires the individual to work in a committed
to the articles of association. manner at a high professional level.
NUMBER OF SHARES ETC. Variable remuneration

At the end of the financial year the H&M group had 245,427 share- There shall be a clear link between the level of variable remuneration
holders. The total number of shares in the H&M group is 1,655,072,000, paid and the H&M group’s financial and sustainable development. From
of which 194,400,000 are class A shares (ten votes per share) and time to time, therefore, senior executives are entitled to variable remu-
1,460,672,000 are class B shares (one vote per share). Class A shares are neration that depends on the fulfilment of targets – which include group-
not listed. Class B shares are listed on the Stockholm stock exchange, wide financial targets such as pre-set targets for profits and sales, sus-
Nasdaq Stockholm. tainability targets, and individual targets within that person’s area of
Ramsbury Invest AB holds all 194,400,000 class A shares, which responsibility. The targets are aimed at promoting the H&M group’s
represent 57.1 percent of the votes, as well as 538,531,922 class B shares, development in both the short and the long term.
representing 15.8 percent of the votes. This means that as of 30 Novem- At individual level it is the position’s significance and opportunity to
ber 2018, Ramsbury Invest AB represents 72.9 percent of the votes influence the overall development of the group that decides the level of
and 44.3 percent of the total number of shares. Ramsbury Invest AB is the variable remuneration. The CEO decides the maximum possible out-
owned by Stefan Persson and family, and primarily by Stefan Persson. come for each position, but always within the framework of these guide-
Karl-Johan Persson is also a shareholder in Ramsbury Invest AB. lines. variable remuneration is not paid if the individual has given notice
There are no restrictions on voting rights or authorisations to the to terminate his/her employment.
board relating to the issue or acquisition of the company’s own shares.
The variable remuneration may consist of:
CORPORATE GOVERNANCE REPORT Short-term variable remuneration, which is the possibility of a cash
The h&m group has elected to present its corporate governance payment provided that the target criteria that were set in advance for
report as a separate document to the annual report in accordance with both the group and the individual have been fulfilled. Half of the payment
Chapter 6 § 8 of the Swedish Annual Accounts Act. The corporate gov- shall be invested in H&M shares that must be held for at least three years.
ernance report is available at about.hm.com and on pages 20–33 of the Short-term variable remuneration must never exceed the fixed basic
annual report. salary for each individual.
GUIDELINES FOR REMUNERATION OF SENIOR EXECUTIVES Long-term variable remuneration, which is based on performance
The board considers it of the utmost importance that senior executives relative to set targets, but is also conditional upon the senior executive
are paid competitive remuneration at a market level, as regards both remaining employed within the H&M group for at least five years. The
fixed and variable compensation, based on responsibilities and perfor- board’s reasoning is – in view of H&M’s strong expansion and the impor-
mance. The board’s proposed remuneration is in the best interests of the tant stage of development that H&M is at, including within multi-brand
company and its shareholders from a growth perspective, since it helps and omni-channel developments – to ensure that these key individuals
motivate and retain talented and committed senior executives. in senior positions remain with the H&M group during this important
39
development phase. The five-year rule applies with effect from the annual general meeting. The long-term variable remuneration that was
year that the annual general meeting adopted this rule, which was at the subject to a five-year rule will no longer be relevant after the 2019
annual general meeting in spring 2014 (when it was referred to as sup- AGM since the programme expires in spring 2019.
plementary guidelines), up to and including the month of May five years In addition to the CEO, the board’s proposed new guidelines for senior
later, i.e. in 2019. At individual level, the remuneration may vary between executives cover members of the executive management team and those
SEK 0.5 m and SEK 5 m net after tax; the exact distribution per individual responsible for other group functions; overall, this amounts to nearly 20
will be decided by the CEO and the chairman of the board. The total cost individuals. The guidelines are based on industry comparisons.
to the group is estimated at around SEK 30 m per year including social Senior executives shall be compensated at what are considered by
security costs over five years. the company to be competitive market rates. The criteria used to set
In a few cases senior executives may, at the discretion of the CEO and levels of compensation shall be based partly on the significance of the
the chairman of the board, receive one-off payments of up to an extra duties performed and partly on the employee’s skills, experience and
year’s fixed basic salary. Discretionary one-off amounts may also be paid performance. Over time, the largest portion of the total remuneration
to other key individuals. shall consist of the fixed salary. The forms of compensation shall moti-
vate senior executives to do their utmost to ensure the good financial
Pension benefits and sustainable development of the H&M group.
By far the majority of senior executives are covered by a premium-based
pension plan, in addition to the ITP plan. Other than the ITP plan, no The total annual remuneration may consist of the following components:
defined benefit pension plans have been taken out for senior executives — fixed basic salary
since 2005. The retirement age for senior executives varies between — short-term variable remuneration
60 and 65 years. The cost of these commitments is partly covered by — pension benefits
separate insurance policies. — other benefits
Other benefits Fixed basic salary

Senior executives receive other benefits such as healthcare and car Senior executives shall have a fixed basic cash salary that is at a market
allowances. Senior executives are also entitled to the benefits accruing level based on each position’s significance for the company as a whole.
under the profit-sharing programme known as the H&M Incentive Pro- The basic salary shall reflect the individual’s area of responsibility, skills
gram, which is for all employees of the H&M group. and experience and requires the individual to work in a committed
manner at a high professional level.
Information concerning the CEO
The retirement age for the CEO is 65. The CEO is covered by the ITP Variable remuneration
plan and a defined contribution plan. The total pension cost shall amount There shall be a clear link between the level of variable remuneration
in total to 30 percent of the CEO’s fixed basic salary. The CEO is entitled paid and the H&M group’s financial and sustainable development. From
to 12 months’ notice. In the event that the company cancels the CEO’s time to time, therefore, senior executives are entitled to variable remu-
employment contract, the CEO will also receive severance pay of an neration that depends on the fulfilment of targets – which include group-
extra year’s salary. wide financial targets such as pre-set targets for profits and sales, sus-
The board of directors sets the CEO’s total remuneration. The CEO is tainability targets, and individual targets within that person’s area of
not included in the long-term variable remuneration, i.e. what was previ- responsibility. The targets are aimed at promoting the H&M group’s
ously referred to as supplementary guidelines. development in both the short and the long term.
At individual level it is the position’s significance and opportunity to
Other influence the overall development of the group that decides the level
The period of notice for senior executives varies from 3 to 12 months. of the variable remuneration. The CEO decides the maximum possible
The board of directors may deviate from the guidelines for remunera- outcome for each position, but always within the framework of these
tion of senior executives in individual cases where there is a particular guidelines. variable remuneration is not paid if the individual has given
reason for doing so. notice to terminate his/her employment.
Where a board member performs work for the company in addition
to his or her board work, a separate fee may be paid for this. This also The variable remuneration may consist of:
applies if the work is performed by a company wholly or partly owned by Short-term variable remuneration, which is the possibility of a cash
the board member. payment provided that the target criteria that were set in advance for
both the group and the individual have been fulfilled. Half of the payment
THE BOARD’S PROPOSALS TO THE 2019 AGM FOR GUIDELINES shall be invested in H&M shares that must be held for at least three years.
FOR REMUNERATION OF SENIOR EXECUTIVES Short-term variable remuneration must never exceed the fixed basic
The board considers it of the utmost importance that senior executives salary for each individual.
are paid competitive remuneration at a market level, as regards both In a few cases senior executives may, at the discretion of the CEO and
fixed and variable compensation, based on responsibilities and perfor- the chairman of the board, receive one-off payments of up to an extra
mance. The board’s proposed remuneration is in the best interests of the year’s fixed basic salary. Discretionary one-off amounts may also be paid
company and its shareholders from a growth perspective, since it helps to other key individuals.
motivate and retain talented and committed senior executives.
Pension benefits
The board is proposing the following guidelines for remuneration of By far the majority of senior executives are covered by a premium-based
senior executives to the annual general meeting on 7 May 2019. The pension plan, in addition to the ITP plan. Other than the ITP plan, no
guidelines essentially accord with the guidelines adopted at the 2018 defined benefit pension plans have been taken out for senior executives
40
since 2005. The retirement age for senior executives varies between The capital structure is defined as net debt in relation to EBITDA. Over
60 and 65 years. The cost of these commitments is partly covered by time, this should not exceed 1.0 x EBITDA. Net debt/EBITDA was 0.3 as
separate insurance policies. of 30 November 2018.
Other benefits DIVIDEND POLICY AND PROPOSED DIVIDEND

Senior executives receive other benefits such as healthcare and car The board of directors’ intention is to provide shareholders with a contin-
allowances. Senior executives are also entitled to the benefits accruing ued good return while ensuring that, as in the past, expansion and invest-
under the profit-sharing programme known as the H&M Incentive Pro- ments can proceed with a continued strong financial profile and freedom
gram, which is for all employees of the H&M group. of action. Based on this, the board of directors has agreed a dividend pol-
icy stating that the total dividend should exceed 50 percent of profit after
Information concerning the CEO tax, yet taking into consideration the capital structure target. The dividend
The retirement age for the CEO is 65. The CEO is covered by the ITP will be paid in two instalments – one in the spring and one in the autumn.
plan and a defined contribution plan. The total pension cost shall amount The board of directors has decided to propose an unchanged divi-
in total to 30 percent of the CEO’s fixed basic salary. The CEO is entitled dend of SEK 9.75 per share (9.75) to the annual general meeting on 7 May
to 12 months’ notice. In the event that the company cancels the CEO’s 2019, corresponding to 127.5 percent (99.7) of the group’s profit after tax.
employment contract, the CEO will also receive severance pay of an The record date proposed for the first payment of SEK 4.90 is 9 May
extra year’s salary. 2019. This would then be paid out on 14 May 2019. The record date pro-
The board of directors sets the CEO’s total remuneration. The CEO posed for the second dividend payment of SEK 4.85 is 12 November
is not included in the long-term variable remuneration, i.e. what was pre- 2019. This would then be paid out on 15 November 2019.
viously referred to as supplementary guidelines.
PROPOSED DISTRIBUTION OF EARNINGS
Other At the disposal of the annual general meeting: SEK 16,175,585,104
The period of notice for senior executives varies from 3 to 12 months.
The board of directors may deviate from the guidelines for remunera- The board of directors proposes a dividend
tion of senior executives in individual cases where there is a particular of SEK 9.75 per share SEK 16,136,952,000
reason for doing so.
Where a board member performs work for the company in addition To be carried forward as
to his or her board work, a separate fee may be paid for this. This also retained earnings SEK 38,633,104
applies if the work is performed by a company wholly or partly owned by SEK 16,175,585,104
the board member.
The board of directors is of the opinion that the proposed dividend is
FINANCING justifiable since it is based on the fact that the underlying operations are
As of 30 November 2018 the group had SEK 9,153 m (9,745) in loans from showing gradual improvements, investments (capex) will reduce in 2019
credit institutions with a term of up to 12 months, as well as SEK 10,170 m and the company remains in a strong financial position. The dividend
(0) in loans from credit institutions with a term of up to 36 months. proposal takes into consideration the financial position and continued
Loans from credit institutions within the Nordic countries amounted to freedom of action of the group and the parent company, the capital
SEK 17,886 m (9,320) with an average interest rate of 0.45 percent. Loans structure target and the requirements that the nature and extent of the
from credit institutions in eurozone countries amounted to SEK 1,034 m business, its risks and expansion and development plans impose on
(0) with an average interest rate of 0.00 percent, and loans from credit the group’s and the parent company’s equity and liquidity.
institutions in the rest of the world amounted to SEK 403 m (425) with an
average interest rate of 8.64 percent. The group’s strategy is to mainly
centralise financing, which is then distributed within the group via loans
to subsidiaries. In some of H&M’s sales markets local rules and currency
restrictions make it more favourable for the group to use local financing.
In 2018 the H&M group carried out financing activities with a view to
improving liquidity and increasing the average term. Cash and cash
equivalents increased to SEK 11,590 m (9,718) and the average term of
loans from credit institutions increased to 1.6 years (0.7). The group’s
five-year revolving credit facility (RCF) of EUR 700 m that was agreed in
2017 has still not been drawn down.
The strong credit profile of the H&M group enables cost-effective
financing. To increase financing flexibility and cost-effectiveness, the
group continuously reviews opportunities to complement this with other
sources of funding on the credit market.
CAPITAL STRUCTURE
The h&m group advocates a conservative leverage ratio, aiming for a
strong capital structure with strong liquidity and financial flexibility. It is
essential that, as in the past, expansion and investments can proceed
with continued freedom of action.
41
Sustainability report in For further details of the policies mentioned below visit
sustainability.hm.com.
accordance with the Annual
Accounts Act Risks and opportunities
By implementing the sustainability strategy, the h&m group aims to take
This report is prepared in accordance with Chapter 6 §§ 10–14 of the a leadership position in addressing some of the most critical risks and
Annual Accounts Act and covers the financial year from 1 December opportunities in the fashion industry, using its size and scale to leverage
2017 to 30 November 2018. systemic change. Key risks addressed include the growing scarcity of
The sustainability report contains the disclosures on sustainability natural resources, climate change and its consequences, reputational
that are required in order to gain an understanding of the company’s risk, corruption, potential political and societal instability in the sourcing
development, position and results and the consequences of the opera- markets as well as specific or local salient human rights issues identified
tions, including information on issues concerning the environment, social in line with the UN Guiding Principles for Business and Human Rights (see
conditions, human resources, respect for human rights and anticorrup- the Sustainability Report for further details). The H&M group is con-
tion measures. The report was submitted to the company’s auditor along vinced that moving towards this vision will create even stronger relation-
with the annual report. As previously, the H&M group also prepares sus- ships with customers and colleagues, as well as with business partners,
tainability reporting in accordance with GRI, which is published on the their employees and the group’s many other stakeholders. This will help
company’s website. identify innovative ways to make and bring fashion and design to cus-
tomers, drive the development of new materials and give the group early
Sustainability strategy of the H&M group access to these – ultimately building an important foundation for suc-
Sustainability is a key part of the h&m group’s success, both today and cessful business in the decades to come. The H&M group has publicly
even more so in the future. The group’s vision is to lead the change towards endorsed the Task Force on Climate-related Financial Disclosures (TCFD)
a circular and renewable fashion industry while being a fair and equal and aims to comply with its recommendations. The group is in the pro-
company. To achieve this vision, the H&M group uses its size and scale and, cess of analysing its climate risks according to the TCFD guidelines and
together with a broad range of external and internal experts, has devel- will follow the recommendations for disclosure.
oped an ambitious strategy. The strategy is built on three key ambitions:
Governance and general follow-up procedures
100% LEADING THE CHANGE The H&M group is constantly reviewing and improving how sustainability
— Promote and scale innovation is organised and integrated across the company and ensures all work is
— Drive transparency run and coordinated optimally, even when the vision, ambitions and strat-
— Reward sustainable actions egy grow and change. The work takes place in cross-functional forums
and collaborations to ensure integration, ownership and accountability.
100% CIRCULAR & RENEWABLE Reporting directly to the CEO, the head of sustainability is responsible
— A circular approach to how products are made and used for the implementation of the sustainability vision and strategy together
— use only recycled or sustainably sourced materials with the executive management team. Twice a year the head of sustain-
— A climate positive value chain ability reports performance (against key sustainability indicators) to the
board of directors.
100% FAIR & EQUAL All the functions within the H&M group set their own sustainability
— Fair jobs for all goals based on the group’s vision and strategy, and follow up on these
— inclusion and diversity goals at least annually.
This is part of the group’s Change-Making Programme which brings
The vision and strategy apply to all brands in the H&M group. To fulfil together the goals, roadmaps, standards, policies and follow-up methods
this vision and lead systemic change across the industry, the group’s needed to work towards the group’s vision, while also leaving room for
work is not limited to its own operations but spans across the entire locally tailored implementation and activities. This enables the group to
value chain including: integrate sustainability across its business, making it a natural, exciting
— Design and essential part of the daily work of all colleagues.
— Choice and development of raw materials
— Suppliers of materials and products – the H&M group works with ENVIRONMENT: CIRCULAR & RENEWABLE
1,269 independent suppliers and their 2,383 factories employing Circular
about 1.6 million people Strategy and policy
— Transport The fashion industry today largely depends on natural resources
— 4,968 stores in 71 markets as well as 47 online markets such as cotton or other cellulosic fibres, as well as oil-based fibres like
— The user phase of the products, including impacts resulting from polyester. With a growing global population and limited planetary bound-
garment care and the product’s end of life aries, these resources are likely to become increasingly scarce. Moving
towards a circular model seeks to decouple future growth from resource
Outlined to the right are key elements of the h&m group’s sustainability use while accelerating innovation, more efficient operations and other
strategy, related policies, governance and results, as well as risks and business opportunities.
opportunities addressed. For a full overview, see the Sustainability This is why the H&M group has set out the vision to become 100 percent
Report at sustainability.hm.com. The Sustainability Report for 2018 will circular. It means building circularity into every stage of the value chain. In
be published in April 2019. the shift from a linear to a circular model, the focus is on five key processes:
42
design, material choice, production processes, prolonging the lifespan of It identifies best-in-class chemicals and safer alternatives, includes
products including product reuse and recycling. The H&M group applies a scoring system to rate chemicals and formulations based on human
this circular approach not just to its commercial goods, but also to non- health and environmental toxicity, and automatically designs out
commercial goods and products such as packaging, built environment, etc. hazardous substances.
— The H&M group has a goal to have 100 percent sustainable cotton in — The H&M group collects old clothes and home textiles, from any brand
the products produced by the group itself by 2020. 95 percent of the and in any condition, for reuse and recycling on a global scale with the
cotton the H&M group used during 2018 was from sustainable sources, goal of collecting 25,000 tonnes annually by 2020. In 2018 the H&M
an increase from 59 percent. group has collected 20,649 tonnes of garments through its garment
— The H&M group has a goal to have 100 percent recycled or other collecting initiatives.
sustainably sourced materials by 2030 (commercial goods and pack-
aging). 57 percent of all materials used during 2018 were recycled or Renewable energy
sustainably sourced, an increase from 35 percent. Climate change remains one of the greatest challenges of our time. Its
— The Textile Exchange’s Preferred Fiber and Materials Market Report consequences will affect the entire planet and everyone living on it –
2018 named the H&M group as the biggest user of preferred cotton making it a risk to many industries, including fashion. The H&M group is
(for the H&M group this consists of better cotton, organic and recycled determined to take a lead in tackling the challenge of climate change and
cotton), and the second biggest user of recycled and organic cotton. has made a bold commitment by setting the goal of becoming climate
The H&M group was also the biggest user of preferred MMC fibres and positive across the entire value chain by 2040. To reach this goal, three
the biggest user of lyocell. key priorities have been established: leadership in energy efficiency, 100
— In 2018 the H&M group set a goal to design all packaging to be reusable, percent renewable energy, and climate resilience and carbon sinks. That
recyclable or compostable by 2025, and by 2030 all packaging material means going way beyond simply cutting the group’s emissions, commit-
should be recycled or other sustainably sourced materials. This is to ting instead to making a significant contribution to help the planet stay
ensure that reuse and recycling systems are in place for the packaging below the 2 °C global warming limit set by the Paris Climate Agreement.
generated in the group’s own operations. A recent landmark report by the uN intergovernmental Panel on Climate
— The Sustainability Commitment – which is signed by all business part- Change (IPCC) described how warming needs to stay below 1.5 °C to
ners – covers animal welfare and material ethics, among other things. avoid the worst impacts of climate change, and called for all sectors to
— As part of the H&M group’s water stewardship strategy, in 2018 the hasten the transition to climate neutral or climate positive business.
H&M group launched a new Water Roadmap for its supply chain, which The h&m group is a signatory of the Fashion industry Charter on
contains key goals and actions up until 2022. Climate Action initiated by the UNFCCC.
— The h&m group bans or limits chemicals considered as hazardous in the — The h&m group is committed to reducing the amount of energy used
production of all its products by means of the h&m Chemical Restric- at every stage of the value chain, with the goal of reducing electricity
tions, which all its business partners are committed to comply with. intensity in stores by 25 percent by 2030 compared to 2016 and
— In 2018 screened chemistry was adopted as a tool to help with choos- having 100 percent of supplier factories enrolled in energy efficiency
ing the best available chemicals for the group’s products. Screened programmes by 2025.
chemistry goes beyond the chemicals listed in Restricted Substance — The H&M group is committed to maximising the use of renewable
Lists (RSL) and Manufacturing Restricted Substance Lists (MRSL). and sustainable energy in its value chain, with the goal of sourcing
KPI GOAL 2018 2017 2016
% recycled or other sustainably sourced materials

in total material use (commercial goods and packaging) 100% by 2030 57 35 26
% cotton from more sustainable resources

(certified organic, recycled or Better Cotton)* 100% by 2020 95 59 43
Tonnes of garments collected through garment collecting initiative* 25,000 t per year by 2020 20,649 17,771 15,888
% of renewable electricity in own operations* 100% 96 95** 96
% change in CO2 emissions from own operations Climate positive

(Scope 1+2***) compared with previous year* value chain by 2040 -11 -21 -47
Tonnes of CO2 emissions from own operations Climate positive

(Scope 1+2***) value chain by 2040 56,977 63,690 80,541
% change in electricity intensity (kwh/m per opening

2
hour in store compared with 2016)* -25% by 2030 -8.2 -2.7 n/a
Indicators marked * have been reviewed by the company’s auditors.

** Due to inaccuracy in calculation the 2017 data has been corrected from 96% to 95%.
*** Scope 1 and 2 are direct and indirect emissions of greenhouse gases from the group’s own operations.
43
100 percent renewable energy in its own operations and working — Although H&M does not own any factories or set factory wages, work
closely with government bodies and other stakeholders to push is taking place to make sure that people employed in the textile supply
progress in renewable energy access in production markets. Sup- chain have fair and decent jobs. While monitoring compliance in suppliers’
pliers are also encouraged to build their own renewable energy factories, the h&m group invests in creating systematic improvements
capacity. for the entire industry with a focus on two closely interlinked areas:
— The h&m group is committed to strengthening the planet’s natural — Well-functioning industrial relations – where workers themselves can
systems so that they can better support ecosystems and climate negotiate and safeguard their interests – are the best foundation for
stability, and is currently exploring different kinds of carbon sinks in achieving and monitoring good working conditions and fair living
three areas: natural carbon sinks, technological carbon sinks and wages in the textile industry. The strategy is based on developing
reductions outside the value chain. functional workplace dialogue systems at factory level, as well as
advancing industrial relations systems in sourcing markets. The goal
Follow-up procedures and results set in 2013 was to have workplace dialogue programmes at supplier
Business partners must sign the Sustainability Commitment before factories covering 50 percent of the production volume by 2018.
any order is placed. This sets out fundamental requirements as well as This goal has been exceeded. Today 73 percent of the group’s pro-
aspirational ambitions for business partners in the areas of healthy work- duction volume is made in factories that have democratically elected
places, healthy ecosystems (including impact on climate and air quality, worker representatives in place. This covers 594 factories and about
impact on water resources, use of chemicals, waste, reuse and recycling, 840,000 workers. The H&M group has also signed a global frame-
conservation of species and natural habitats) and animal welfare. Com- work agreement with IndustriALL, Global Union and IF Metall and
pliance with the fundamental requirements and performance against works with other relevant stakeholders such as the UN body ILO to
aspirational ambitions are followed up regularly through the Sustainable advance industrial relations at industry level.
Impact Partnership Programme (SIPP), which is integrated into regular — The H&M group has developed a fair living wage strategy – working
supplier reviews and thereby works to provide better business oppor- to improve wages for garment workers systematically by getting
tunities for better sustainability performance. supplier factories to implement improved wage management sys-
tems, working with governments to create the necessary legal
SOCIAL CONDITIONS AND EMPLOYMENT: frameworks, and working with other brands and partners to estab-
FAIR & EQUAL lish a common approach to responsible purchasing practices. The
Strategy and policy goal set in 2013 was for supplier factories covering 50 percent of the
The h&m group believes that everyone should be treated in a fair and production volume to have implemented improved wage manage-
equal way. In short, this means making sure that the company’s values as ment systems by 2018. This goal has been exceeded. Today 67 per-
well as respect for human rights are upheld and promoted – both within cent of the product volume is made in factories that have imple-
the H&M group and across the supply chain. The group’s strategy is mented improved wage management systems. This covers 500
about ensuring decent jobs, being inclusive, promoting diversity, and for factories and about 635,000 workers. For further details please visit
people across the business to develop and enjoy life. The group has https://about.hm.com/en/sustainability/sustainable-fashion/wages/
therefore set out the vision of being a 100% Fair & Equal company. The key-impacts-and-learnings.html
group’s ambition has two focus areas: fair jobs, and stewardship of inclu- — The Ethical Trading Initiative (ETI) has conducted an independent
sion and diversity. review of the H&M group’s fair living wage strategy. The review can
— Within the group’s own operations a set of specific policies guides the be found here: https://www.ethicaltrade.org/resources/review-hm-
work as an addition to the group’s corporate values, such as the H&M groups-roadmap-to-fair-living-wage
group’s Global Compensation and Benefit Policy, Health and Safety — The h&m group remains committed to its vision of achieving fair
Policy and the Employee Relations Policy, as well as the framework living wages for all textile workers and will continue to work with its
agreement with UNI Global Union. supplier factories to build further on the positive learnings and
KPI GOAL 2018 2017 2016
% of employees agreeing with the statement “I feel comfortable

being myself at work” and % of employees agreeing with the
statement “I am treated with respect and dignity” **** Annual increase 83, 81 n/a n/a
Number of supplier factories implementing improved wage 50% of production

management systems (% of production volume covered) volume by 2018 500 (67%) 227 (40%) 140 (29%)
Number of supplier factories that have implemented democratically 50% of production

elected worker representation (% of production volume covered) volume by 2018 594 (73%) 458 (52%) 290 (42%)
% of business partners regarding the h&m group

as a fair business partner 90% by 2018 93 94 83
**** New baseline replacing the previous KPI of % of employees agreeing with the statement “People here are treated fairly regardless of age,
ethnicity, sex, sexual orientation, disabilities”, as a new engagement survey platform has been introduced.
44
impacts from the implementation of improved wage management — A due diligence process that includes human rights is conducted prior
systems and workplace dialogue. Beyond this, the H&M group to entering into a new contract with a business partner.
continues to need strong collaboration with various actors and will — All new markets (retail and production) are assessed on human rights,
therefore continue and further expand its work with different key as are new materials, processes and products.
partners in the industry. This includes continuing to work with ACT — human rights training is given to relevant staff covering basic human
(Action, Collaboration, Transformation) and its groundbreaking rights, the company’s responsibilities as per the UN Guiding Principles,
approach to achieving fair living wages. due diligence and how to analyse and handle cases, situations and
— making inclusion and diversity a key focus area, the h&m group is incidents with a human rights impact.
seeking to ensure everyone’s right to equal treatment and lack of dis-
crimination. This is manifested and implemented, for example, in the Issue-specific follow-up procedures
company’s Global Policy on Diversity, Inclusiveness and Equality. To When an incident occurs, the group has a systematic approach to analys-
advance inclusion and diversity in the H&M group’s own operations as ing the company’s responsibilities according to the UNGP and taking
well as in the supply chain and the communities the group is present appropriate measures.
in, a Global Lead has been appointed and a dedicated task force has
been formed to catalyse the work within this focus area. During 2018 ANTI-CORRUPTION
the group has focused on raising internal awareness around inclusion, Strategy and policy
diversity and unconscious bias and consequently, 100 percent of Corruption is a risk in many of the markets in which the H&M group and
management teams in the head office have conducted training. The its suppliers operate. Acting ethically, with respect and integrity is an
H&M group’s strategic framework on inclusion and diversity, including unquestionable rule within the company and is intrinsic to the company’s
objectives and global goals, has been updated and further developed. values. The company has a strong anti-corruption programme in place,
The group’s brands have continued to promote diversity and equality with a focus on preventing corruption. The H&M group’s Code of Ethics
in various campaigns and products. outlines the group’s expectations on employees and business partners
when conducting business for and on behalf of the H&M group. The H&M
Follow-up procedures and results group also has a zero tolerance policy towards any form of corruption.
— The h&m group conducts internal audits to assess the implementation — All employees in contact with business partners must sign the Code
of its policies. of Ethics when employed.
— The H&M group conducts annual employee surveys. — it is mandatory for all the h&m group’s business partners to sign the
— Commercial business partners sign the Sustainability Commitment Code of Ethics.
before any kind of order is placed. This sets out fundamental require- — Risk of corruption is included in due diligence process for all new busi-
ments and aspirational ambitions for the company’s business partners ness partners. The company’s risk assessments for corruption focus
in the areas of healthy workplaces and healthy ecosystems (including on levels of risk defined by country, industry and position/function.
health and safety, discrimination, diversity and equality, recognised — Once the level of risk has been ascertained, short- and long-term goals
employment, fair living wages and benefits, working hours, freedom of are set to help mitigate the risk. The group annually maps the biggest
association and collective bargaining, child labour and young workers, risks of corruption in its organisation, and uses the results to allocate
as well as forced, bonded, prison and illegal labour). Compliance with resources in the best way.
the fundamental requirements and performance against aspirational — Training is provided for employees and prioritised business partners.
ambitions are followed up regularly through the Sustainable Impact
Partnership Programme (SIPP), which is integrated into regular supplier Follow-up procedures and results
reviews and thereby works to provide better business opportunities — All violations against the company’s Code of Ethics will be addressed
for better sustainability performance. and might lead to termination of business relationship or employment.
— The number of violations against the Code of Ethics is tracked
HUMAN RIGHTS and reported yearly to the CEO, CFO and board of directors as well
Strategy and policy as externally.
The h&m group considers respect for human rights a fundamental — Internal audits are performed to ensure compliance with the Code
part of a successful business. As a global business, however, the group of Ethics.
has operations and suppliers in countries where there is a risk of human — Business partners and employees can make use of the company’s
rights violations. As stated in its Human Rights Policy, the company rec- open-door policy, whistleblowing policy and coe@hm.com to
ognises its responsibility to respect human rights and hence the need report cases.
to integrate this perspective across the operations and in all relevant — During 2018 there were 25* confirmed incidents of non-compliance
activities. This means that the group needs to understand the risks and that led to terminations and/or written warnings.
impacts on human rights, and to seek ways to prevent, mitigate and
remediate these impacts. Indicators marked * have been reviewed by the company’s auditors.
— The H&M group’s approach to human rights is based on the UN Guid-
ing Principles on Business and Human Rights (UNGP). The company’s
Human Rights Policy applies to all entities within the H&M group.
— The H&M group has a recurring process for identifying and reviewing
salient human rights issues.
— All the company’s functions perform an annual sustainability risk
assessment that includes human rights.
45
FiNANCiAL REPORTS
Group income statement
SEK M
1 DECEMBER – 30 NOVEMBER 2018 2017
Net sales, note 3, 4 210,400 200,004

Cost of goods sold, note 6, 7, 9 -99,513 -91,914
GROSS PROFIT 110,887 108,090
Selling expenses, note 6, 7, 9 -87,512 -80,427

Administrative expenses, note 6, 7, 9, 10 -7,882 -7,094
OPERATING PROFIT 15,493 20,569
interest income and similar items 292 281

Interest expense and similar items -146 -41
PROFIT AFTER FINANCIAL ITEMS 15,639 20,809
Tax, note 11 -2,987 -4,625

PROFIT FOR THE YEAR 12,652 16,184
All profit for the year is attributable to the shareholders of the parent company H & M Hennes & Mauritz AB.
Earnings per share, SEK* 7.64 9.78

Number of shares, thousands* 1,655,072 1,655,072
* Before and after dilution.
Consolidated statement of comprehensive income
SEK M
Other comprehensive income

Items that are or may be reclassified to profit or loss
Translation differences 1,895 -1,496
Change in hedging reserves
Change in the value of derivatives, note 20 483 -1,341
Reclassified to profit or loss, note 20 52 1,162
Tax attributable to change in hedging reserves -123 39
Items that will not be reclassified to profit or loss

Remeasurement of defined benefit pension plans, note 19 14 78
Tax related to the above remeasurement -3 -19
OTHER COMPREHENSIVE INCOME 2,318 -1,577
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 14,970 14,607
All comprehensive income is attributable to the shareholders of the parent company H & M Hennes & Mauritz AB.
46
FiNANCiAL REPORTS
COMMENTS ON THE GROUP INCOME STATEMENT viewed primarily against the backdrop of the rapid transformation of the
For the 2017/2018 financial year the H&M group’s net sales increased by fashion retail sector and a tougher market than the company had initially
5 percent to SEK 210,400 m (200,004). In local currencies, sales increased expected, as well as issues in connection with the implementation of
by 3 percent. The group’s online sales made up 14.5 percent (12.5) of the logistics systems in some important markets which led to higher costs.
group’s total sales at the end of the financial year. To secure upcoming transitions of logistics systems and the replacement
Gross profit increased to SEK 110,887 m (108,090). This corresponds of the online platform in Germany, there were additional costs in the
to a gross margin of 52.7 percent (54.0). The gross profit and gross mar- fourth quarter. Although these costs had a negative impact on earnings,
gin are a result of many different factors, internal as well as external, and they will result in a range of improvements for customers. After a difficult
are mostly affected by the decisions that the h&m group takes in line first half, however, the group’s transformation work started to take effect
with its strategy to always have the best customer offering in each indi- in the second half of the year. Improved collections generated better
vidual market – based on the combination of fashion, quality, price and full-price sales and lower markdowns towards the end of the year.
sustainability.
Selling and administrative expenses increased by 9 percent in SEK TAX
and by 6 percent in local currencies during the 2017/2018 financial year The H&M group’s effective tax rate for the 2017/2018 financial year was
compared to the previous year. 19.1 percent (22.2). The final tax rate for the year depends on the results of
Profit after financial items amounted to SEK 15,639 m (20,809). the group’s various companies, the corporate tax rates in each country and
2018 was a challenging year for the whole industry, and thus also any additional taxes relating to previous years. In addition to this, tax was
for the H&M group. The profit development for the year must be affected by remeasurements of deferred tax liabilities and receivables.
GROSS PROFIT SELLING AND PROFIT AFTER

NET SALES AND GROSS MARGIN ADMINISTRATIVE EXPENSES FINANCIAL ITEMS
SEK M SEK M SEK M + 9% SEK M

54.0% 52.7% 95,394
+ 5% 87,521
108,090 110,887
210,400
200,004
20,809 - 25%
15,639
2017 2018 2017 2018 2017 2018 2017 2018
TOP TEN SALES MARKETS 2018 2017 CHANGE IN % 30 NOV – 18 2018

SEK M SEK M LOCAL NUMBER OF NEW STORES
NET SALES NET SALES SEK CURRENCY STORES (NET)
Germany 32,367 30,959 5 -1 468 5
uSA 24,798 26,330 -6 -6 578 42
uK 13,760 12,622 9 5 304 12
France 11,311 11,383 -1 -6 237 -3
China 10,743 9,484 13 10 530 24
Sweden 8,404 8,236 2 2 175 3
italy 7,630 7,525 1 -4 179 4
Spain 7,373 6,816 8 2 172 -3
Netherlands 6,465 6,191 4 -1 144 -1
Russia 5,737 4,915 17 23 139 5
Others* 81,812 75,543 8 6 2,042 141
Total 210,400 200,004 5 3 4,968 229
* Of which franchises 5,620 4,938 14 14 255 36
47
FiNANCiAL REPORTS
Group balance sheet
SEK M SEK M
30 NOVEMBER 2018 2017 30 NOVEMBER 2018 2017
ASSETS EQUITY AND LIABILITIES
NON-CURRENT ASSETS EQUITY
Intangible assets Share capital, note 18 207 207

Brands, note 12 – 18 Reserves 3,322 1,015
Customer relations, note 12 – 8 Retained earnings 55,017 58,491
Leasehold and similar rights, note 12 508 592 TOTAL EQUITY 58,546 59,713
Capitalised development costs, note 12 9,046 6,361
LIABILITIES
Goodwill, note 12 64 64
Non-current liabilities
9,618 7,043
Provisions for pensions, note 19 445 445
Property, plant and equipment
Deferred tax liabilities, note 11 5,088 5,331
Buildings and land, note 13 831 824
Liabilities to credit institutions, note 23 10,170 –
Equipment, tools, fixture and
fittings, note 13 41,608 38,994 Other interest-bearing liabilities,
note 14, 23 322 350
42,439 39,818
16,025 6,126
Non-current financial assets
Other shares and interests 478 233
Current liabilities
Accounts payable 6,800 7,215
Other non-current assets
Tax liabilities, note 11 1,163 918
Non-current receivables 885 806
Liabilities to credit institutions, note 23 9,153 9,745
Deferred tax receivables, note 11 3,794 2,916
Other interest-bearing liabilities,
4,679 3,722 note 14, 23 136 125
Other liabilities 3,800 3,672
TOTAL NON-CURRENT ASSETS 57,214 50,816
Accrued expenses and prepaid
income, note 21 23,167 19,048
CURRENT ASSETS 44,219 40,723
Stock-in-trade, note 15 37,721 33,712
TOTAL LIABILITIES 60,244 46,849
Current receivables
Accounts receivable, note 20 6,329 5,297 TOTAL EQUITY AND LIABILITIES 118,790 106,562
Tax receivables, note 11 1,448 2,375
Other receivables 1,607 1,874
Prepaid expenses, note 16 2,881 2,770
12,265 12,316
Cash and cash equivalents, note 17 11,590 9,718
TOTAL CURRENT ASSETS 61,576 55,746
TOTAL ASSETS 118,790 106,562
48
FiNANCiAL REPORTS
COMMENTS ON THE GROUP BALANCE SHEET STOCK-IN-TRADE

The H&M group remains in a strong financial position. The group’s equity/ SEK M
assets ratio was 49.3 percent (56.0) and the share of risk-bearing capital + 12%
was 53.6 percent (61.0). 37,721
Equity apportioned on the outstanding 1,655,072,000 (1,655,072,000) 33,712
shares as of 30 November 2018 was SEK 35.37 (36.08).
Stock-in-trade
Stock-in-trade amounted to SEK 37,721 m (33,712), an increase of 12
percent in SEK compared with the same point in time last year. In local
currencies the increase was 10 percent.
Although the inventory level remains too high, both the level and the
composition improved between the third and fourth quarters – showing 2017 2018
that the company is on the right track. With a stronger customer offer-
ing combined with more efficient buying and logistics, this will result
in gradual improvements to inventory levels going forward. It is therefore
expected that markdowns in relation to sales may decrease in the first
quarter 2019 compared to the same quarter the previous year.
The stock-in-trade amounted to 31.7 percent (31.6) of total assets
and 17.9 percent (16.9) of net sales.
Financing
As of 30 November 2018 the group had SEK 9,153 m (9,745) in loans from
credit institutions with a term of up to 12 months, as well as SEK 10,170 m
(0) in loans from credit institutions with a term of up to 36 months.
Loans from credit institutions within the Nordic countries amounted
to SEK 17,886 m (9,320) with an average interest rate of 0.45 percent.
Loans from credit institutions in eurozone countries amounted to SEK
1,034 m (0) with an average interest rate of 0.00 percent, and loans
from credit institutions in the rest of the world amounted to SEK 403 m
(425) with an average interest rate of 8.64 percent.
49
FiNANCiAL REPORTS
Group changes in equity
Since there are no minority interests, all shareholders’ equity is attributable to the shareholders of the parent company H & M Hennes & Mauritz AB.
SHARE TRANSLATION HEDGING RETAINED

SEK M CAPITAL DIFFERENCES RESERVES EARNINGS TOTAL EQUITY
SHAREHOLDERS’ EQUITY, 1 DECEMBER 2017 207 1,353 -338 58,491 59,713
Profit for the year – – – 12,652 12,652

Translation differences – 1,895 – – 1,895
Change in value of derivatives – – 483 – 483
Reclassified to profit or loss – – 52 – 52
Tax related to hedging reserves – – -123 – -123
Remeasurement of defined benefit pension plans – – – 14 14

Tax related to the above remeasurement – – – -3 -3
Other comprehensive income – 1,895 412 11 2,318
Total comprehensive income – 1,895 412 12,663 14,970
Dividend – – – -16,137 -16,137

SHAREHOLDERS’ EQUITY, 30 NOVEMBER 2018 207 3,248 74 55,017 58,546
SHARE TRANSLATION HEDGING RETAINED

SEK M CAPITAL DIFFERENCES RESERVES EARNINGS TOTAL EQUITY
SHAREHOLDERS’ EQUITY, 1 DECEMBER 2016 207 2,849 -198 58,378 61,236

Adjustment of opening balance* 7 7
ADJUSTED SHAREHOLDERS’ EQUITY, 1 DECEMBER 2016 207 2,849 -198 58,385 61,243
Profit for the year – – – 16,184 16,184

Translation differences – -1,496 – – -1,496
Change in value of derivatives – – -1,341 – -1,341
Reclassified to profit or loss – – 1,162 – 1,162
Tax related to hedging reserves – – 39 – 39
Remeasurement of defined benefit pension plans – – – 78 78

Tax related to the above remeasurement – – – -19 -19
Other comprehensive income – -1,496 -140 59 -1,577
Total comprehensive income – -1,496 -140 16,243 14,607
Dividend – – – -16,137 -16,137

SHAREHOLDERS’ EQUITY, 30 NOVEMBER 2017 207 1,353 -338 58,491 59,713
* Effective from the 2017 financial year, the way that certain defined contribution pension plans are recognised has changed in two of the Swedish companies.
The effect in relation to previous years is reported as an adjustment to opening equity.
50
FiNANCiAL REPORTS
Group cash flow statement
SEK M
Current operations
Profit after financial items* 15,639 20,809
Provisions for pensions 0 9
Depreciation 9,671 8,488
Tax paid -3,098 -6,051
Other 39 -20
Cash flow from current operations before changes in working capital 22,251 23,235
Changes in working capital

Current receivables -587 -1,115
Stock-in-trade -3,489 -2,414
Current liabilities 3,112 1,881
CASH FLOW FROM CURRENT OPERATIONS 21,287 21,587
Investing activities
investment in leasehold and similar rights -64 -102
investment in other intangible assets -3,207 -2,058
investment in buildings and land -5 -27
investment in equipment -9,552 -10,284
Other investments -324 -25
CASH FLOW FROM INVESTING ACTIVITIES -13,152 -12,496
Financing activities
Short-term loans -592 7,677
New borrowing 10,170 –
Finance lease repayments -126 -57
Dividend -16,137 -16,137
CASH FLOW FROM FINANCING ACTIVITIES, NOTE 23 -6,685 -8,517
CASH FLOW FOR THE YEAR 1,450 574
Cash and cash equivalents at beginning of financial year 9,718 9,446

Cash flow for the year 1,450 574
Exchange rate effect 422 -302
Cash and cash equivalents at end of year, note 17 11,590 9,718
* Interest paid for the group amounts to SEK 107 m (40). Received interest for the group amounts to SEK 292 m (260).
51
FiNANCiAL REPORTS
Parent company income statement
SEK M
External net sales 22 13

Internal net sales, note 6 4,262 4,069
GROSS PROFIT 4,284 4,082
Administrative expenses, note 6, 7, 9, 10 -156 -158

OPERATING PROFIT 4,128 3,924
Dividend from subsidiaries 13,793 13,004

Interest income and similar items, note 28 97 18
Interest expense and similar items, note 28 -44 -91
PROFIT AFTER FINANCIAL ITEMS 17,974 16,855
Appropriations, note 24 -1,164 -328

Tax, note 11 -673 -773
Parent company statement of comprehensive income
SEK M

Items that will not be reclassified to profit or loss
Remeasurement of defined benefit pension plans, note 19 -9 -1
Tax related to the above remeasurement 2 0
OTHER COMPREHENSIVE INCOME -7 -1
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 16,130 15,753
52
FiNANCiAL REPORTS
Parent company balance sheet
SEK M SEK M
30 NOVEMBER 2018 2017 30 NOVEMBER 2018 2017
ASSETS EQUITY AND LIABILITIES
NON-CURRENT ASSETS EQUITY
Property, plant and equipment Restricted equity

Buildings and land, note 13 146 148 Share capital, note 18 207 207
Equipment, tools, fixture and fittings, Restricted reserves 88 88
note 13 143 219
295 295
289 367
Non-restricted equity
Non-current financial assets
Retained earnings 46 430
Shares and interests, note 25 588 588
Profit for the year 16,130 15,753
Receivables from subsidiaries 842 849
16,176 16,183
Other non-current receivables 115 111
Deferred tax receivables, note 11 76 79 TOTAL EQUITY 16,471 16,478
1,621 1,627
UNTAXED RESERVES, NOTE 26 96 417

TOTAL NON-CURRENT ASSETS 1,910 1,994
LIABILITIES
CURRENT ASSETS Non-current liabilities
Current receivables Provisions for pensions, note 19 181 182
Accounts receivable 6 4 Liabilities to credit institutions, note 23 9,113 –
Receivables from subsidiaries 30,104 19,287 9,294 182
Other receivables 2 8 Current liabilities
Prepaid expenses, note 16 121 13 Accounts payable 1 3
30,233 19,312 Tax liabilities 21 41
Liabilities to credit institutions, note 23 6,000 4,000
Cash and cash equivalents, note 17 93 133
Other liabilities 200 176
TOTAL CURRENT ASSETS 30,326 19,445 Accrued expenses and prepaid

income, note 21 153 142
6,375 4,362
TOTAL ASSETS 32,236 21,439
TOTAL LIABILITIES 15,669 4,544
TOTAL EQUITY AND LIABILITIES 32,236 21,439
53
FiNANCiAL REPORTS
Parent company changes in equity
SHARE RESTRICTED RETAINED

SEK M CAPITAL RESERVES EARNINGS TOTAL EQUITY
SHAREHOLDERS’ EQUITY, 1 DECEMBER 2017 207 88 16,183 16,478
Profit for the year – – 16,137 16,137

Remeasurement of defined benefit pension plans – – -9 -9
Tax related to the above remeasurement – – 2 2
Other comprehensive income – – -7 -7
Total comprehensive income – – 16,130 16,130
Dividend – – -16,137 -16,137

SHAREHOLDERS’ EQUITY, 30 NOVEMBER 2018 207 88 16,176 16,471
SHARE RESTRICTED RETAINED

SEK M CAPITAL RESERVES EARNINGS TOTAL EQUITY
SHAREHOLDERS’ EQUITY, 1 DECEMBER 2016 207 88 16,562 16,857

Adjustment of opening balance* 5 5
ADJUSTED SHAREHOLDERS’ EQUITY, 1 DECEMBER 2016 207 88 16,567 16,862
Profit for the year – – 15,754 15,754

Remeasurement of defined benefit pension plans – – -1 -1
Tax related to the above remeasurement – – 0 0
Other comprehensive income – – -1 -1
Total comprehensive income – – 15,753 15,753
Dividend – – -16,137 -16,137

SHAREHOLDERS’ EQUITY, 30 NOVEMBER 2017 207 88 16,183 16,478
* Effective from the 2017 financial year, the way that certain defined contribution pension plans are recognised has changed.
The effect in relation to previous years is reported as an adjustment to opening equity.
54
FiNANCiAL REPORTS
Parent company cash flow statement
SEK M
Current operations
Profit after financial items* 17,974 16,855
Provisions for pensions -1 -10
Depreciation 83 101
Taxes paid -691 -1,498
Cash flow from current operations before changes in working capital 17,365 15,448
Changes in working capital

Current receivables -10,921 -3,126
Current liabilities -1,457 -231
CASH FLOW FROM CURRENT OPERATIONS 4,987 12,091
Investing activities
investment in buildings and land -5 -27
Other investments 2 -170
CASH FLOW FROM INVESTING ACTIVITIES -3 -197
Financing activities
Short-term loans 2,000 4,000
New borrowing 9,113 –
Dividend -16,137 -16,137
CASH FLOW FROM FINANCING ACTIVITIES -5,024 -12,137
CASH FLOW FOR THE YEAR -40 -243
Cash and cash equivalents at beginning of year 133 376

Cash flow for the year -40 -243
Cash and cash equivalents at end of year, note 17 93 133
* Interest paid for the parent company amounts to SEK 44 m (11). Received interest for the parent company amounts to SEK 19 m (18) – see note 28.
55
N OT E S
Notes to the financial statements
CORPORATE INFORMATION as well as changes that affect liquidity, such as changes resulting from
The parent company H & M Hennes & Mauritz AB (publ) is a limited com- acquisitions and translation differences. The group provides this infor-
pany domiciled in Stockholm, Sweden. The parent company’s corporate mation in note 23.
identity number is 556042-7220. The company’s shares are listed on — IAS 12 Income Taxes. The standard has been amended to clarify
the Stockholm stock exchange, Nasdaq Stockholm. The group’s business when a deferred tax receivable can be recognised. A deductible tem-
consists mainly of sales of clothing, accessories, footwear, cosmetics, porary difference generates a deferred tax receivable where changes
home textiles and homeware to consumers. The company’s financial year in value are negative and these only become deductible on realisation.
runs from 1 December to 30 November. The annual report was approved if there are no restrictions, the company must assess the deferred
for publication by the board of directors on 18 February 2019 and will be tax receivable along with other deferred tax assets attributable to tem-
submitted to the annual general meeting for approval on 7 May 2019. porary differences. Where there are restrictions, the company must
Ramsbury invest AB’s holding of shares in h & m hennes & mauritz AB assess the deductible temporary difference along with corresponding
represents 44.3 percent of all shares and 72.9 percent of the total voting types of deductible temporary differences. The amendments are
power. Ramsbury Invest AB (556423-5769) is thus formally the parent to be applied retrospectively for accounting year beginning on or after
company of H & M Hennes & Mauritz AB. 1 January 2017. The change has had no material effect on the con-
solidated financial statements.
1. ACCOUNTING PRINCIPLES
Basis for preparation of the accounts New standards, amended standards and interpretations that have not
The consolidated accounts have been prepared in accordance with the yet come into force have not been applied early to H&M’s financial
International Financial Reporting Standards (IFRS) issued by the Interna- statements. The following standards enter into force for financial years
tional Accounting Standards Board (IASB) and the interpretations pro- beginning on or after 1 December 2018.
vided by the IFRS Interpretations Committee. Since the parent company
is a company within the EU, only IFRS approved by the EU are applied. Future accounting principles and disclosure requirements
The consolidated accounts also contain disclosures in accordance with A number of new standards, revisions and interpretations of existing
the Swedish Financial Reporting Board’s recommendation RFR 1, Sup- standards have been published but have not yet entered into force for
plementary Accounting Rules for Groups. the H&M group. Of these, only the standards below are expected to have
The financial statements are based on historical acquisition costs, any effect on the consolidated financial statements.
apart from certain financial instruments which are reported at fair value. — IFRS 9 Financial Instruments will be applied by H&M from the 2018/2019
The parent company’s functional currency is Swedish kronor, which financial year, when it will replace IAS 39 Financial Instruments: Recog-
is also the reporting currency for the parent company and for the group. nition and Measurement. The new standard makes certain changes to
Unless otherwise indicated, all amounts are reported in millions of the recognition and measurement of financial assets and financial liabil-
Swedish kronor (SEK m). ities. The standard is divided into three parts: classification and meas-
Where relevant, accounting principles are described within each note. urement, hedge accounting and impairment. The principles relating to
when financial assets and liabilities are recognised or derecognised
Parent company in the financial statements are the same as under IAS 39; see note 20.
The parent company applies the Swedish Annual Accounts Act and IFRS 9 requires financial assets to be classified in three different
the Swedish Financial Reporting Board’s recommendation RFR 2, measurement categories: at amortised cost, at fair value through other
Accounting for Legal Entities, which essentially means that IFRS is comprehensive income or at fair value through profit or loss. In the
applied. In accordance with RFR 2, the parent company does not apply case of financial liabilities there are no significant changes compared
iAS 39 or the forthcoming standard iFRS 9 to the recognition and meas- to IAS 39. The changes to the principles for the classification and
urement of financial instruments and does not capitalise development measurement of financial assets and liabilities are not expected to
costs (IAS 38.57). Due to the link between reporting and taxation, year- have a material effect on the measurement of the group’s financial
end appropriations and untaxed reserves are reported in the parent instruments in the income statement and balance sheet. The group’s
company’s financial statements. financial assets and liabilities are classified as follows:
Group contributions that the parent company receives from subsidi- Amortised cost is used for assets held for the purpose of receiving
aries and provides to subsidiaries are reported under appropriations in contractual cash flows that relate only to payments of capital and inter-
accordance with the alternative rule in RFR 2. est, as well as for financial liabilities other than derivatives. Accounts
The changes in RFR 2 that apply as a result of the group applying IFRS receivable are recognised initially at the invoiced amount, while other
9 and IFRS 15 from 1 December 2018 will not result in any significant assets and liabilities are measured initially at fair value plus or minus
changes for the parent company or impact the parent company’s finan- transaction costs. They are subsequently measured at amortised cost
cial statements. using the effective interest method, or without discounting for receiv-
ables close to their due date. The recognised value of assets and
Changes in accounting principles and disclosure requirements receivables is net after impairment relating to expected credit losses.
Described below are changed accounting principles applied by the group Fair value through other comprehensive income includes shares
with effect from 1 December 2017. These changes have had no material not held for trading that the group has irrevocably chosen to classify
effect on the consolidated financial statements. In other respects the in this category. Dividends received are recognised in profit or loss.
accounting principles applied for 2017/2018 are the same as those Changes in value and gains or losses on disposal are recognised in
applied in the previous year. other comprehensive income and are not reclassified to profit or loss.
— IAS 7 Statement of Cash Flows. The standard has been amended and Fair value through profit or loss includes holdings of shares that
disclosure requirements have been expanded to cover changes in are not classified at fair value through other comprehensive income,
liabilities attributable to financing activities. The required disclosures funds and any derivatives to which hedge accounting is not applied.
relate to changes attributable to incoming and outgoing payments
56
N OT E S
Derivatives are held only for hedging purposes and are recognised beginning on or after 1 January 2019 and will supersede IAS 17
at fair value both upon initial recognition and thereafter. For cash flow Leases and its associated interpretations IFRIC 4, SIC-15 and SIC-27.
hedges and hedging of net investments in foreign operations, the The standard requires lessees to recognise assets and liabilities for
effective portion of the derivative’s change in value is recognised in all leases unless the lease term is 12 months or less or the underlying
other comprehensive income and accumulated in equity. The same asset has a low value. This is based on the approach that the lessee
applies to currency effects for liabilities in foreign currency which are has a right to use an identified asset for a specific period of time and
hedging instruments in the hedging of net investments in foreign oper- at the same time a liability to pay for this right. Recognition for lessors
ations. The amounts in equity are reclassified to profit or loss when will essentially be unchanged.
the hedged item affects profit or loss, which in the case of the hedging During the year the group continued its evaluation of the new standard
of net investments in foreign operations is on disposal of the foreign and expects it to result in recognition of significant assets and liabilities
operation. The group is applying hedge accounting according to IFRS 9 associated with the group’s leases for premises. Since the standard will
with effect from the 2018/2019 financial year. The group’s hedging sit- be applied for the first time in respect of the 2019/2020 financial year,
uation on the transition to IFRS 9 is deemed to fulfil the criteria for the judgement has been made that it is not yet possible to assess and
hedge accounting and no transitional effects are recognised in equity. calculate its effects on the figures with any certainty.
Finally, new principles have been introduced for the impairment of — IFRIC 23 Uncertainty over Income Tax Treatments. This interpretation
financial assets measured at amortised cost as described above, using of the standard clarifies recognition and measurement when there is
a model based on expected losses rather than losses incurred. One of uncertainty over income tax treatments. The interpretation is applica-
the aims of the new model is that provision for credit losses will be ble to annual reporting periods beginning on or after 1 January 2019.
made at an earlier stage. The transition to the new model for impair- During 2019 the group will complete its assessment of the effects of
ment losses has no material impact on the group’s recognition of credit the interpretation.
losses, however, and the group’s impairment of bad debts is affected
only to an insignificant extent by the transition to IFRS 9. Impairment of Estimates, assumptions and assessments
accounts receivable is based on historical losses taking into considera- The preparation of the annual report and consolidated accounts requires
tion forward-looking factors. Impairment of other assets is generally estimates and assumptions to be made, as well as judgments in the appli-
according to the rating-based method. For accounts receivable and cation of the accounting principles. These affect carrying amounts for
assets with a term of less than 12 months impairment is applied for the assets, liabilities, income, expenses and supplementary information. The
full term. For assets with a longer remaining term impairment is applied estimates and assumptions are based on historical experience, other
for the coming 12 months unless there has been a material increase in relevant factors and expectations of the future and are reviewed regularly.
credit risk, in which case impairment will be applied for the entire The actual outcome may therefore deviate from the estimates and assump-
remaining term. tions made. The sources of uncertainty that have been identified by H&M
Overall the introduction of IFRS 9 is not expected to have any sig- are the measurement of stock-in-trade and the measurement of current
nificant effect on the consolidated accounts. However, IFRS 9 requires and deferred tax; see also note 11 for tax and note 15 for stock-in-trade.
additional disclosures concerning risk management and the effects of It is judged that, as of 30 November 2018, there are no estimates or
hedge accounting according to IFRS 7. In accordance with the stand- assumptions in the financial statements that involve a significant risk
ard’s transitional rules, the group will not restate comparative figures of any material adjustment to the values of assets and liabilities in the
for the 2017/2018 financial year. forthcoming financial year, other than those mentioned above.
— IFRS 15 Revenue from Contracts with Customers. This standard applies
to annual reporting periods beginning on or after 1 January 2018 (in Consolidated accounts
H&M’s case, from the 2018/2019 financial year). The standard replaces Basis of consolidation
all previously issued standards and interpretations dealing with revenue The consolidated accounts cover the parent company and its subsidi-
(i.e. IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer aries, and have been prepared according to the acquisition method. The
Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real financial reports for the parent company and the subsidiaries included
Estate, iFRiC 18 Transfers of Assets from Customers and SiC-31 Revenue: in the consolidated accounts cover the same period and have been
Barter Transactions Involving Advertising Services). prepared in accordance with the accounting principles that apply to the
IFRS 15 contains an overall model for reporting revenue arising from group. Intra-group income, expenses, receivables and liabilities, as well as
contracts with customers. The idea is that everything starts with an agree- unrealised gains and losses, are eliminated entirely in the preparation of
ment between two parties concerning the sale of a good or service. Ini- the consolidated accounts. All companies in which the group owns or
tially a customer agreement is to be identified, which generates an asset controls more than 50 percent of the votes, or in which the group alone
(rights, a promise that compensation will be received) and a liability has a controlling interest through an agreement or otherwise, are con-
(commitments, a promise to deliver goods/services) for the seller. Under solidated as subsidiaries. Subsidiaries are included in the consolidated
the model the company then reports a revenue item and thereby dem- accounts from the date of acquisition, which is the date on which the
onstrates that the company is meeting a commitment to deliver prom- parent company gains a controlling interest, and are included in the
ised goods or services to the customer. To assess how the introduction consolidated accounts until such date as the controlling interest ends.
of IFRS 15 will impact the group, a preliminary study of the company’s
revenue streams was conducted. The preliminary study, which was Business combinations
conducted using the five-step model, showed that the group’s income In business combinations acquired assets and liabilities are identified and
statement will not be significantly affected by the introduction of IFRS 15. classified, and these are then measured at fair value on the acquisition date.
The only exception is that the group will report provisions for returns If the acquisition cost of the subsidiary’s shares exceeds the calculated
gross. The group has elected to use a prospective method of transition value of the net identifiable assets of the acquired company at the time
and consequently comparative figures have not been restated. of acquisition, the difference is reported as goodwill upon consolidation.
— IFRS 16 Leases. This standard applies to annual reporting periods If the acquisition cost is less than the finally established value of the net
57
N OT E S
identifiable assets, the difference is reported directly in the income The risks relating to these instruments are primarily the following:
statement. Minority interests are determined for each transaction either — interest rate risk associated with liabilities to credit institutions, cash
as a proportionate share of the fair value of net identifiable assets or at and cash equivalents and short-term investments;
fair value. Transaction costs associated with acquisitions are not included — currency risk associated with flows and with financial assets and
in the acquisition cost; instead these are expensed immediately. liabilities in foreign currencies;
— credit risk and counterparty risk associated with financial assets and
Translation of foreign subsidiaries derivative positions;
The companies making up the group present their financial reports in — liquidity risk and financing risk relating to liquidity and cash flow as well
the currency used in the economic environment in which the company as financing and refinancing of the group’s capital requirements.
concerned mainly operates, known as the functional currency. These
reports form the basis of the consolidated accounts. The consolidated Interest rate risk
accounts are presented in Swedish kronor, which is the parent compa- interest risk is the risk that earnings or the fair value of assets and liabilities
ny’s functional currency and reporting currency. Assets and liabilities in will be adversely affected by changes in interest rates. The group’s expo-
foreign subsidiaries are translated at the exchange rate on the closing sure to risk from changes in interest rates relates to cash and cash equiv-
date, while the income statement is translated at the average exchange alents, short-term investments and liabilities to credit institutions and for
rate for the financial year. The translation difference arising from this, and finance leases. The original term of the investments is up to three months
also as a result of the fact that the net investment is translated at a differ- as of the closing date. The financial policy permits investments of up to
ent exchange rate at the end of the financial year than at the beginning two years. The group’s cash and cash equivalents and short-term invest-
of the financial year, is posted directly to equity as a translation reserve, ments as of the closing date amounted to 11,590 m (9,718). As of the closing
via the statement of comprehensive income. On disposal of a foreign date, liabilities to credit institutions and for finance leases amounted to
business the accumulated translation differences in the income state- 19,781 m (10,220). An interest rate increase of 1 percentage point on these
ment are posted together with the profit or loss on disposal. amounts would increase interest income from cash and cash equivalents
and short-term investments by SEK 116 m (97), and would increase inter-
Foreign currency est expense for external borrowing and finance leases by SEK 198 m
monetary assets and liabilities in foreign currencies are converted at (102). A corresponding decrease in the interest rate would reduce inter-
the exchange rate on the closing date. Exchange rate differences arising est income by the same amount and would decrease interest expense
on translation are reported in the income statement with the exception related to liabilities to credit institutions and for finance leases.
of exchange rate differences in respect of intra-group loans, which are
to be regarded as net investment in a foreign business. Exchange rate Currency risk
differences of this type are posted to equity as translation differences There is a risk that fluctuations in exchange rates will have an adverse
via the statement of comprehensive income. Exchange rate differences effect on the company’s financial position, profitability and cash flow. H&M
relating to loans in foreign currency taken out to hedge net investments is affected by fluctuations in exchange rates via transaction exposure
in foreign operations are also recognised in other comprehensive income. and translation exposure. Transaction exposure arises when sales and
purchases are made in currencies other than the company’s reporting
Interest income currency. Translation exposure arises when subsidiaries’ results, assets,
Interest income is recognised as it is earned. liabilities and equity are translated into SEK, the group’s reporting currency.
Other provisions Currency exposure associated with financial instruments

Provisions are reported in the balance sheet when there is an under- H&M’s currency risk associated with financial instruments is mainly related
taking as a result of an event occurring and it is likely that an outflow of to financial investments, accounts payable and derivatives. The group’s
resources will be required for the undertaking and the amount can be accounts payable in foreign currencies are mainly handled in Sweden and
reliably estimated. are largely hedged through forward contracts. Based on this, a change in
the value of the Swedish krona of 2 percent in relation to other currencies
Cash flow statement would have an insignificant momentary effect on profit related to finan-
The cash flow statement is prepared according to the indirect method. The cial instrument holdings as of the closing date. A 2 percent strengthening
reported cash flow covers only transactions involving payments in or out. of the Swedish krona would have a positive effect on the hedge reserve in
equity of around SEK 486 m (200) before taking into account the tax effect,
2. FINANCIAL RISKS of which SEK 371 m (237) relates to EUR and SEK -229 m (-230) to USD.
The group’s financing and management of financial risk is carried out The group’s exposure to outstanding derivative instruments is
centrally within the group’s financial department in accordance with a reported in note 20.
financial policy established by the board of directors. The financial policy The group’s operating result for the year was affected by net
is the most important financial control tool for the company’s financial exchange rate differences relating to flows of goods in the amount of
activities and establishes the framework within which the company acts. SEK 582 m (44).
The group’s accounting principles for financial instruments, including
derivatives, are described in note 20. Transaction exposure associated with commercial flows
In the course of doing business the group is exposed to risk associated Payment flows in the form of payments in foreign currencies for accounts
with financial instruments, such as cash and cash equivalents, short-term receivable and payable expose the group to currency risk. To manage
investments, accounts receivable, accounts payable and loans. The group currency risk relating to changes in exchange rates, the group hedges its
also executes transactions involving currency derivatives and loans in currency risk within the framework of the financial policy. Currency risk
foreign currency for the purpose of managing currency risk that arises exposure is dealt with at a central level. A large share of the group’s sales
in the course of the group’s business. are made in euros, while the group’s most significant purchase curren-
58
N OT E S
cies are the US dollar and the euro. Fluctuation in the US dollar/euro 3. SEGMENT REPORTING
exchange rate is the single largest transaction exposure within the group. The group’s business consists mainly of sales of clothing, accessories,
To hedge the flows of goods in foreign currencies and thereby reduce footwear, cosmetics, home textiles and homeware to consumers. Inter-
the effects of future exchange rate fluctuations, the group’s purchases nal follow-up is carried out on a country-by-country basis by the CEO,
of goods and the bulk of corresponding forecast inflows from the sales who is the group’s chief operating decision maker. Each country is thus
companies are fully hedged under forward contracts on an ongoing an operating segment. The various countries sell similar products via
basis. The average term of outstanding forward contracts is around similar sales channels to similar customers, however. Goods purchasing
three months. is carried out collectively for the group. Some countries have similar eco-
nomic characteristics, such as long-term economic results. In view of
Translation exposure on consolidation of units outside Sweden this, the countries may be combined in segment reporting in accordance
In addition to the effects of transaction exposure, profits are also with IFRS 8. H&M has combined countries to form the segments Asia
affected by translation effects as a result of changes in exchange rates and Oceania, Europe and Africa, and North and South America. The par-
for the local currencies of the various foreign subsidiaries against the ent company and subsidiaries with no external sales are reported in a
Swedish krona, compared to the same period the previous year. The separate Group Functions segment. The same accounting principles are
underlying profit/loss in a market may be unchanged in the local cur- applied to segment reporting as in the consolidated accounts. Transac-
rency, but when converted into SEK may increase if the Swedish krona tions between segments take place on normal commercial terms.
has weakened or decrease if the Swedish krona has strengthened.
Translation effects also affect the group’s net assets on consolidation 2018 2017
of the foreign subsidiaries’ balance sheets (translation exposure in the Asia and Oceania
balance sheet). Where the remeasurement of balance sheet items External net sales 31,902 29,557
affects the group’s income statement, such as in the case of short-term Operating profit 735 1,143
intra-group liabilities and short-term intra-group receivables, these are Operating margin, % 2.3 3.9
fully hedged. Net investment in foreign currency may hedged in full Assets excluding tax receivables and internal receivables 16,102 14,490
or in part through liabilities in the same currency using what is known Liabilities excluding tax liabilities and internal liabilities 2,400 1,487
as an equity hedge. As of 30 November 2018 certain portions of net investments 1,047 1,651
investments are hedged in this way. Depreciation 1,667 1,455
Europe and Africa*

Credit risk and counterparty risk External net sales 143,480 135,567
Credit risk is the risk that the H&M group’s counterparties will be unable Operating profit 4,787 4,066
to meet their commitments and thus cause losses for the H&M group. Operating margin, % 3.3 3.0
Financial credit risk arises primarily as counterparty risk in the form of Assets excluding tax receivables and internal receivables 47,571 45,894
investments or cash and cash receivables in the bank accounts, and also Liabilities excluding tax liabilities and internal liabilities 15,952 13,553
as receivables from banks attributable to surplus value in derivatives. investments 4,378 4,824
The financial policy states maximum amounts and terms for investments Depreciation 4,528 4,118
and for cash and cash equivalents in bank accounts with different ratings. North and South America
Credit exposure as of 30 November 2018, corresponding to the book External net sales 35,018 34,880
value for cash and cash equivalents of SEK 11,590 m (9,718), accounts Operating profit 946 794
receivable of SEK 6,329 m (5,297) and other SEK 1,735 m (1,536), totalled Operating margin, % 2.7 2.3
SEK 19,654 m (16,551). Accounts receivable are divided between a large Assets excluding tax receivables and internal receivables 19,863 18,959
number of customers with low amounts per customer. The average debt Liabilities excluding tax liabilities and internal liabilities 7,909 6,785
was around SEK 2,801 (2,794). Bad debts during the year from accounts investments 2,915 3,258
receivable were insignificant. Depreciation 2,437 2,120
Group Functions
Liquidity risk and financing risk Net sales to other segments 67,795 72,901
Liquidity risk refers to the risk that the H&M group will be unable to meet Operating profit 9,025 14,566
its payment commitments due to a lack of liquidity. Financing risk refers to Operating margin, % 13.3 20.0
the risk that the financing of the group’s capital requirements and the refi- Assets excluding tax receivables and internal receivables 30,012 21,928
nancing of outstanding loans becomes more difficult or more expensive. Liabilities excluding tax liabilities and internal liabilities 27,732 18,775
The strategy for the H&M group’s liquidity planning and financing investments 4,557 3,017
is to maintain good payment capacity and to identify and cover liquidity Depreciation 1,039 795
needs arising in the group. Liquidity and financing risks are regulated in Eliminations
the H&M group’s financial policy, which states that loans are to have an Net sales to other segments -67,795 -72,901
evenly distributed maturity structure and that cash and unused credit
Total
facilities are to cover the company’s forecast short-term liquidity needs.
External net sales 210,400 200,004
As of 30 November 2018 the group had SEK 19,323 m (9,745) in loans
Operating profit 15,493 20,569
from credit institutions with a term of up to 36 months, with an average
Operating margin, % 7.4 10.3
term of 1.6 years. At the closing date, cash and cash equivalents amounted
Assets excluding tax receivables and internal receivables 113,548 101,271
to SEK 11,590 m (9,718). Starting from the first quarter of 2017 the H&M
Liabilities excluding tax liabilities and internal liabilities 53,993 40,600
group has a five-year revolving credit facility (RCF) of EUR 700 m, with an Investments 12,897 12,750
option to extend this for a further two years. The credit facility has not Depreciation 9,671 8,488
been drawn down.
* South Africa
59
N OT E S
Cont. Note 3, Segment reporting Cont. Note 4, Net sales by market

No. of stores No. of stores
Operating profit for each segment is based on how H&M tracks results 2018 30 Nov. 2018 2017 30 Nov. 2017
internally within the group and may deviate from the fiscal result in Turkey 2,852 68 2,962 70
each market. Romania 2,299 56 1,979 56
The group’s property, plant and equipment amounted to SEK 42,439 m Croatia 719 16 685 15
(39,818) as of 30 November 2018. The property, plant and equipment Singapore 801 12 899 13
are largely distributed between the countries in accordance with each Bulgaria 635 21 581 20
country’s level of sales. In Sweden property, plant and equipment Latvia 356 8 326 8
amounted to SEK 2,694 m (2,113) as of 30 November 2018. malaysia 1,177 47 1,109 44
Mexico 2,854 45 1,988 37
4. NET SALES BY MARKET Chile 1,488 13 1,250 8
The group’s income is generated mainly by the sale of clothing, accesso- Lithuania 351 9 324 9
ries, footwear, cosmetics, home textiles and homeware to consumers. Serbia 423 13 363 12
Sales revenues are reported as net sales in the income statement, i.e. Estonia 381 12 350 10
sales revenue less value-added tax, returns and discounts. Revenue from Australia 2,283 44 2,383 32
store and online sales is reported in conjunction with sale/delivery to the Philippines 1,007 34 926 32
customer and is based on the country in which the customer lives. Online Taiwan 627 12 742 12
sales made up 14.5 percent (12.5) of the group’s sales. Franchise sales Peru 763 11 725 8
have two components: sales of goods to franchisees, which are reported macau 120 2 135 2
on delivery of the goods, and franchise fees, which are reported when india 1,408 39 1,092 27
the franchisee sells goods to the consumer. South Africa 842 23 780 17
Reporting of H&M Club follows the principles in IFRIC 13. Points Puerto Rico 80 2 91 2
earned that have not been used are reported as a liability as well as a Cyprus 79 1 80 1
reduction in revenue in order to meet the future cost that will arise for New Zealand 284 4 183 3
the points issued. The liability is based on the fair value calculated per Kazakhstan 203 3 158 3
outstanding point. Colombia 405 4 188 3
The group’s income exhibits seasonal variations. The first quarter of the iceland 192 3 76 2
financial year is normally the weakest and the last quarter the strongest. vietnam 271 6 63 2
Georgia 102 2 7 1
ukraine 57 2
No. of stores No. of stores uruguay 64 1
2018 30 Nov. 2018 2017 30 Nov. 2017
Franchise 5,620 255 4,938 219
Sweden 8,404 175 8,236 172
Total 210,400 4,968 200,004 4,739
Norway 4,964 130 4,900 128
Denmark 5,045 113 4,639 110
uK 13,760 304 12,622 292
Switzerland 5,145 100 5,471 100 5. REVENUE FROM GROUP COMPANIES
Germany 32,367 468 30,959 463 The parent company’s internal sales consist of royalties of SEK 4,169 m
Netherlands 6,465 144 6,191 145 (3,962) and other income of SEK 93 m (107) from group companies.
Belgium 3,815 96 3,726 97
Austria 4,901 88 4,666 86 6. COSTS BY TYPE
Luxembourg 406 10 408 10 Costs for the group are allocated to three functions: cost of goods sold,
Finland 2,412 67 2,295 64 selling expenses and administrative expenses. The cost of goods sold
France 11,311 237 11,383 240 includes all costs of designing, producing and transporting the goods to
uSA 24,798 578 26,330 536 distribution centres. In addition to pure purchasing costs for the products,
Spain 7,373 172 6,816 175 it includes costs such as customs duties, environmental levies, employee
Poland 5,285 186 4,402 175 benefit expenses and the cost of premises for the buying department,
Czech Republic 1,610 52 1,341 50 IT costs related to buying and logistics as well as handling costs in the
Portugal 1,179 32 1,075 32 distribution centres and shipping costs from warehouses to stores. Selling
italy 7,630 179 7,525 175 expenses include store expenses such as salaries and rents, marketing
Canada 4,569 94 4,291 91 costs, handling costs in replenishment centres for stores, shipping costs
Slovenia 488 12 452 13 to online customers, IT costs related to stores and sales, as well as cen-
ireland 1,104 24 961 24 tral support functions related to sales. The item administrative expenses
hungary 1,646 47 1,402 45 includes the costs of other central support functions, such as salaries,
Slovakia 750 25 616 22 rents and IT costs for administrative systems.
Greece 1,718 35 1,576 35 For information on employee benefit expenses see note 7 and for
China 10,743 530 9,484 506 depreciation see note 9.
hong Kong 1,502 26 1,663 28
Japan 4,573 91 4,469 82
Russia 5,737 139 4,915 134
South Korea 1,957 46 1,807 41
60
N OT E S
7. SALARIES, OTHER REMUNERATION Cont. Note 7, Salaries, other remuneration and social security costs
AND SOCIAL SECURITY COSTS
salary. Pension expenses amounted to SEK 4.2 m (4.1). The retirement
2018 Board, CEO, of of which pens.
executive Salary, Social which board, CEO, age for the CEO is 65.
management other sec. costs pens. executive The CEO is entitled to a 12-month period of notice. In the event that
team, salary employees total total management
the company cancels the CEO’s employment contract, the CEO will also
Sweden, parent receive severance pay of an extra year’s salary. The CEO’s terms of
company 20 0 23 17 17
employment are determined by the board of directors.
Subsidiaries 45 31,045 7,467 692 19
The CEO is not included in the long-term variable remuneration, i.e.
Group total 65 31,045 7,490 709 36
what was previously referred to as supplementary guidelines; see the
administration report on page 40.
2017 Board, CEO, of of which pens.
executive Salary, Social which board, CEO,
management other sec. costs pens. executive Pension for the former CEO
team, salary employees total total management The former CEO retired on 1 September 2009. The total pension com-
Sweden, parent mitments recognised as liabilities, based on the fact that the former CEO
company 20 0 15 9 9 receives a pension for the first three years of his retirement equivalent
Subsidiaries 48 28,620 6,979 589 23 to 65 percent of his fixed salary followed by a lifelong pension equivalent
Group total 68 28,620 6,994 598 32 to 50 percent of the same salary, amount to SEK 145.8 m (140.6). The
change in the year’s pension commitments recognised as liabilities
includes actuarial losses of SEK 9.5 m (actuarial losses of SEK 3.5 m).
Board fees Pension costs for the former CEO are included under “of which pen-
Board fees paid for the year as approved by the 2017 annual general sions to board, CEO, executive management”.
meeting (AGM) amounted to SEK 5,775,000 (6,075,000). Board fees
were paid as follows: Remuneration of the executive management team
SEK In addition to the CEO, as of 30 November 2018 the executive manage-
Stefan Persson, chairman 1,675,000 ment comprised nine (ten) individuals, six of whom are women. The
Stina Bergfors 600,000 executive management team consists of the CFO and the COO as well
Anders Dahlvig 750,000 as the individuals responsible for the following group functions: sustain-
Lena Patriksson Keller 600,000 ability, communications, human resources, business development and
Christian Sievert 800,000 the two persons responsible for the H&M brand and the person respon-
Erica Wiking Häger 750,000 sible for new business.
Niklas Zennström 600,000 Remuneration paid to members of the executive management
team, other than the CEO, in the form of salary and benefits amounted
The fees were paid as resolved at the 2017 AGM. This means that the fees to SEK 45.4 m (48.2), which included variable remuneration of SEK 0 m
related to the period until the next AGM was held, i.e. the period 11 May (0). In addition to this, an estimated expense of SEK 30 m (30) has been
2017 to 8 May 2018. The amounts were paid out after the 2018 AGM. recognised in respect of remuneration that certain senior executives
As of the AGM on 8 May 2018 the board consists of seven ordinary may receive in accordance with the long-term variable remuneration
members elected by the AGM. There are also two employee representa- programme, i.e. what was previously referred to as supplementary guide-
tives, with two deputies for these positions. Seven members of the board lines for senior executives; see further description in the administration
are women, four are men, and four of the 11 are employed by the company. report on page 39. This will be paid out no earlier than 2019, in accord-
Board member Lena Patriksson Keller is the majority shareholder in ance with the guidelines approved at the 2014 AGM. Pension expenses
Patriksson Communication AB, which had business dealings with H&M relating to the executive management team during the year amounted
during the year. The transactions took place on market terms and remu- to SEK 18.5 m (17.0). There are rules in place for members of the exec-
neration for 2018 amounted to SEK 5.9 m (1.3). Outstanding balances as utive management team with respect to supplements to retirement
of 30 November 2018 totalled SEK 0.1 m (0.1). Erica Wiking Häger is a part- pension beyond the ITP plan. The retirement age varies between 62 and
ner at the law firm Mannheimer Swartling, which had business dealings 65. The cost of this commitment is partially covered by separate insur-
with H&M during the year. The transactions took place on market terms ance policies.
and remuneration for 2018 amounted to SEK 0.6 m (0.6). Outstanding
balances as of 30 November 2018 totalled SEK 0 m (0.1). H&M Incentive Program (HIP)
An extraordinary general meeting held on 20 October 2010 resolved to
Remuneration of senior executives introduce an incentive programme for all employees of the H&M group.
Remuneration of senior executives is based on resolutions on guide- The programme was initiated by Stefan Persson and family through
lines adopted annually by the AGM; see the administration report on the donation of 4,040,404 H&M shares worth around SEK 1 billion to
pages 39–40. a Swedish foundation, Stiftelsen H&M Incentive Program.
All employees of the h&m group, regardless of their position and
Remuneration of the chief executive officer salary level, are included in the programme according to the same basic
Remuneration paid to the CEO for the 2018 financial year in the form of principle – based on length of employment, either full-time or part-time.
salary and benefits amounted to SEK 13.8 m (13.7), which included variable The number of years that the employee has worked for the company
remuneration of SEK 0 m (0). Pension benefits for the CEO are covered previously is taken into account in the qualification period, which is five
by a defined contribution plan and by the ITP plan. The combined pen- years unless local rules require otherwise. As a general rule, funds will
sion expenses shall amount in total to 30 percent of the CEO’s fixed begin to be paid out no earlier than the age of 62. However, it will also be
61
N OT E S
Cont. Note 7, Salaries, other remuneration and social security costs Cont. Note 8, Average number of employees
2018 2017
possible for payments to be made after ten years of employment – but Total % men Total % men
no earlier than 2021. China 9,574 29 9,323 28
The 2013 annual general meeting resolved to change the basis of hong Kong 1,081 35 965 32
future contributions to HIP. The contribution is no longer linked to the Japan 2,435 30 2,317 41
increase in dividend; instead, contributions to HIP are based on 10 per- Russia 3,092 26 2,724 26
cent of the increase in the company’s profit after tax between two South Korea 1,202 31 1,160 32
consecutive financial years. The increase in profit is calculated on profit Turkey 3,389 42 3,305 46
after tax before any contribution to HIP. Thus when calculating the con- Romania 1,198 25 1,078 25
tribution to HIP for year 2, the year’s profit after tax is compared with Croatia 336 9 332 10
year 1’s profit after tax before any contribution to HIP. This ensures that Singapore 420 31 540 30
the two years are compared on a like-for-like basis; in other words, profit Bulgaria 359 19 366 24
after tax before any contribution to HIP. The first contribution to HIP Latvia 306 14 305 14
based on an increase in profit was made for the financial year which malaysia 815 54 803 55
ended on 30 November 2013. Mexico 2,225 49 1,534 49
The contribution to HIP for a financial year is expensed in the year to Chile 1,051 58 721 46
which it relates. For example, if profit after tax in year 1 is 100 and profit Lithuania 215 11 226 10
after tax in year 2 is 130, then the contribution is 3 and will be expensed Serbia 216 19 195 19
in year 2. Estonia 238 5 245 5
There is a ceiling that limits the size of the contribution when the Australia 1,209 35 1,107 29
increase in profit between two years may be deemed disproportionately Philippines 823 30 723 48
large. The ceiling has been set at 2 percent of profit for the year after tax Taiwan 341 28 370 30
before any contribution to HIP. Peru 699 55 657 54
The contributions to the foundation are to be invested in H&M shares. macau 64 39 63 43
H&M has no other commitments beyond this. india 1,781 62 1,329 60
in the consolidated accounts the costs of the incentive programme South Africa 568 36 548 34
are recognised in accordance with the rules on short-term profit-sharing Puerto Rico 41 20 51 27
and bonus schemes set out in IAS 19. The expense will be recognised Cyprus 52 27 68 19
when the amount has been established and an obligation exists. New Zealand 185 31 118 24
For 2018 no contribution was made to the incentive programme, Kazakhstan 149 29 158 39
based on the principle for contributions to HIP that was adopted at the Colombia 329 49 273 20
2013 AGM and is described above. iceland 74 15 20 15
vietnam 224 32 102 25
8. AVERAGE NUMBER OF EMPLOYEES Georgia 92 14 68 16
ukraine 113 28
2018 2017 uruguay 63 24
Total % men Total % men
Other countries 953 72 914 72
Sweden 10,839 24 10,100 23
Total 123,283 26 120,191 26
Norway 1,815 10 1,799 10
Denmark 1,864 10 1,899 9
uK 8,128 22 7,565 23
Switzerland 1,998 15 2,129 15
9. DEPRECIATION AND AMORTISATION
Germany 13,766 19 14,504 19
Depreciation has been calculated at 12.5 percent of the acquisition cost
Netherlands 2,537 17 2,636 16 of equipment and leasehold rights, and 20 percent for computer equip-
Belgium 2,377 28 2,349 27 ment and vehicles. Brands and customer relations relating to FaBric
Austria 1,951 11 1,955 10 Scandinavien AB and capitalised development costs are amortised at
Luxembourg 152 16 159 16 10 percent of the acquisition cost. Buildings are depreciated at 3 percent
Finland 1,230 7 1,195 7 of their acquisition cost. No depreciation is applied to land values. Depre-
France 5,324 24 5,765 28 ciation for the year is reported in the income statement as follows:
uSA 12,956 37 13,248 37
GROUP PARENT COMPANY
Spain 4,739 21 4,581 20
2018 2017 2018 2017
Poland 6,613 16 6,649 16
Cost of goods sold 558 736 – –
Czech Republic 1,230 13 1,121 13
Selling expenses 8,566 7,175 – –
Portugal 752 16 804 17
Administrative expenses 547 577 83 101
italy 4,293 27 4,346 28
Total 9,671 8,488 83 101
Canada 1,890 24 1,823 24
Slovenia 154 7 162 10
ireland 482 17 442 16
hungary 773 15 750 16
Slovakia 371 14 316 16
Greece 1,137 19 1,186 17
62
N OT E S
10. AUDIT FEES Cont. Note 11, Tax
GROUP PARENT COMPANY GROUP PARENT COMPANY

2018 2017 2018 2017 2018 2017 2018 2017
Ernst & Young Tax expense (-) / tax receivable (+):
Audit engagement 30.7 29.0 3.7 3.5 Current tax
Other auditing 4.4 4.4 0.2 0.2 Tax expense for the period -4,236 -4,044 -671 -772
Tax consultancy 11.1 13.0 – 0.1 Adjusted tax expense for previous
years -23 -14 0 0
Other consultancy 4.1 3.1 0.4 –
Sub-total -4,259 -4,058 -671 -772
Other auditors Deferred tax receivable (+) /

Audit engagement 7.8 6.9 – – tax expense (-) in respect of:
Total 58.1 56.4 4.3 3.8 Stock-in-trade -628 -105 – –
Loss carryforward 29 13 – –
Pension provisions -16 -28 -2 -1
11. TAX
Tax allocation reserve 1,780 110 – –
Income taxes in the income statement represent current and deferred
intangible non-current assets -595 -366 – –
corporation tax payable by Swedish and foreign subsidiaries. Current tax
Property, plant and equipment -39 -339 – –
is tax that will be paid or received in respect of the current year as well as
Other temporary differences 223 148 – –
adjustments to current tax attributable to previous periods. The income
Effect of changed tax rates 518 – – –
tax rate in force in each country is applied.
Sub-total 1,272 -567 -2 -1
Deferred tax is calculated according to the balance sheet method
based on temporary differences arising between reported and fiscal Total -2,987 -4,625 -673 -773
values of assets and liabilities. Deferred tax is calculated using the tax
Deferred tax recognised in other
rates that are expected to apply in the period when the receivables are comprehensive income in respect of:
deducted or the liabilities are settled, based on the tax rates (and the hedging reserves -123 39 – –
tax legislation) in force on the closing date. Deferred tax receivables are Defined benefit pension plans -3 -19 2 0
recognised for all temporary differences unless they relate to goodwill
Sub-total -126 20 2 0
or an asset or a liability in a transaction that is not a company acquisition
Reconciliation between current tax
and that, at the time of acquisition, affects neither the reported nor tax- rate and effective tax rate:
able profit or loss for the period. Also, temporary differences relating Expected tax expense according to
to investments in subsidiaries and associated companies are taken into the Swedish tax rate of 22% -3,441 -4,577 -3,698 -3,636
account only to the extent it is likely that the temporary difference will Difference in foreign tax rates 53 -33 – –
be reversed in the foreseeable future. Deferred tax receivables for tem- Non-deductible/non-taxable -94 -1 -9 2
porary differences and loss carryforwards are recognised only to the Other – – – –
extent it is likely that these will be able to be utilised. Tax for previous years -23 -14 0 0
The carrying amounts of deferred tax receivables are tested as of Tax-free dividend subsidiaries – – 3,034 2,861
each closing date and reduced where it is no longer deemed likely that Effect of changed tax rates 518 – – –
they will be able to be utilised. Total -2,987 -4,625 -673 -773
The US tax reform (Tax Cuts & Jobs Act) was enacted in December Recognised deferred tax
2017. For H&M this means that deferred tax liabilities and deferred tax receivable relates to:
receivables assignable to H&M’s US subsidiary were remeasured in Pension provisions 119 131 76 79
2018. This had a one-off effect of SEK 425 m. Based on the decision to intangible non-current assets 191 195 – –
reduce the Swedish corporate tax rate, the group has also remeasured Property, plant and equipment 816 384 – –
the deferred tax liability relating to capitalised development costs and Loss carryforward in subsidiaries 60 30 – –
excess depreciation. The group had one-off positive tax income of Stock-in-trade 680 682 – –
SEK 93 m in the financial year as a result of these remeasurements. hedging reserves 8 106 – –
Cash flow was not affected by these one-off effects. Other temporary differences 1,920 1,388 – –
Global companies such as H&M are sometimes involved in tax pro- Total 3,794 2,916 76 79
ceedings of varying extent and at different stages. H&M continually Recognised deferred tax
evaluates tax proceedings in progress. Where it is likely that additional liabilities relate to:
tax will have to be paid and the outcome can be reasonably estimated, intangible non-current assets 1,891 1,408
the necessary reserve is made. As of the closing date, tax proceedings Property, plant and equipment 2,116 1,872
relating to internal pricing are in progress in some countries. H&M has Stock-in-trade 757 243
made an assessment of the likely outcome and reserved the tax expense Tax allocation reserve 0 1,780
concerned. As of the closing date, this reserve totalled SEK 435 m (424). hedging reserves 31 0
This assessment took account of aspects such as whether agreements Other temporary differences 293 28
on double taxation exist and whether there are differences between Total 5,088 5,331
the tax rates in different countries.
As of the closing date, the group has no loss carryforward other than
the recognised deferred taxes receivable.
63
N OT E S
12. INTANGIBLE ASSETS Cont. Note 12, Intangible assets

Intangible assets with a finite useful life are reported at acquisition cost
GROUP
less accumulated amortisation and any accumulated impairment. Amor-
2018 2017
tisation is distributed on a straight-line basis over the assets’ expected
Capitalised development costs
useful life.
Opening acquisition cost 6,910 4,852
Development costs are capitalised to the extent that it is judged that
Acquisitions during the year 3,207 2,058
the company will derive future financial benefits and if the acquisition
impairment -19 0
cost can be reliably calculated. The reported value includes the direct
Closing acquisition cost 10,098 6,910
costs of services and materials acquired, employee benefit expenses
and indirect costs attributable to the asset. Other development costs, as Opening amortisation -549 -285
well as maintenance and training initiatives, are recognised as expenses Amortisation for the year -503 -264
in the income statement as they arise. Closing accumulated amortisation -1,052 -549
Goodwill is the amount by which the acquisition cost of the subsidiary’s Closing book value 9,046 6,361
shares exceeds the calculated value of the subsidiary’s net identifiable
Capitalised development costs refers mainly to IT-related investments. Amortisation has
assets upon acquisition. Goodwill on acquisition of subsidiaries is reported commenced for those parts that were taken into use during 2013 – 2018, corresponding
as an intangible asset. Intangible assets with an indefinite useful life, to around 55 percent of the capitalised development costs. Those projects that are not
including goodwill, are tested for impairment annually or more often if yet ready for use are tested for impairment annually. The year’s impairment testing for
there is an indication of a decline in value. If the carrying amount of the these projects resulted in projects related to Cheap Monday being written off.
asset exceeds the recoverable amount (the higher of the net realisable Goodwill*
value and the value in use), an impairment loss is applied for the neces- Opening book value 64 64
sary amount. Any impairment is recognised in profit/loss. Change for the year – –
Closing book value 64 64
GROUP
2018 2017 * Brands, customer relations and goodwill assets were added through the acquisition in
2008 of the company FaBric Scandinavien AB, which is a cash-generating unit. H&M
Brands* acquired the remaining 40 percent of the shares in FaBric Scandinavien AB at the end
Opening acquisition cost 470 470 of November 2010.
Acquisitions during the year – –
Closing acquisition cost 470 470 A goodwill impairment test was carried out at the end of 2018. Significant assumptions
used when testing goodwill for impairment are sales development and gross margin.
Opening amortisation -452 -404 The impairment test is based on a calculation of value in use. The value in use has been
Amortisation for the year -18 -48 assessed based on discounted cash flows according to forecasts for the next five years
and with an annual growth rate of 2 percent (2) in subsequent years. A discount rate of
Closing accumulated amortisation -470 -452
14 percent (14) before tax was used. The cash flows are based on H&M’s business plan.
Closing book value – 18 The growth rate of 2 percent (2) is based on H&M’s assessment of the opportunities and
risks associated with the business. The discount rate is based on an average weighted
Customer relations*
capital cost that is estimated to be on a par with the external requirements that the
Opening acquisition cost 131 131 market imposes for similar companies. No impairment was identified and H&M is of the
Acquisitions during the year – – opinion that reasonable possible changes in the variables above would not have such a
Closing acquisition cost 131 131 significant impact that the recoverable amount would be reduced to a lower amount
than the carrying amount.
Opening amortisation -123 -111
Amortisation for the year -8 -12
13. BUILDINGS, LAND AND EQUIPMENT
Costs relating to property, plant and equipment are reported in the
Closing book value – 8
balance sheet if it is likely that the company will derive future financial
Leaseholds and similar rights benefits associated with the asset and if the asset’s acquisition cost
Opening acquisition cost 1,265 1,438 can be reliably calculated. Other costs and costs relating to ongoing
Acquisitions during the year 68 140 maintenance and repair are reported as an expense in the period in
Sales/disposals -121 -326 which they arise. Property, plant and equipment are reported at acquis-
Translation effects 38 13 ition cost less accumulated depreciation and any accumulated impair-
Closing acquisition cost 1,250 1,265 ment. Depreciation is distributed on a straight-line basis over the assets’
Opening amortisation -689 -855
expected useful life. No depreciation is applied to land. The carrying
Sales/disposals 114 323
amount of property, plant and equipment is tested for any indication of
Amortisation for the year -159 -148
impairment. If the carrying amount of the asset exceeds the recoverable
Translation effects -21 -9
amount (the higher of the net realisable value and the value in use), an
impairment loss is applied for the necessary amount. Any impairment is
recognised in profit/loss.
Closing book value 495 576
Opening value, projects in progress 16 47

Change for the year -4 -38
Translation effects 1 7
Closing value, projects in progress 13 16
Total closing book value 508 592
64
N OT E S
Cont. Note 13, Buildings, land and equipment 14. PAYMENTS FOR OPERATING LEASES
AND FINANCE LEASES
Leases are classified in the consolidated accounts as either finance
2018 2017 2018 2017
or operating leases. Finance leases exist when the financial risks and
Buildings
benefits associated with the ownership of an object are essentially
Opening acquisition cost 1,099 1,068 229 146
transferred from the lessor to the lessee, regardless of whether the legal
Acquisitions during the year 6 84 6 83
ownership lies with the lessor or the lessee. Assets held under finance
Sales/disposals 0 -37 – –
leases are reported as non-current assets and future payment commit-
Translation effects 48 -16 – –
ments are reported as liabilities in the balance sheet. On initial recogni-
Closing acquisition cost 1,153 1,099 235 229
tion the asset and liability are reported at the net present value of future
Opening depreciation -419 -423 -89 -83 minimum lease payments and any residual value. On subsequent occa-
Sales/disposals 0 25 – – sions the expense is distributed between an interest portion and a repay-
Depreciation for the year -34 -32 -7 -6 ment portion. All other rental agreements that do not fulfil the conditions
Translation effects -20 11 – – for classification as finance leases are deemed to be operating leases.
Closing accumulated depreciation -473 -419 -96 -89 Lease payments made under operating leases are expensed over the
Closing book value 680 680 139 140 lease period using the straight-line method, even if the payment schedule
deviates from this. From and including the 2016 financial year, H&M has
Opening value, projects in progress 1 57 1 57
not only operating leases but also some leases that are classified as
Change for the year -1 -56 -1 -56
finance leases. The group’s main leases are rental agreements for prem-
Translation effects – 0 – –
ises. variable (sales-based) rents are recognised in the same period as
Closing value, projects in progress – 1 – 1
the corresponding sales.
Total closing book value 680 681 139 141
Operating leases
Land
The group has leases relating to rented premises which were entered into
Opening acquisition cost 143 148 7 7
on normal market terms. Most of the agreements contain options to extend
Acquisitions during the year – 0 – –
the term. Rental costs for the 2018 financial year amounted to SEK 24,801 m
Sales/disposals – -3 – –
(23,317), of which sales-based rent amounted to SEK 4,428 m (4,191).
Translation effects 8 -2 – –
Closing book value 151 143 7 7
Rent according to the group’s rental agreements (basic rent excluding
Equipment any sales-based rent) amounts to:
Opening acquisition cost 67,936 63,727 1,001 1,001
Acquisitions during the year 9,109 11,035 – – GROUP
Sales/disposals -5,912 -4,960 – – 2018 2017
Translation effects 3,321 -1,866 – – Rental commitments in next 12 months 16,234 16,219
Closing acquisition cost 74,454 67,936 1,001 1,001 Rental commitments in next 1–5 years 37,535 41,788
Rental commitments more than 5 years ahead 16,413 20,330
Opening depreciation -30,263 -27,733 -782 -688
Total 70,182 78,337
Sales/disposals 5,628 4,583 – –
Depreciation for the year -8,563 -7,711 -76 -94
Translation effects -1,578 598 – –
Finance leases
Closing accumulated depreciation -34,776 -30,263 -858 -782
The group has assets held under finance leases in respect of store
Closing book value* 39,678 37,673 143 219
cash registers with a year-end residual value according to plan of
Opening value, projects in progress 1,321 1,849 – – SEK 450 m (497).
Change for the year 516 -476 – –
Translation effects 93 -52 – – Finance lease payments are due as follows:
Closing value, projects in progress 1,930 1,321 – –
2018 Present value interest cost Nominal
Total closing book value 41,608 38,994 143 219 In next 12 months 136 2 138
* Financial leases on store tills included in the closing book value of equipment amount In next 2–5 years 305 3 308
to SEK 450 m (497). The contracts run for up to seven years. More than 5 years ahead 17 0 17
Total 458 5 463
2017 Present value interest cost Nominal

In next 12 months 125 3 128
In next 2–5 years 329 4 333
More than 5 years ahead 21 0 21
Total 475 7 482
65
N OT E S
Cont. Note 14, Payments for operating leases and finance leases 17. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and bank balances as well as
Liabilities for leased property, plant and equipment short-term investments with a maximum term of three months from the
GROUP date of acquisition. These investments carry no significant risk of
2018 2017 changes in value.
Opening balance 475 272
Additional contracts 69 280
Amortisation -126 -57 2018 2,017 2018 2017
interest costs 2 1 Cash and bank balances 10,428 9,117 93 133
Translation effects 37 -21 Short-term investments, 0–3 months 1,162 601 – –
Total 457 475 Total 11,590 9,718 93 133
During the 2018 financial year expenses attributable to finance leases investments are made on market terms and the interest rates are
including depreciation were charged to earnings for the group in the between -0.60 and 29 percent. The difference in interest rate depends
amount of SEK 116 m (55), as well as interest expenses of SEK 2 m (1). mainly on the currency in which the funds are invested.
15. STOCK-IN-TRADE 18. SHARE CAPITAL AND DISTRIBUTION OF EARNINGS

Stock-in-trade is valued at the lower of the acquisition cost and the net The share capital is divided between 194,400,000 class A shares
realisable value. Acquisition cost refers to the company’s expenses for (ten votes per share) and 1,460,672,000 class B shares (one vote per
acquiring the goods including customs duties and shipping. The net share). There are no other differences between the rights associated
realisable value is the estimated market value less the calculated selling with the shares. The total number of shares is 1,655,072,000. The
expenses. From the moment the goods are transferred from the sup- dividend paid per share in 2018 was SEK 9.75.
plier to the transport service provider appointed by h&m, the goods The group’s managed capital consists of shareholders’ equity.
are owned according to civil law by H&M and become part of H&M’s The group’s goal with respect to managing capital is to enable good
reported stock-in-trade. Goods that have not yet arrived at a store are growth to continue and to be prepared to exploit business opportuni-
valued at their actual acquisition cost including the estimated cost of ties. The board of directors’ intention is to provide shareholders with
customs duties and shipping. a continued good return while ensuring that, as in the past, expansion
For almost half of the group’s goods in the sales companies the acqui- and investments can proceed with a continued strong financial profile
sition cost is established by reducing the selling price by the estimated and freedom of action. Based on this, the board of directors has agreed
gross margin (the retail method), while for other sales companies the a dividend policy stating that the total dividend should exceed 50 per-
acquisition cost is calculated as weighted average prices. The group is cent of profit after tax, yet taking into consideration the capital structure
gradually moving across to calculating acquisition cost as weighted aver- target. The dividend will be paid in two instalments – one in the spring
age prices. This change has no material impact on the consolidated and one in the autumn.
financial statements. The board of directors is of the opinion that the proposed dividend is
Stock-in-trade amounted to SEK 37,721 m (33,712), an increase of justifiable since it is based on the fact that the underlying operations are
12 percent in SEK compared with the same point in time last year. In local showing gradual improvements, investments (capex) will reduce in 2019
currencies the increase was 10 percent. and the company remains in a strong financial position. The dividend
Significant write-downs are rare. There were no material write-downs proposal takes into consideration the financial position and continued
in the current or previous financial years. Only an insignificant part of the freedom of action of the group and the parent company, the capital
stock-in-trade is measured at net realisable value. The stock-in-trade is structure target and the requirements that the nature and extent of the
not considered to have any material degree of obsolescence. business, its risks and expansion and development plans impose on
The stock-in-trade amounted to 31.7 percent (31.6) of total assets and the group’s and the parent company’s equity and liquidity.
17.9 percent (16.9) of net sales.
The board’s proposal to the 2019 AGM regarding distribution of earnings
16. PREPAID EXPENSES
SEK
At the disposal of the annual general meeting 16,175,585,104
2018 2017 2018 2017
Prepaid rent 2,155 2,118 – – The board of directors proposes a dividend
Other items 726 652 121 13 of SEK 9.75 per share 16,136,952,000
Total 2,881 2,770 121 13
To be carried forward as retained earnings 38,633,104

16,175,585,104
66
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19. PROVISIONS FOR PENSIONS actuarial gains or losses. The actuarial gains and losses arising are mainly
H&M has several different plans for benefits after employment has ended. due to the financial assumptions, such as changes in the discount rate.
The plans are either defined benefit or defined contribution plans. Defined Such gains or losses are recognised in other comprehensive income in
contribution plans are reported as an expense in the period when the the year they arise.
employee performs the service to which the benefit relates. Defined For salaried employees in Sweden, H&M applies the ITP plan through
benefit plans are assessed separately for the respective plan based on insurance policies with Alecta and Collectum, i.e. ITP 2 and ITP 1. According
the benefits earned during the previous and current periods. The defined to statement UFR 10 from the Swedish Financial Reporting Board, ITP 2
benefit obligations less the fair value of managed assets are reported is a defined benefit plan that covers a number of employers. The plan
under the heading Provisions for pensions. In the case of the Swedish will be reported as a defined contribution plan until the company gains
entities, the actuarial calculations also cover future payments of special access to information that allows this plan to be reported according to
payroll tax. Defined benefit plans are primarily found in Sweden, but also the rules for defined benefit plans. The ITP 1 plan is a defined contribu-
in the UK, Norway, Switzerland, Spain and Germany. Pension obligations tion plan. See also note 7 for information on pension to the former CEO.
are assessed annually with the help of independent actuaries according Alecta’s surplus cannot be allocated to the insured employer and/or
to the Projected Unit Credit Method. The assessment is made using the insured employees. As of 30 September 2018, Alecta’s consolidation
actuarial assumptions. These assumptions include such things as the ratio was 159 percent (158). The consolidation ratio is calculated as the
discount rate, anticipated salary and pension increases as well as the fair value of managed assets as a percentage of the obligations calcu-
expected return on managed assets. Changes in the actuarial assump- lated in accordance with Alecta’s actuarial assumptions. This calculation
tions and outcomes that deviate from the assumptions give rise to is not in line with IAS 19.

2018 2017 2016 2018 2017 2016
Present value of defined benefit obligations 1,588 1,488 1,581 196 197 210
Fair value of managed assets -1,143 -1,043 -1,054 -15 -15 -19
Provisions for pension obligations recognised in the balance sheet 445 445 527 181 182 191
Opening balance, 1 December 445 527 449 182 191 195

Recognised pension expenses, net 69 -23 150 14 5 10
Premiums paid by employer -51 -52 -55 – – –
Pensions paid out -18 -17 -17 -15 -14 -14
Disbursements from assets – 10 – – – –
Carrying amount of defined benefit obligations, 30 November 445 445 527 181 182 191
Of the total recognised obligation, SEK 210 m (210) relates to defined benefit pensions plans in Sweden and SEK 186 m (184) to plans in Switzerland.
The weighted average maturity of these pension plans is 10.1 (10.4) years for the Swedish plans and 15.3 (15.8) years for the Swiss plans.
The amounts recognised as pension expenses comprise the following items:

Current service cost 67 67 73 – – –
Interest expense 14 13 18 4 4 6
interest income -8 -7 -10 0 0 0
Reductions/adjustments gains (-) and losses (+) -4 -2 – – – –
Past service cost 2 – -26 – – –
Changes in foreign exchange rates for plans denominated
in a currency other than the reporting currency 16 -14 17 – – –
Pension expenses recognised in the income statement 87 57 72 4 4 6
Pension expenses recognised in other comprehensive income

Acturial gains/losses financial assumptions asset -20 -50 -13 1 2 1
Acturial gains/losses demographic assumptions liability 0 – -44 0 – –
Acturial gains/losses financial assumptions liability 2 -30 135 9 -1 3
Acturial gains (-) and losses (+) -18 -80 78 10 1 4
Total recognised pension expenses 69 -23 150 14 5 10
The cost of defined contribution pension plans amounts to SEK 647 m (631).
Next year’s expected payments for defined benefit pension plans amount to SEK 32 m.
Significant acturial assumptions on the balance sheet date (weighted average amounts)
Discount rate 1.02% 0.95% 0.88% 2.00% 2.25% 2.25%
Future salary increases 1.27% 1.29% 1.36% 3.00% 5.00% 5.00%
Future pension increases (inflation) 0.31% 0.30% 0.34% 2.00% 1.75% 1.50%
A 0.5 percentage point reduction in the discount rate would increase the liability for the Swedish commitments by SEK 11.7 m (12.0).
67
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20. FINANCIAL ASSETS AND LIABILITIES BY CATEGORY
Loans receivable and Financial assets held Derivatives for hedging Other financial
accounts receivable to maturity recognised at fair value liabilities Total book value
2018 2017 2018 2017 2018 2017 2018 2017 2018 2017
Other non-current receivables – – 885 806 – – – – 885 806
Accounts receivable 6,329 5,297 – – – – – – 6,329 5,297
Other receivables – – – – 372 497 – – 372 497
Shares and interests – – 478 233 – – – – 478 233
Cash and cash equivalents 10,428 9,117 1,162 601 – – – – 11,590 9,718
Total financial assets 16,757 14,414 2,525 1,640 372 497 – – 19,654 16,551
Accounts payable – – – – – – 6,800 7,215 6,800 7,215

Liabilities to credit institutions – – – – – – 19,323 9,745 19,323 9,745
Other liabilities – – – – 238 903 – – 238 903
Total financial liabilities – – – – 238 903 26,123 16,960 26,361 17,863
The fair value of all financial assets and liabilities essentially corresponds to the book value. Assets and liabilities that are recognised at amortised cost have short remaining terms,
making the difference between book value and fair value negligible.
Financial instruments recognised in the balance sheet include on the liabilities stated above under financial liabilities are measured at amor-
assets side cash and cash equivalents, accounts receivable, short-term tised cost and do not deviate significantly from the fair values.
investments, non-current receivables and derivatives. On the liabilities GROUP
side are accounts payable, liabilities to credit institutions and derivatives.
2018 2017
Financial instruments are reported in the balance sheet when the group
becomes a party to the contractual terms of the instrument. Financial
Reported in other comprehensive income 483 -1,341
assets are removed from the balance sheet when the contractual rights
Reclassified to profit or loss 52 1,162
to the cash flows from the asset cease. Financial liabilities are removed
Total 535 -179
from the balance sheet when the obligation is met, cancelled or ends.
Financial assets and liabilities at fair value through profit or loss Reporting of derivatives used for hedging purposes
This category consists of two sub-groups: financial assets and liabilities All derivatives are reported initially and continually at fair value in the
held for trading, and other financial assets and liabilities that the com- balance sheet.
pany initially chose to place in this category when they were first recog- The group’s policy is for derivatives to be held for hedging purposes
nised. Assets and liabilities in this category are assessed continually at only. Derivatives comprise forward currency contracts used to hedge
fair value, with changes in value recognised in profit/loss. No financial the risk of exchange rate fluctuations for internal and external flows
assets or liabilities have been classified in this category. of goods.
To meet the requirements of hedge accounting there must be a clear
Loans receivable and accounts receivable link to the hedged item. In addition, the hedge must effectively protect
This category primarily covers cash and bank balances as well as the hedged item, hedge documentation must have been prepared and
accounts receivable. Cash and bank balances are valued at amortised the effectiveness must be measurable.
cost. Accounts receivable have a short expected term and are spread In hedge accounting, derivatives are classified as cash flow hedging or
across a large number of customers, with low amounts per customer, as fair value hedging. In the past financial year and the previous financial
and are measured without discounting at the original invoiced amount year all of the group’s derivatives were for cash flow hedging and
with deductions for doubtful receivables. The average debt was around hedging of net investments in foreign operations.
SEK 2,801 (2,794). Bad debts during the year from accounts receivable
were insignificant. Hedging of forecast currency flows – cash flow hedging
Derivatives that hedge the forecast flow are reported in the balance
Financial assets held to maturity sheet at fair value. Changes in value are reported in equity as a hedging
Financial assets held to maturity are assets with payment flows that are reserve, through other comprehensive income, until such time as the
fixed or that can be established in advance and with a fixed term which hedged flow is recognised in operating profit, at which time the hedging
the group has the express intention and capacity to hold until maturity. instrument’s accumulated changes in value are transferred to the income
Assets in this category are valued at amortised cost, with the effective statement where they then correspond to the profit/loss effects of the
interest rate being used to calculate the value. As of the closing date, all hedged transaction.
of the group’s short-term investments fell into this category. The category derivatives for hedging recognised at fair value is meas-
ured based on observable data; in other words, in accordance with level
Other financial liabilities 2 in the measurement hierarchy established in IFRS 13. The fair value of
Financial liabilities that are not held for trading are valued at amortised forward exchange contracts is calculated by discounting the difference
cost. Accounts payable fall into this category. These have a short expected between the agreed forward rate and the forward rate that can be obtained
term and are recognised at the nominal amount with no discounting. Lia- on the closing date for the remaining contract term. Contracts are dis-
bilities to credit institutions are measured at amortised cost. All of the counted to a risk-free rate based on government bonds.
68
N OT E S
Cont. Note 20, Financial assets and liabilities by category Cont. Note 20, Financial assets and liabilities by category
Hedging of net investments in foreign operations ASSETS/LIABILITIES Derivative Derivative

Derivatives intended for hedging net investments in foreign operations 2018 assets liabilities Total
are recognised in equity through other comprehensive income. Gross amounts
Total in balance sheet 372 238 134
Forward contracts
Financial instruments -151 -151 0
All changes in the value of derivatives are recognised initially in equity as
Net amount 221 87 134
a hedging reserve through other comprehensive income. Through other
comprehensive income, the fair value is transferred from the hedging
ASSETS/LIABILITIES Derivative Derivative
reserve to the income statement in conjunction with a hedged transac- 2017 assets liabilities Total
tion taking place. Gross amounts
The table below shows the outstanding forward contracts for cash Total in balance sheet 497 903 -406
flow hedging as of the closing date:
Financial instruments -281 -281 0
Book value and fair Nominal Average remaining Net amount 216 622 -406
value, SEK amount, SEK terms in months
SELL/BUY 2018 2017 2018 2017 2018 2017
At the closing date, forward contracts with a positive market value
NOK/SEK 14 11 633 751 3 2
amount to SEK 372 m (497), which is reported under other current
GBP/SEK 19 -113 3,336 2,677 3 3
DKK/SEK 5 -22 1,115 867 3 3
receivables. Forward contracts with a negative market value amount
ChF/SEK -2 7 642 610 3 3
to SEK 238 m (903), which is reported under other current liabilities.
EuR/SEK 50 -445 16,170 16,781 4 3
Of the outstanding forward contracts, gains of SEK 62 m (gains of 36)
PLN/SEK 1 -45 1,240 1,042 3 3
were transferred to the income statement when hedged transactions
uSD/SEK -48 -47 4,001 5,513 3 3 occurred for these contracts. The residual fair value of SEK 72 m
CAD/SEK 4 -1 547 645 3 3 (-442) is included in the hedging reserve in equity.
JPy/SEK 0 3 738 787 3 3
hKD/SEK -3 -1 182 209 3 3 21. ACCRUED EXPENSES AND PREPAID INCOME
RON/SEK 3 -8 550 394 3 3
CZK/SEK 3 -13 268 290 3 3
2018 2017 2018 2017
huF/SEK 1 -5 319 263 3 3
holiday pay liability 1,500 1,385 – –
AuD/SEK -8 6 425 461 3 2
Social security costs 1,027 619 38 35
CNh/SEK 1 -25 1,506 789 3 3
Payroll liability 1,968 1,577 0 0
RuB/SEK -2 -22 1,076 754 3 3
Costs relating to premises 12,985 10,749 – –
TRy/SEK -71 20 479 418 4 3
Other accrued overheads 5,687 4,718 115 107
mXN/SEK 22 -4 579 474 3 2
Total 23,167 19,048 153 142
SEK/uSD 149 273 14,376 15,473 2 2
SEK/EuR -2 36 1,755 1,603 2 2
Sub-total 136 -395 49,937 50,801 22. RELATED PARTY DISCLOSURES
Ramsbury Invest AB, which is owned by Stefan Persson and family, is the
Book value and fair Nominal Average remaining parent company of H & M Hennes & Mauritz AB. The H&M group leases
value, SEK amount, uSD terms in months
the following store premises in properties directly or indirectly owned by
SELL/BUY 2018 2017 2018 2017 2018 2017 Stefan Persson and family: Drottninggatan 50–52 and Drottninggatan 56
KRW/uSD 0 -11 25 37 4 3 in Stockholm, Kungsgatan 55 in Gothenburg, Stadt Hamburgsgatan 9 in
CLP/uSD -2 0 29 26 4 3 Malmö, Amagertorv 23 in Copenhagen, Oxford Circus and Regent Street
Sub-total -2 -11 54 63 in London, Kaufinger Strasse in Munich, via del Corso/via Tomacelli in
Total 134 -406 Rome, Wisconsin Avenue in Washington DC and, since January 2008,
premises for H&M’s head office in Stockholm. Rent is paid at market
rates, and rental costs and other property-related expenses totalled
SEK 371 m (384) for the financial year.
Karl-Johan Persson received remuneration in the form of salary and
benefits amounting to SEK 13.8 m (13.7), which included variable remu-
neration of SEK 0 m (0), for work carried out during the 2018 financial
year as CEO of H & M Hennes & Mauritz AB.
Outstanding balances with related parties as of 30 November 2018
totalled SEK 0.1 m (51.8).
See also note 7 for outstanding balances with board members.
69
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23. INTEREST-BEARING LIABILITIES

interest rate % In next In next more than interest rate % In next In next
2018 30 Nov 12 months 1–5 years 5 years ahead 30 Nov 12 months 1–5 years
Liabilities to credit institutions
Nordic countries 0,012–0.80 8,750 9,136 – 0,012–0.80 6,000 9,113
Eurozone countries 0.00 – 1,034 – – – –
Other countries 8.25–18.50 403 – – – – –
Liabilities, finance leases 0.21–1.53 136 305 17 – – –
Total 9,289 10,475 17 6,000 9,113

interest rate % In next In next more than interest rate % In next In next
2017 30 Nov 12 months 1–5 years 5 years ahead 30 Nov 12 months 1–5 years
Liabilities to credit institutions
Nordic countries 0.00–0,072 9,320 – – 0,032 4,000 –
Outside Nordic countries 8.75–16.00 425 – – – – –
Liabilities, finance leases 0.21–1.53 125 329 21 – – –
Total 9,870 329 21 4,000 –
Reconciliation of liabilities attributable to financing activities
Cash flow Exchange rate

2017 change Acquisition* changes* 2018
Long-term borrowings – 10,170 10,170
Short-term borrowings 9,745 -592 9,153
Lease liabilities 475 -126 69 39 457
Derivatives 406 -541 -134
Total liabilities from financing activities 10,626 9,452 69 -502 19,646
* Not affecting cash flow
24. APPROPRIATIONS 25. INTERESTS IN GROUP COMPANIES

PARENT COMPANY All group companies are wholly owned.
2018 2017
Corporate iD No. of Book
Group contributions provided -1,485 -340
2018 number shares value Domicile
Depreciation in excess of plan 16 12
Parent company’s shareholdings
Reversal of tax allocation reserve 305 –
h & m hennes & mauritz Sverige AB 556151-2376 1,250 0.1 Stockholm
Total -1,164 -328
h & m Online AB 556023-1663 1,150 0.6 Stockholm
H & M Hennes & Mauritz GBC AB 556070-1715 1,000 2.6 Stockholm
h & m hennes & mauritz
International B.v. 40 0.1 Netherlands
india Private Ltd 8,650,000 12.5 india
h & m hennes & mauritz Japan KK 99 11.7 Japan
FaBric Scandinavien AB 556663-8523 1,380 560.7 Tranås
international AB 556782-4890 1,000 0.1 Stockholm
h & m Fashion AB 556922-7878 50,000 0.1 Stockholm
h & m Finance AB 559159-7090 50,000 0.1 Stockholm
Total 588.5
70
N OT E S
Cont. Note 25, Interests in group companies Cont. Note 25, Interests in group companies
2018 Corporate iD number Domicile 2018 Corporate iD number Domicile
Subsidiaries’ holdings h & m Retail SDN BhD malaysia
h & m hennes & mauritz AS Norway h & m hennes & mauritz SpA Chile
h & m hennes & mauritz A/S Denmark h & m hennes & mauritz OÜ Estonia
h & m hennes & mauritz uK Ltd uK h & m hennes & mauritz uAB Lithuania
h & m hennes & mauritz SA Switzerland H & M Hennes & Mauritz d.o.o. Serbia
H & M Hennes & Mauritz B.v. & Co. KG Germany h and m hennes and mauritz Proprietary Limited South Africa
Impuls GmbH Germany h & m hennes & mauritz Pty Ltd Australia
H & M Hennes & Mauritz Logistics AB Co. KG Germany H & M Hennes & Mauritz S.A.C. Peru
H & M Hennes & Mauritz online shop AB & Co. KG Germany H & M Hennes & Mauritz (Macau) Limited macau
& Other Stories AB & Co. KG Germany h & m hennes & mauritz Retail Private Limited india
H & M New Business AB & Co. KG Germany Germany h &m hennes & mauritz iNC Philippines
H & M Hennes & Mauritz Holding B.v. Netherlands H &M Hennes & Mauritz New Zealand Limited New Zealand
H & M Hennes & Mauritz Netherlands B.v. Netherlands h &m hennes & mauritz Cyprus Limited Cyprus
H & M Hennes & Mauritz Management B.v. Netherlands h & m hennes & mauritz Kazakhstan LLP Kazakhstan
h & m hennes & mauritz Belgium Nv Belgium H & M Hennes & Mauritz Colombia S.A.S Colombia
H & M Hennes & Mauritz Logistics GBC Nv Belgium h & m hennes & mauritz iceland ehf iceland
h & m NB Belgium Nv Belgium h & m hennes & mauritz vietnam LLC vietnam
H & M Hennes & Mauritz GesmbH Austria H & M Hennes & Mauritz Georgia LLC Georgia
h & m hennes & mauritz Oy Finland Hennes & Mauritz Uruguay S.A. uruguay
h & m hennes & mauritz SARL France h & m hennes & mauritz LLC ukraine
H & M Hennes & Mauritz Logistics GBC France France h & m hennes & mauritz Bel LLC Belarus
h & m hennes & mauritz LP uSA H & M Hennes & Mauritz B&H d.o.o. Bosnia-herzegovina
hennes & mauritz SL Spain
hennes & mauritz Customer Services SL Spain
H & M Hennes & Mauritz sp. z.o.o. Poland 26. UNTAXED RESERVES
PARENT COMPANY
H & M Hennes & Mauritz Logistics sp. z.o.o. Poland
H & M Hennes & Mauritz Logistics 1 Sp.z.o.o Poland 2018 2017
H & M Hennes & Mauritz CZ, s.r.o. Czech Republic Depreciation in excess of plan 96 112
hennes & mauritz Lda Portugal Tax allocation reserve – 305
H & M Hennes & Mauritz S.r.l. italy Total 96 417
H & M Services S.r.l. italy
H & M Hennes & Mauritz Inc. Canada
H & M Hennes & Mauritz d.o.o. Slovenia 27. CONTINGENT LIABILITIES
H & M Hennes & Mauritz (Ireland) Ltd ireland A contingent liability is reported where there is a possible obligation for
h & m hennes & mauritz Kft hungary which it remains to be confirmed whether the company has an existing
H & M Hennes & Mauritz (Far East) Ltd hong Kong obligation that could result in an outflow of resources. Alternatively, there
Puls Trading Far East Ltd hong Kong may be an existing obligation that does not fulfil the criteria for reporting
h & m hennes & mauritz holding Asia Ltd hong Kong in the balance sheet as a provision or other liability since it is not likely
h & m hennes & mauritz Ltd hong Kong that an outflow of financial resources will be required in order to settle
Hennes & Mauritz (Shanghai) Commercial Co Ltd China the obligation or the amount cannot be reliably estimated.
H & M Hennes & Mauritz (Shanghai) Trading Co Ltd China The group is involved in various types of disputes, but it is assessed
H & M Hennes & Mauritz (Shanghai) that no current disputes will have any significant impact on the group’s
Garments & Accessories Co Ltd China
results. For further information concerning tax disputes see note 11.
H & M Hennes & Mauritz SK s.r.o. Slovakia
Neither the group nor the parent company has any pledged assets.
H & M Hennes & Mauritz A.E. Greece
h & m hennes & mauritz LLC Russia PARENT COMPANY
h & m hennes & mauritz TR Tekstil Ltd Sirketi Turkey
2018 2017
h & m hennes & mauritz Ltd South Korea
Parent company’s lease guarantees 12,432 11,406
h & m hennes & mauritz SRL Romania
Total 12,432 11,406
H & M Hennes & Mauritz d.o.o. za trgovinu Croatia
h & m hennes & mauritz PTE Ltd Singapore
h & m hennes & mauritz EOOD Bulgaria
Weekday Brands AB 556675-8438 Sweden
FaBric Sales AB & Co. KG Germany Germany
H & M Hennes & Mauritz S.A de C.v. Mexico
H & M Hennes & Mauritz Management S.A de C.v. Mexico
H & M Hennes & Mauritz Servicios S.A de C.v. Mexico
H & M Hennes & Mauritz Support S.A de C.v. Mexico
h & m hennes & mauritz SiA Latvia
71
N OT E S
28. INTEREST INCOME, INTEREST EXPENSE Cont. Note 30, Key ratio definitions
AND SIMILAR ITEMS
The parent company’s interest income and similar items consists of Gross profit GROUP
SEK 19 m (18) in interest income and SEK 78 m (0) in translation effects 2018 2017
on receivables and liabilities from group companies. Net sales 210,400 200,004
The parent company’s interest expense and similar items consists of Cost of goods sold -99,513 -91,914
SEK -44 m (-11) in interest expense and SEK 0 m (-80) in translation
Gross profit 110,887 108,090
effects on receivables and liabilities from group companies.
Definition: Net sales minus cost of goods sold.
29. EVENTS AFTER THE CLOSING DATE Reason for use: This is one of the ways in which H&M measures
No significant events have occurred since the end of the reporting period. profitability. Gross profit is affected by a number of factors such as
the product assortment, price development and cost changes.
30. KEY RATIO DEFINITIONS
This report contains key financial ratios in accordance with the frame-
work for financial reporting applied by the H&M group, which is based on Gross margin GROUP
IFRS. Other key ratios and indicators are also used to follow up, analyse 2018 2017
and govern the business and to provide the h&m group’s stakeholders Net sales 210,400 200,004
with financial information concerning the group’s financial position, Gross profit 110,887 108,090
results and performance in a consistent way. Gross margin 52.7% 54.0%
These other key ratios and indicators are considered necessary in
Definition: Gross profit in relation to net sales.
order to be able to monitor performance against the group’s financial
targets. A combination of continual growth, high profitability, stable cash Reason for use: This is one of the ways in which H&M measures
flow and using capital in the right way is intended to generate a high over- profitability. Gross profit is affected by a number of factors such as
all return for the H&M group’s shareholders. It is therefore relevant to the product assortment, price development and cost changes.
present key ratios relating to growth, profitability and capital, share-based
measurements and terms relating to capital on a continuous basis. Operating profit GROUP
The key ratios and indicators used, referred to and presented in the 2018 2017
reporting are defined as shown in the list below. Net sales 210,400 200,004
Cost of goods sold -99,513 -91,914
PROFIT AND YIELD MEASUREMENTS Selling expenses -87,512 -80,427

Administrative expenses -7,882 -7,094
Return on equity GROUP
2018 2017 Definition: Net sales minus all costs attributable to operations but
Profit for the year 12,652 16,184
excluding net financial items and tax.
Average equity 59,130 60,475 Reason for use: Shows the result of operating activities.
Return on equity 21.4% 26.8%
Definition: Profit for the year in relation to average equity. Operating margin GROUP
2018 2017
Reason for use: Return on equity is used as a measure of how invest-
ments are used to generate increased revenue. Net sales 210,400 200,004
Operating margin 7.4% 10.3%
Return on capital employed GROUP
2018 2017 Definition: Operating profit as a percentage of net sales for the year.
Profit after financial items 15,639 20,809 Reason for use: An indicator of operational profitability.
Interest expense 146 41
Average equity 59,130 60,475
EBITDA GROUP
Average interest-bearing liabilities 15,446 6,766
2018 2017
Return on capital employed 21.2% 31.0%
Definition: Profit after financial items plus interest expense in relation Depreciation and amortisation 9,671 8,488
to average equity plus average interest-bearing liabilities. EBITDA 25,164 29,057
Reason for use: A measure of profitability after taking into consideration Definition: EBITDA (Earnings Before Interest, Taxes, Depreciation
the amount of capital employed. A higher return on capital employed and Amortisation). Operating profit before interest, taxes, depreciation
indicates that the capital is being used more effectively. and impairments.
Reason for use: A measurement that complements operating profit,
since it shows the cash result of operations.
72
N OT E S
Cont. Note 30, Key ratio definitions Cont. Note 30, Key ratio definitions
CAPITAL MEASUREMENTS SHARE-RELATED MEASUREMENTS
Share of risk-bearing capital GROUP Equity per share GROUP

2018 2017 2018 2017
Equity 58,546 59,713 Equity 58,546 59,713
Deferred tax liability 5,088 5,331 Number of shares, millions 1,655.072 1,655.072
Balance sheet total 118,790 106,562 Equity per share 35.37 36.08
Share of risk-bearing capital 53.6% 61.0%
Definition: Equity divided by the number of shares.
Definition: Equity plus deferred tax liability in relation to the balance Reason for use: This indicator can show over time whether the company
sheet total. is increasing the shareholders’ capital.
Reason for use: To demonstrate financial potential and independence
to develop the business.
Cash flow from current
operations per share GROUP
Equity/assets ratio GROUP 2018 2017
2018 2017 Cash flow from current operations 21,287 21,587
Equity 58,546 59,713 Number of shares, millions 1,655.072 1,655.072
Balance sheet total 118,790 106,562 Cash flow from current operations per share 12.86 13.04
Equity/assets ratio 49.3% 56.0%
Definition: Cash flow from current operations for the period divided
Definition: Equity in relation to the balance sheet total. by the number of shares.
Reason for use: To demonstrate financial potential and independence Reason for use: This indicator shows cash flow from current
to develop the business. operations per share, which is significant for how the company
can finance its investments.
Capital employed GROUP
2018 2017 P/E ratio GROUP
Equity 58,546 59,713 2018 2017
interest-bearing liabilities 20,226 10,665 Price per share at closing day 167.64 197.10
Capital employed 78,772 70,378 Earnings per share 7.64 9.78
P/E ratio 22 20
Definition: Equity plus interest-bearing liabilities.
Reason for use: To show the company’s ability to meet current capital Definition: Price per share divided by earnings per share.
commitments. Reason for use: This indicator shows how the profit for the period relates
to the price of the shares.
Net debt GROUP
2018 2017
Provisions for pensions 445 445
Interest-bearing liabilities finance leases 458 475
Liabilities to credit institutions 19,323 9,745
Cash and cash equivalents -11,590 -9,718
Net debt 8,636 947
Definition: interest-bearing liabilities including pension liabilities less cash

and cash equivalents as well as short-term investments.
Reason for use: To show the net value of interest-bearing assets and
interest bearing liabilities.
73
SIGNING OF THE ANNUAL REPORT
Signing of the annual report
The undersigned hereby provide an assurance that the annual report that the administration report provides a true and fair view of the
and consolidated accounts have been drawn up in accordance with development of the group’s and the parent company’s business, position
IFRS international accounting standards, as adopted by the EU, with and earnings, and also describe the significant risks and uncertainties
good accounting practice, and that they provide a true and fair view of faced by the companies making up the group.
the group’s and the parent company’s position and earnings, and also
Stefan Persson Stina Bergfors Anders Dahlvig

Chairman of the Board Board member Board member
Lena Patriksson Keller Christian Sievert Erica Wiking Häger

Board member Board member Board member
Niklas Zennström Ingrid Godin Alexandra Rosenqvist

Board member Board member Board member
Karl-Johan Persson
Chief Executive Officer
Our audit report was submitted on 18 February 2019
Ernst & young AB
Åsa Lundvall
Authorised Public Accountant
74
A u D i TO R ’ S R E P O R T
Auditor’s report
To the general meeting of the shareholders of h & m hennes & mauritz AB

INCOME TAXES
(publ), corporate identity number 556042-7220
Description of matter
REPORT ON THE ANNUAL ACCOUNTS Accounting for income taxes is subject to complex tax legislation that require inter-
pretations and assessments by H&M. These interpretations may be questioned by
AND CONSOLIDATED ACCOUNTS
various tax authorities and courts. H&M conducts operations in a significant number
Opinions of countries and tax jurisdictions. The pricing of cross-border transactions and
We have audited the annual accounts and consolidated accounts of consequently how the taxable profit is distributed between the countries is deter-
H & M Hennes & Mauritz AB (publ) for the financial year 1 December 2017 mined by the transfer pricing model developed by the company. From time to time
entities within the company are subject to ongoing tax proceedings that may range
to 30 November 2018, with the exception of the sustainability report on from tax audits to tax litigations at multiple levels of the court systems. The com-
pages 42–45. The annual accounts and consolidated accounts of the pany evaluates the expected outcome of tax proceedings in progress on a continu-
company are included on pages 36–74 in this document. ous bases. Where it is likely that additional tax will have to be paid and outcome
in our opinion, the annual accounts have been prepared in accordance can be reasonably estimated, necessary provisions are made.
with the Annual Accounts Act and present fairly, in all material respects, The evaluation of the expected outcome of ongoing tax proceedings requires
assumptions and assessments that are complex by nature. Changes in assumptions
the financial position of the parent company as of 30 November 2018
and assessments may have a material effect on the financial statements, and con-
and its financial performance and cash flow for the year then ended in sequently income taxes is considered a key audit matter.
accordance with the Annual Accounts Act. The consolidated accounts
Information related to the company’s accounting for income taxes is found in note 1
have been prepared in accordance with the Annual Accounts Act and (section “Estimates, assumptions and assessments”) and note 11 (“Tax”).
present fairly, in all material respects, the financial position of the group
Considerations of the matter in the audit
as of 30 November 2018 and their financial performance and cash flow
for the year then ended in accordance with International Financial Report- Our audit included, among other things, the following audit procedures:
ing Standards (IFRS), as adopted by the EU, and the Annual Accounts Act. – Review of the completeness and valuation of the amounts reported as current
and deferred tax, among other things by reviewing tax calculations.
Our opinion does not cover the sustainability report on pages 42–45. The
– Review of the company’s transfer pricing model and evaluation whether the
statutory administration report is consistent with the other parts of the
company has complied with the model.
annual accounts and consolidated accounts.
– Review of the company’s assumptions and assessments concerning
We therefore recommend that the general meeting of shareholders the outcome of ongoing tax proceedings and tax risks. We have included
adopts the income statement and balance sheet for the parent company tax professionals as part of our audit.
and the group. – Assessment of appropriateness of disclosures provided in the financial
Our opinions in this report on the annual accounts and consolidated statements.
accounts are consistent with the content of the additional report that has
been submitted to the parent company’s audit committee in accordance
with the Audit Regulation (537/2014) Article 11.
VALUATION OF STOCK-IN-TRADE
Basis for opinions Description of matter
We conducted our audit in accordance with International Standards on As at 30 November 2018 H&M’s stock-in-trade amounts to SEK 37,721 million,
Auditing (ISA) and generally accepted auditing standards in Sweden. Our corresponding to 32% of the Group’s total assets, spread across central ware-
responsibilities under those standards are further described in the Audi- houses and retail stores. Stock-in-trade is valued at the lower of cost and net real-
isable value. The net realisable value is the estimated market value less calculated
tor’s Responsibilities section. We are independent of the parent company
selling expenses. Goods that have not yet arrived at a store are valued at their
and the group in accordance with professional ethics for accountants in actual acquisition cost including the estimated cost of customs duties and freight.
Sweden and have otherwise fulfilled our ethical responsibilities in accord- For stock in the stores, cost is determined by reducing the selling price by the
ance with these requirements. This includes that, based on the best of calculated gross margin.
our knowledge and belief, no prohibited services referred to in the Audit Estimating the net realisable value requires assumptions and assessments concern-
ing future events which are subject to uncertainty. Calculating the cost of customs
Regulation (537/2014) Article 5.1 have been provided to the audited com-
duties and freight also requires assumptions. Changes in assumptions and assess-
pany or, where applicable, its parent company or its controlled companies ments may have a material effect on the financial statements, and consequently
within the EU, with the exception of one service with very limited scope, valuation of stock-in-trade is considered a key audit matter.
which has been terminated and reported to the Audit Committee. information related to the company’s valuation of stock-in-trade is found in
We believe that the audit evidence we have obtained is sufficient and note 1 (the section “Estimates, assumptions and assessments”) and note 15
(“Stock-in-trade”).
appropriate to provide a basis for our opinions.
Considerations of the matter in the audit
Key audit matters Our audit included, among other things, the following audit procedures:
Key audit matters of the audit are those matters that, in our professional – Review of the company’s processes and procedures for stock accounting,
judgment, were of most significance in our audit of the annual accounts including the company’s procedures and assumptions used in the calculation
and consolidated accounts of the current period. These matters were of accrued costs for customs duties and freight.
addressed in the context of our audit of, and in forming our opinion – Review of the reported acquisition cost on a sample basis.
thereon, the annual accounts and consolidated accounts as a whole, but – Analysis of the company’s assessment of net realisable value, as well as
review of assumptions and calculations for stock obsolescence.
we do not provide a separate opinion on these matters. For each matter
to the right, our description of how our audit addressed the matter is – Review of elimination of internal profits in stock at group level.
provided in that context. – Assessment of appropriateness of disclosures provided in the financial

statements.
We have fulfilled the responsibilities described in the Auditor’s
responsibilities for the audit of the financial statements section of our
75
report, including in relation to these matters. Accordingly, our audit influence the economic decisions of users taken on the basis of these
included the performance of procedures designed to respond to our annual accounts and consolidated accounts.
assessment of the risks of material misstatement of the financial state- As part of an audit in accordance with ISAs, we exercise professional
ments. The results of our audit procedures, including the procedures judgment and maintain professional skepticism throughout the audit.
performed to address the matters stated on the previous page, provide We also:
the basis for our audit opinion on the accompanying financial statements. — identify and assess the risks of material misstatement of the annual
accounts and consolidated accounts, whether due to fraud or error,
Information other than the annual accounts design and perform audit procedures responsive to those risks, and
and consolidated accounts obtain audit evidence that is sufficient and appropriate to provide
This document also contains other information than the annual a basis for our opinions. The risk of not detecting a material misstate-
accounts and consolidated accounts and is found on pages 4–35 and ment resulting from fraud is higher than for one resulting from error,
78. The board of directors and the CEO are responsible for this other as fraud may involve collusion, forgery, intentional omissions, mis-
information. representations, or the override of internal control.
Our opinion on the annual accounts and consolidated accounts — Obtain an understanding of the company’s internal control relevant
does not cover this other information and we do not express any form to our audit in order to design audit procedures that are appropriate in
of assurance conclusion regarding this other information. the circumstances, but not for the purpose of expressing an opinion
In connection with our audit of the annual accounts and consoli- on the effectiveness of the company’s internal control.
dated accounts, our responsibility is to read the information identified — Evaluate the appropriateness of accounting policies used and the
stated on the previous page, and consider whether the information is reasonableness of accounting estimates and related disclosures made
materially inconsistent with the annual accounts and consolidated by the board of directors and the CEO.
accounts. In this procedure we also take into account our knowledge — Conclude on the appropriateness of the board of directors’ and the
otherwise obtained in the audit and assess whether the information CEO’s use of the going concern basis of accounting in preparing the
otherwise appears to be materially misstated. annual accounts and consolidated accounts. We also draw a conclusion,
If we, based on the work performed concerning this information, con- based on the audit evidence obtained, as to whether any material
clude that there is a material misstatement of this other information, we uncertainty exists related to events or conditions that may cast signifi-
are required to report that fact. We have nothing to report in this regard. cant doubt on the company’s and the group’s ability to continue as a
going concern. If we conclude that a material uncertainty exists, we are
Responsibilities of the board required to draw attention in our auditor’s report to the related disclo-
of directors and the CEO sures in the annual accounts and consolidated accounts or, if such dis-
The board of directors and the CEO are responsible for the preparation closures are inadequate, to modify our opinion about the annual
of the annual accounts and consolidated accounts and that they give a accounts and consolidated accounts. Our conclusions are based on
fair presentation in accordance with the Annual Accounts Act and, con- the audit evidence obtained up to the date of our auditor’s report.
cerning the consolidated accounts, in accordance with IFRS as adopted However, future events or conditions may cause a company and a
by the EU. The board of directors and the CEO are also responsible for group to cease to continue as a going concern.
such internal control as they determine is necessary to enable the prepa- — Evaluate the overall presentation, structure and content of the annual
ration of annual accounts and consolidated accounts that are free from accounts and consolidated accounts, including the disclosures, and
material misstatement, whether due to fraud or error. whether the annual accounts and consolidated accounts represent
in preparing the annual accounts and consolidated accounts, the the underlying transactions and events in a manner that achieves fair
board of directors and the CEO are responsible for the assessment of presentation.
the company’s and the group’s ability to continue as a going concern. — Obtain sufficient and appropriate audit evidence regarding the finan-
They disclose, as applicable, matters related to going concern and using cial information of the entities or business activities within the group to
the going concern basis of accounting. The going concern basis of express an opinion on the consolidated accounts. We are responsible
accounting is however not applied if the board of directors and the for the direction, supervision and performance of the group audit.
CEO intends to liquidate the company, to cease operations, or has We remain solely responsible for our opinions.
no realistic alternative but to do so.
The Audit Committee shall, without prejudice to the board of direc- We must inform the board of directors of, among other matters, the
tor’s responsibilities and tasks in general, among other things oversee planned scope and timing of the audit. We must also inform of significant
the company’s financial reporting process. audit findings during our audit, including any significant deficiencies in
internal control that we identified.
Auditor’s responsibility We must also provide the board of directors with a statement that we
Our objectives are to obtain reasonable assurance about whether the have complied with relevant ethical requirements regarding independ-
annual accounts and consolidated accounts as a whole are free from ence, and to communicate with them all relationships and other matters
material misstatement, whether due to fraud or error, and to issue an that may reasonably be thought to bear on our independence, and
auditor’s report that includes our opinions. Reasonable assurance is a where applicable, related safeguards.
high level of assurance, but is not a guarantee that an audit conducted From the matters communicated with the board of directors, we
in accordance with ISAs and generally accepted auditing standards in determine those matters that were of most significance in the audit of
Sweden will always detect a material misstatement when it exists. Mis- the annual accounts and consolidated accounts, including the most
statements can arise from fraud or error and are considered material if, important assessed risks for material misstatement, and are therefore
individually or in the aggregate, they could reasonably be expected to the key audit matters. We describe these matters in the auditor’s
76
report unless law or regulation precludes disclosure about the matter Our objective concerning the audit of the proposed appropriations of
or when, in extremely rare circumstances, we determine that a matter the company’s profit or loss, and thereby our opinion about this, is to
should not be communicated in the auditor’s report because the adverse assess with reasonable degree of assurance whether the proposal is in
consequences of doing so would reasonably be expected to outweigh accordance with the Companies Act.
the public interest benefits of such communication. Reasonable assurance is a high level of assurance, but is not a guar-
antee that an audit conducted in accordance with generally accepted
REPORT ON OTHER LEGAL auditing standards in Sweden will always detect actions or omissions
AND REGULATORY REQUIREMENTS that can give rise to liability to the company, or that the proposed appro-
Opinions priations of the company’s profit or loss are not in accordance with the
in addition to our audit of the annual accounts and consolidated accounts, Companies Act.
we have also audited the administration of the board of directors and the As part of an audit in accordance with generally accepted auditing
CEO of H & M Hennes & Mauritz AB (publ) for the financial year 1 Decem- standards in Sweden, we exercise professional judgment and maintain
ber 2017 – 30 November 2018 and the proposed appropriation of the professional skepticism throughout the audit. The examination of the
company’s profit or loss. administration and the proposed appropriations of the company’s profit
We recommend to the general meeting of shareholders that the profit or loss is based primarily on the audit of the accounts. Additional audit
be appropriated in accordance with the proposal in the statutory admin- procedures performed are based on our professional judgment with
istration report and that the members of the board of directors and the starting point in risk and materiality. This means that we focus the exam-
CEO be discharged from liability for the financial year. ination on such actions, areas and relationships that are material for the
operations and where deviations and violations would have particular
Basis for opinions importance for the company’s situation. We examine and test decisions
We conducted the audit in accordance with generally accepted audit- undertaken, support for decisions, actions taken and other circum-
ing standards in Sweden. Our responsibilities under those standards are stances that are relevant to our opinion concerning discharge from liab-
further described in the Auditor’s Responsibilities section. We are inde- ility. As a basis for our opinion on the board of directors’ proposed
pendent of the parent company and the group in accordance with pro- appropriations of the company’s profit or loss we examined the board
fessional ethics for accountants in Sweden and have otherwise fulfilled of directors’ reasoned statement and a selection of supporting evidence
our ethical responsibilities in accordance with these requirements. in order to be able to assess whether the proposal is in accordance with
We believe that the audit evidence we have obtained is sufficient and the Companies Act.
appropriate to provide a basis for our opinions.
Auditor’s opinion regarding the statutory sustainability report
Responsibilities of the board of directors and the CEO The board of directors is responsible for the sustainability report on
The board of directors is responsible for the proposal for appropriations pages 42–45 and for ensuring that it is prepared in compliance with the
of the company’s profit or loss. At the proposal of a dividend, this includes Annual Accounts Act.
an assessment of whether the dividend is justifiable considering the Our examination has been conducted in accordance with FAR’s audit-
requirements which the company’s and the group’s type of operations, ing standard RevR 12 The auditor’s opinion regarding the statutory sus-
size and risks place on the size of the parent company’s and the group’s tainability report. This means that our examination of the sustainability
equity, consolidation requirements, liquidity and position in general. report has a different focus and is substantially less in scope than an
The board of directors is responsible for the company’s organization audit conducted in accordance with International Standards on Auditing
and the administration of the company’s affairs. This includes among and generally accepted auditing standards in Sweden. We believe that
other things continuous assessment of the company’s and the group’s our examination provides a reasonable basis for our opinion.
financial situation and ensuring that the company’s organization is A sustainability report has been prepared.
designed so that the accounting, management of assets and the com-
pany’s financial affairs otherwise are controlled in a reassuring manner. Ernst & Young AB, Box 7850, 103 99 Stockholm, was appointed auditor
The CEO shall manage the ongoing administration according to the of h& m hennes & mauritz AB by the general meeting of shareholders on
board of directors’ guidelines and instructions and among other mat- 8 May 2018. Ernst & Young AB and auditors within the audit firm have
ters take measures that are necessary to fulfill the company’s account- been elected since before 17 June 1994. Under the current regulations,
ing in accordance with law and handle the management of assets in a Ernst & Young AB cannot be reappointed after 16 June 2020.
reassuring manner.
Auditor’s responsibility Ernst & young AB
Our objective concerning the audit of the administration, and thereby
our opinion about discharge from liability, is to obtain audit evidence to
assess with a reasonable degree of assurance whether any member of
the board of directors or the CEO in any material respect: Åsa Lundvall
— has undertaken any action or been guilty of any omission which can Authorised Public Accountant
give rise to liability to the company, or
— in any other way has acted in contravention of the Companies Act,
the Annual Accounts Act or the Articles of Association.
77
C A L E N DA R A N D C O N TAC T D E TA i L S
Annual general meeting

TIME AND PLACE The 2019 annual general meeting will be held at 3 p.m. on Tuesday 7 May 2019 in the Erling Persson Hall,
Aula Medica, Karolinska Institutet, Solna.
Shareholders who are registered in the share register printout as of Tuesday 30 April 2019 and give notice of
their intention to attend the AGM no later than Tuesday 30 April 2019 will be entitled to participate in the AGM.
NOMINEE SHARES Shareholders whose shares are registered in the name of a nominee must re-register their shares in their
own name in order to be entitled to participate in the AGM. In order to re-register shares in time, share-
holders should request temporary owner registration, which is referred to as voting right registration, well
in advance of 30 April 2019.
NOTICE OF ATTENDANCE Shareholders must provide notice of their intention to participate h & m hennes & mauritz AB
in the AGM by post, telephone or via H&M’s website to: Attn: Annual general meeting
SE-106 38 Stockholm
Shareholders must provide their name, Telephone: +46 (0)8-796 55 00,
civil identity number and telephone number preferably between 08.00–17.00,
(daytime) when providing notice of their stating notice of attendance at the AGM
intention to participate. about.hm.com/agm
DIVIDEND The board of directors has decided to propose to the annual general meeting on 7 May 2019 a dividend
of SEK 9.75 per share for the 2017/2018 financial year. The board of directors proposes that the dividend
is to be paid in two instalments during the year – in May and in November.
The record date proposed for the first dividend payment of SEK 4.90 per share is 9 May 2019.
With this record day, Euroclear Sweden AB is expected to pay the dividend on 14 May 2019.
To be guaranteed dividend payment, the h&m shares must have been purchased no later than
7 May 2019. Ex-dividend day is 8 May 2019.
The record date proposed for the second dividend payment of SEK 4.85 per share is 12 November 2019.
With this record day, Euroclear Sweden AB is expected to pay the dividend on 15 November 2019.
To be guaranteed the second dividend payment, the h&m shares must have been purchased no later
than 8 November 2019. Ex-dividend day is 11 November 2019.
Financial information
CALENDAR H & M Hennes & Mauritz AB will provide the following information:
29 March 2019 Three-month report

7 May 2019 Annual general meeting 2019 in the Erling Persson Hall,
Aula Medica, Karolinska Institutet, Solna at 3 p.m.
27 June 2019 Six-month report
3 October 2019 Nine-month report
Contact details
HEAD OFFICE H & M Hennes & Mauritz AB, Mäster Samuelsgatan 46A, SE-106 38 Stockholm, Sweden,
Telephone: +46 (0)8–796 55 00
CONTACTS INVESTOR RELATIONS Nils vinge For information about COVER

COMMUNICATIONS Kristina Stenvinkel the h&m group’s various H&M Conscious Exclusive,
GOVERNANCE Liv Asarnoj brands see: spring 2019, photographed
hm.com by Josh Olins.
cosstores.com
DISTRIBUTION POLICY The h&m group sends out the printed
weekday.com The annual report is printed
version of the annual report to shareholders on FSC ® certified paper.
cheapmonday.com*
who have specifically expressed an interest
monki.com
in receiving the printed version. The annual
stories.com
report is also available to read and down-
arket.com
load at about.hm.com.
afound.com
* Cheap Monday will be closed down in 2019.
78
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Annual report 2018

H&M Group in brief 4

Comments by our CEO 6

& Other Stories 14

Markets and expansion 16

Five year summary 18

The H&M share 19

Corporate governance report including the board of directors 20

Auditor’s statement on the corporate governance report 34

Administration report including sustainability report 36

Group income statement 46

Consolidated statement of comprehensive income 46

Group balance sheet 48

Group changes in equity 50

Group cash flow statement 51

Parent company income statement 52

Parent company statement of comprehensive income 52

Parent company balance sheet 53

Parent company changes in equity 54

Parent company cash flow statement 55

Notes to the financial statement 56

Signing of the annual report 74

Calendar and contact details 78

H & M Hennes & Mauritz AB’s annual accounts and consolidated

H&M Conscious Exclusive, spring 2019. The collection is made of sustainable,

The H&M group is characterised

Our transformation work

210 Online sales +21%

Comments by our CEO

MORE FULL-PRICE SALES

An inspiring and convenient shopping experience INVESTMENTS IN OUR TECH FOUNDATION

FAST, EFFICIENT AND FLEXIBLE PRODUCT FLOW

INITIATIVES FOR AN IMPROVED CUSTOMER EXPERIENCE

Some examples of digital services as well as tests and initiatives in

H&M is present in 71 markets – 47 of which also offer online sales –

H&M is a fashion brand, offering

Image recognition is one example of H&M’s digital functions

COS offers reinvented classics and less capsule menswear collection,

Weekday is a Swedish denim and fashion brand influenced by youth

In summer 2018 the collaboration Monki x HoloMe

H&M Home is a design-driven inte-

Afound is a new type of outlet that

ARKET is a modern-day market

Most ARKET stores include a café, based on

Information at arket.com tells customers the factory

Skinny jeans have been Cheap retailers. This traditional wholesale

Market count per brand

BRAND NEW STORES NUMBER OF NUMBER OF NUMBER OF

* Cheap Monday will be closed down in 2019. Se also page 36.

Germany* 32,367 30,959 5 468 Portugal* 1,179 1,075 32

USA* 24,798 26,330 42 578 Malaysia* 1,177 1,109 3 47

UK* 13,760 12,622 12 304 Ireland* 1,104 961 24

France* 11,311 11,383 -3 237 Philippines* 1,007 926 2 34

China* 10,743 9,484 24 530 South Africa 842 780 6 23

Sweden* 8,404 8,236 3 175 Singapore* 801 899 -1 12

Italy* 7,630 7,525 4 179 Peru 763 725 3 11

Spain* 7,373 6,816 -3 172 Slovakia* 750 616 3 25

Netherlands* 6,465 6,191 -1 144 Croatia* 719 685 1 16

Russia* 5,737 4,915 5 139 Bulgaria* 635 581 1 21