Annual Report 2001 - About H&M

Annual Report 2001

CONTENTSFinancial highlights 1Report of the Managing Director 2H&M 2001 4Our communication 6Our products 8Our stores 10Our markets 12Growth markets 15Other markets 17From idea to store 20Design, production and buying 21Logistics 23Our employees 24Our social responsibilities 26External factors 30Administration report 32Income statements 33Balance sheets 34Cash flow analyses 36Notes to the financial statements 37Proposed distribution of earnings 40Auditor’s report 41Five-year summary 42H&M share 43Board of Directors 44Addresses 46Annual General Meetingof shareholders 49Financial information 49Business conceptH&M’s business concept is to offer fashionand quality at the best price.In order to be able to offer the latestfashion, we have a design and purchasingdepartment that creates our clothingcollections. We are able to maintainthe best price by:■■■■■■having few intermediariesbuying in large volumeshaving long experience of the clothingindustryhaving a good understanding of whichgoods to buy from which markethaving effective distribution systemsbeing cost-conscious at every stage

FINANCIAL HIGHLIGHTS2001 2000Gross sales, including VAT, SEK M 46,528.2 35,876.1Change, % + 30 + 9Sales outside Sweden, SEK M 41,095.0 30,621.0Sales outside Sweden as a percentage of gross sales, % 88 85Operating margin, % 13.8 12.4Profit after financial items, SEK M 5,734.0 4,003.2Net profit for the year, SEK M 3,816.4 2,552.7Earnings per share, SEK 4.61 3.08Change from previous year, % + 50 - 17Return on shareholders' equity, Note 19, % 27.9 23.0Return on capital employed, Note 19, % 41.6 35.8Debt/equity ratio, Note 19, % 1.2 1.2Share of risk-bearing capital, Note 19, % 77.8 79.8Solidity, Note 19, % 75.6 75.7Number of stores in Sweden 118 115Number of stores outside Sweden 653 567Total number of stores 771 682Average number of employees 22,944 20,680

REPORT OF THE MANAGING DIRECTORresulted in substantially lower price reductionsthan last year.We have made ongoing improvements toour logistics flow and have been able to cutlead times from the idea until the finishedproduct is in the store. We have also continuedto force down costs throughout theorganisation. The results of the cost cuttingprogramme introduced in spring 2000 cannow fully be seen.Last but not least, H&M’s success has beendue to fantastic commitment from ouremployees at all levels in the company.AN EVENTFUL ANDPROFITABLE YEARI ended my report last year with the commentthat, as far as H&M was concerned,2001 had every indication of being a fun,eventful and profitable year. And I am verypleased to be able to report that the yearlived up to our expectations – even if 2001 inmany ways has been dramatic with a weakeningbusiness cycle and terror attacks thataffected us all and that led to great uncertainty.Rapid paceH&M is today in a strong position. We are aninternational fashion company that at theclose of the financial year boasted 771 storesand a headcount of 34,000 in 14 countries.Nearly 90 per cent of our sales are now madeoutside Sweden.We have two successful seasons behind usand during the year we strengthened ourposition in all our markets. The pace hasbeen a rapid one throughout the company,and particularly so in our growth markets.In Germany, which is H&M’s biggest market,we now have over 200 stores. During theyear we also opened flagship stores in France– on Boulevard Haussmann in Paris – and inthe UK, on London’s Kensington High Street.New stores in the USA included one in Manhattan’sSoHo district and several stores inand around Boston.In total 93 new stores were opened duringthe year.Strong profit levelTurnover for the year amounted to SEK 46.5billion, an increase of 30 per cent – or 20 percent with comparable exchange rates.Profit after financial items was SEK 5.7billion, up by SEK 1.7 billion or 43 per centon last year. This profit equals a return onequity of 28 per cent.This is a strong result, on a par with ourrecord year of 1999, despite a weak first quarterand notwithstanding continued strongexpansion in new markets.Factors in our successH&M’s strong development during the year isdue to a number of factors.Absolutely the most pleasing element isthat our collections have been so good andhave been so well received by our customers.This is the single most important factor ifthings are to go well for H&M. In the courseof the year we have also gradually broughtour buying volumes into equilibrium andachieved a well balanced range. Overall thisIncreased customer focusWe are constantly trying to get better at followingup both our customers and developmentsin the market in order to be able tooffer an attractive range. Our customers mustalways be able to find what they are lookingfor at H&M, whether they come in for everydaygarments or for something hip andtrendy. What’s more, the price and the qualitymust be right.In 2001 we worked on identifying moreclearly the products that attract our majorcustomer groups. The fact that we got thesecollections right – they are produced in largevolumes – has been a major factor in H&M’sgood profitability over the year.We have also carried out more in-depthanalysis of our spearhead garments. Theseare important, because many of H&M’s futurevolume items are generated from this group.Moreover, they help to strengthen H&M’simage as a fashion company. One indicationthat we are at the forefront in this respect isthat in June H&M’s clever designers wereawarded the Gold Button design prize by thefashion magazine Damernas Värld.Unique fashion showOne of the highpoints of the year was in May,when we held a fashion show for over 500Swedish and foreign journalists at Dalhalla,a former limestone quarry in the Swedishregion of Dalarna.Similar events are organised every four orfive years in our various sales countries. It is away of gathering together the media inH&M’s 14 markets and creating publicity forour collections.The choice of Dalhalla was based partlyon the great international interest that hassurrounded Scandinavian design in recentyears and partly on H&M’s Swedish origins.The unique setting provided a thrilling contrastto the big designer shows that usuallytake place in Paris, London or New York.2

The fashion year drives our businessDesign and fashion, and thus the fashion year,are the drivers behind H&M’s business. Thefashion year is geared around the spring andautumn collections. Over the year we workedon buying more and more garments duringthe season, which helps reduce the risk ofbuying mistakes and also means we canquickly replenish items that are selling well.Our aim is to have the shortest possibletransitional periods between the seasons.Attractive collections and continual restockingwith new goods allows us to extend theseasons into the winter and summer periods,which helps establish a strong basis forachieving good margins.H&M’s responsibilitiesH&M cooperates with 900 independent suppliersin Europe and Asia that produce ourproducts. Every supplier that signs a contractwith H&M undertakes to abide by our Code ofConduct. The requirements cover issues suchas fire safety, the working environment and aban on child labour. We check that suppliersare meeting their commitments through regularinspections.During a recent trip to Asia I had opportunityto visit several of our suppliers, includingsome of those in China. I met with ourinspectors and got to see with my own eyesthe extensive work that we put into checkingthe working conditions in our suppliers’ factories.H&M cannot guarantee that there willnever be any shortcomings, but it is good toknow that we have a well-functioning organisationin place which continuously makessure that our Code of Conduct is beingobserved.USA still an important expansionmarketH&M opened its first store in the USA in theyear 2000. It received a rapturous receptionand by the end of the past financial year wehad 30 stores in the north-eastern UnitedStates. However, we know from experiencethat moving into a new market is expensive.What’s more, the USA represents a brand newcontinent for us.The investment in the USA is an investmentin the future that we have great faithin. We are not happy with the operatingcosts, however, which are still at too high alevel. To improve efficiency in existing storesthe rate of expansion in the US market willtherefore be somewhat slower than previouslystated. The uncertainty in the Americanmarket since September 11 has also played apart in this decision.Nonetheless, I would like to point outthat H&M will continue to expand substantiallyin the USA. In 2002 we expect to open afurther 12 stores, including a number ofstores in Philadelphia.Growth with good profitabilityH&M’s strong expansion is continuing andaround 90 new stores are planned in total for2002. We are in a strong financial position,which gives us the freedom to act and togrow at our own pace. H&M’s strong presencein all 14 markets provides a firm foundationfor continued growth. The primary expansionwill take place in our growth markets ofGermany, France, the USA, Spain and the UK.We will also be growing in our other markets,both by establishing new stores and bydeveloping and strengthening our existingbusiness. The focus in 2002 will be on furtherimprovements in profitability.H&M is well equipped for further growthand expansion and I am highly optimisticabout the year ahead.Rolf Eriksen3

Parisians now have a new landmark toorientate by on Boulevard Haussman.A new store was opened on KensingtonHigh Street.The magazine Damernas Värld yearlyawards the Golden Button prize toSwedish clothing design.Fashion show forthe world’s pressThis year we invited 550 Swedish andforeign journalists to a very different fashionshow at Dalhalla, a former limestonequarry in the Swedish region of Dalarna.40 top international models showed offour Autumn/Winter collection on a catwalkbuilt out over the water, culminatingin the appearance to great acclaim ofsinger and actress Grace Jones. Theevent in Dalhalla was a great successand resulted in masses of media coverageboth 4 in Sweden and internationally.

H&M 2001■Well-received collections and increased sales inall markets.■20 new stores open in the USA, includingH&M’s first store in Boston.■Substantial expansion also in the UK andFrance, with new flagship stores on KensingtonHigh Street in London and Boulevard Haussmannin Paris.■At the end of the year there are over 200 H&Mstores in Germany, H&M’s biggest market.■2,400 inspections are carried out to check thatH&M’s suppliers are observing our Code ofConduct as regards good working conditions.■The cost-cutting programme aimed at achievingsavings of SEK 500m on a full-year basis iscompleted.■Better provision of information: press conferencesand analysis conferences in conjunctionwith quarterly reports, reporting of sales figureson a monthly basis.■A spectacular fashion show attracts the world’spress to Dalhalla.■H&M is awarded the Gold Button design prizeby the magazine Damernas Värld.■H&M is named best European company by theEuropean Business Press, a federation of fiftyor so business journals around Europe.■93 stores opened and 4 closed.■At the close of the year there are 771 H&Mstores in 14 countries.5

OUR COMMUNICATIONA VISIBLE BRANDThe H&M brand is one of our most importantassets. We have identified four strategic componentsthat make up our brand and areconstantly working on the balance betweenthese:■ Our products■ Our stores■ Our employees■ Our communication/advertisingProductsOur products – the backbone of H&M’s businessconcept – are constantly undergoingimprovements in both price and quality. Thedriving force is always to surpass our customers’expectations by offering a widerange, yet one that is still appropriate to ourtarget groups. With 16 different concepts forwomen, men, young people and kids H&Mhas products for everyone with an interest infashion.StoresOur stores are an incredibly strong mediumthat we will continue to develop. By havingwell-thought out displays we can create a feelof fashion and style that inspires our customersas well as guiding them and keepingthem informed. Ever since the company’sestablishment in 1947 we have stuck by ourprinciple of “best business location” and wecontinue to hold fast to it today, whether fora high-profile flagship store or a store in asmaller town.EmployeesAll H&M’s 34,000 or so employees are responsiblefor the brand and its development. Thespirit of H&M today is the same at heart as inour earliest years – open doors, direct communication,short decision paths, cost consciousnessand sound common sense.Communication/advertisingThe keywords of clarity, simplicity and presenceare consistent characteristics of H&M’scommunication activities. We handle ouroverall communication ourselves and buy inthe best solutions within each discipline.This method is identical to how H&M workswith suppliers in other areas.Our communication shows what westand forH&M uses a number of communication toolsto convey the business concept, includingadvertising, PR and our website. Our communicationis a long-term part of building upthe H&M brand. Our marketing has a majorimpact and it is therefore essential to conveya positive and healthy image and good values.We use different characters and a mix ofdifferent looks and styles for our various concepts.Consistent advertising– variation in the mixIn the course of the year a great many advertisingproductions were implementedaround Europe and in parts of the USA.H&M’s advertisements can be seen primarilyon billboards, in newspapers, fashion magazines,catalogues, cinema advertisements andon the Internet.The design is clear and simple and aimsto inform our customers about what’s new atH&M and to show who we are and what westand for. The advertisements show the latest6

fashions as well as the price of the items. Tomake it as clear and as inspiring as possiblewe use professional models, photographersand stylists.The advertisements are produced centrallyin Sweden by H&M’s advertising departmentin cooperation with freelance creativeprofessionals and advertising agencies. Theyare largely identical in all our markets, butthe media mix is adapted to local needs andconditions.PR makes us heard above the noisePR is a powerful tool for reaching various targetgroups in a growing media circus, whichhas become increasingly important as weestablish the brand in new markets.H&M works on PR on an ongoing basisand organises events such as meetings withthe press to show the latest fashions. InSpring 2001 we also put on a very successfulfashion show at Dalhalla in the Swedishregion of Dalarna. The show brought togetherleading journalists from Europe and theUSA and gave H&M extensive publicity.Our website reaches all our targetgroupsH&M’s website is aimed primarily at our customers,but also at other parties with aninterest, shareholders and the media. Thewebsite features H&M’s advertising campaigns,information about the company, ourrange and our stores as well as a job opportunitiespage. Temporary campaigns on thewebsite are an important channel for creatingcontact and dialogue with young people.Improved informationH&M now has more than 180,000 shareholdersand is one of the most heavily tradedshares on the Stockholm Exchange. We takeour responsibility to provide financial informationvery seriously and are happy to followthe rules that apply to listed companies.Over the year we have consolidated ourinformation services and increased our accessibility.We hold press conferences and teleconferencesfor journalists and analysts everyquarter in connection with our reports. Wehave also set up a separate investor relationsfunction. Since September 2001 we have alsobeen reporting our sales figures on a monthlybasis.However, we will continue to be cautiousabout passing on certain sensitive key figures,since we believe that for competitivereasons this is in the interests of both thecompany and its shareholders.7

OUR PRODUCTSH&M HAS SOMETHINGFOR EVERYONEH&M’s wide range is divided into 16 differentconcepts for women, men, teenagers andchildren. Each collection is aimed at adefined customer group. By offering fashionbasics and clothes with a high fashion contentwithin each collection, we allow our customersto combine different garments andfind their own personal style.Women’s wear makes up the largest partof H&M’s range, followed by children, teenageand men.Most of the collections are represented inthe majority of H&M’s stores, but there arealso stores that are specially aimed at women,children or teenagers or that sell only cosmeticsand underwear.WomenThe various concepts offer a wide range forfashion-conscious women from 18 to 45 yearsof age – or who feel they fit into this agegroup and are interested in fashion.Clothes – for the fashion-consciouswoman who always follows the latest trends.She is not loyal to a particular style butinstead is always on the lookout for a newlook.Hennes – represents current fashion forall women interested in fashion. The collectionoffers the latest trends and modernbasics.Mama – for the mother-to-be who wantsto continue to dress fashionably during herpregnancy. The emphasis is on comfortableand modern materials in functional cuts.Styles follow the trends in the Hennes collection.L.O.G.G./L.O.G.G. Sport – offer leisurefavourites that are constantly updatedaccording to the season’s trends. The emphasisis on the choice of fabrics, designs anddetails.BiB – aimed at plus-size women who areinterested in fashion, offering trendy gar-8

ments as well as functional basics. Theemphasis is on continuity in the collection, agood fit and choice of material.ChildrenH&M’s four children’s collections form amuch valued part of H&M’s range. The basicidea is to offer good, safe and functional children’sclothing that also follows the fashions.Baby Baby – sizes 50-80 cm, 0-12 months.Comfortable and practical babywear.Chiboogi – for boys and girls, sizes 86-140cm, 18 months-10 years. Playful and functionalcollection.DUbbSTER – for boys and girls, sizes 86-164 cm, 18 months-14 years. Clothes in adenim style with a high fashion content.L.O.G.G. – for boys and girls, sizes 86-164cm, 18 months-14 years. Modern versions ofclassic favourites.TeenageOur range for young people is updated everyseason with the latest trends in music, filmand street fashion.Divided – for young guys and girls from15 to 25 years of age. The concept is aimed atyoung people who want to have an individualand personal style. It includes both everydaywear and party wear as well as a wide rangeof denim garments.MenThe men’s range consists of four collectionsthat are designed separately.Clothes Men – reflects the very latesttrends. Here, the latest fabrics, colours andsilhouettes are important.Conwell – for a well-dressed and casualstyle. A wide range of modern, up-to-theminutegarments.L.O.G.G. – Label of Graded Goods. This collectionconsists of modern, contemporarycasual clothes, which naturally follow thecurrent trends in colours, cuts and details.L.O.G.G. Sport – part of the L.O.G.G. collection.Functional influences in the detailsand materials, and the focus is on sport asfashion.Underware and accessoriesA wide range of underwear, accessories andhosiery is offered with all of the collections.CosmeticsH&M started selling cosmetics in 1975 andtoday sells cosmetics in Sweden, Norway, Denmark,Finland, Germany, Great Britain, Austriaand Spain. The cosmetics departmentoffers H&M products of good quality, bothour own and selected outside brands. Theproduct range consists of body care and haircare products, make-up and accessories. Duringthe year the range was concentrated tofocus more on our own-brand products. Notesting is carried out on animals either duringproduction or of finished products.Beauty Box – make-up, accessories, haircare and body care. A wide range of modernproducts.Divided – make-up and hare care productsforF.O.B. (Face of Beauty) – classic high qualitymake-up range.Hair System - high-tech hair care rangeL.O.G.G. Sport – fresh, practical body carefor active people.Conwell - new range of basic products formen. The range was introduced in 2001.9

OUR STORESTHE LOCATION– CRUCIAL FOR SUCCESSH&M is always on the lookout for the bestbusiness locations for its stores. This has beena firm principle since 1947 and is no less truetoday. A presence on the best stopping streetsis of crucial strategic importance for aninflow of customers and others of the world’sforemost fashion companies can also befound at these addresses.Our aim is to be the most attractiveoption for our customers in every town orcity or other store location. We see it as anadvantage to be close to our competitors,since this increases the pulling power of thearea and gives us a better chance of offeringmore customers the opportunity to get agood deal.By being represented at the hottestaddresses in fashion’s capital cities – BoulevardHaussmann in Paris, Kensington HighStreet in London and Fifth Avenue in NewYork – H&M is also able to profile itself as anup-to-the-minute fashion house.Store display – an effective marketingtoolThe stores play a vital part in building up ourbrand. Over the year further investmentshave been made in order to exploit thepotential of display and improve service toour customers.The stores are structured so as to be largelyself-service. The aim is to create a comfortableand inspiring environment in whichcustomers feel at home and can find whatthey are looking for in the range easily. H&Mmust always surprise them with somethingnew. At the same time, customers must beable to find their way about in whicheverH&M store they happen to find themselves.The shop window is a central part of ourpresentation and must grab the customer’sattention within the space of a few seconds.In the entrance area we give customers moretips by showing the possibilities offered byour garments. By hanging the clothes inclear programmes and using mannequins toinspire customers as to how the clothes canbe put together we pass on ideas that allowcustomers to select on their own those itemsthat suit their particular style.A great deal of the responsibility for displayexists at store level. The centrallydesigned methods of presentation are adaptedto the specific situation and clientele ofeach individual store.The stores must always look fresh andappealing. Minor renovations such as paintingtake place on an ongoing basis, whilemajor renovations and refurbishments arecarried out as needed. The furnishings aresimple and uniform throughout H&M’sstores, although modified to a certain extentto take account of location and property. TheH&M store on Fifth Avenue in New York, forexample, differs in design from a store in ashopping mall.Mail order – H&M Rowells – a complementarysales channelSince 1980 H&M has offered its customers analternative and convenient way of shoppingby mail order. Here,again, the business conceptis to provide fashionand quality at thebest price. Our mailorder business, H&MRowells, has customersin Sweden, Norway, Finlandand Denmark.Some of the range is the same as that foundin our stores, but since the sales pattern isdifferent there is also a separate range.Shop online – a pilot project with potentialfor growthE-commerce was started as a test activity inSweden in March 1998. In 1999 the activitywas extended to Denmark and Finland and in2001 our online shop expanded to includeNorway. We are evaluatingand continuallyimproving our e-commercesite. A newclearer design waslaunched during theyear to make it even easier to shop on theWeb.We are keeping a close eye on consumerpurchasing behaviour and have the resourcesand experience to cope with any increaseddemand for e-commerce services quickly ifnecessary. We see the Internet as one of severaldistribution channels and anticipate thatthe bulk of our sales will continue to bemade in our stores.11

OUR MARKETSFROM VÄSTERÅSTO MANHATTANH&M has expanded substantially in recentyears. At the end of the year H&M sold clothesand cosmetics in 771 stores in 14 countries.Turnover including VAT over the yearamounted to SEK 46.5 billion, an increase of30 per cent on last year. With comparableexchange rates the increase was 20 per cent.Sales outside Sweden accounted for 88 percent of group turnover.H&M’s sales primarily take place in stores.In the course of the financial year 93 newstores were opened and four stores wereclosed. In Scandinavia H&M also sells fashionby mail order through H&M Rowells. In Sweden,Norway, Denmark and Finland a certainamount of sales are also conducted via theInternet.Geographical spreadToday there are H&M stores in 13 Europeancountries as well as in the USA. Germany isthe biggest individual market with around athird of group turnover. Sweden accounts for12 per cent of sales and remains our secondbiggestmarket. H&M now has very good marketcoverage in Sweden. It is therefore likelythat in terms of sales Sweden will be overtakenby our expansion markets of the UK, USAand France within the space of a few years.Our first stores outside Sweden wereestablished in Norway and Denmark in the1960s. Our first store outside Scandinavia wasopened in the UK in 1976. The latest marketsto be added are the USA and Spain, whereH&M opened its first stores in 2000.Expansion and growth strategyH&M is an expansive and financially verystrong company. Over the past four yearsturnover has more than doubled and thenumber of stores has increased from 490 to771. This expansion has been entirelyfinanced using our own resources. At the endof the financial year our solvency stood at 76per cent, giving us the strength we need togrow at our own pace. H&M’s strategy is forcontinued expansion while maintaininggood profitability.The availability of attractive business locationsis decisive for our rate of expansion.H&M stores must always be at the best businesslocation in a city or shopping centre.H&M stores vary in size from 300 to 4,000square metres, are always owned and run byH&M, and are one of the most importantsymbols of the corporate brand.12

H&M has great potential for continuedexpansion and growth and has a strong baseto build on in all 14 of our markets.H&M’s markets can be divided into twocategories: growth markets and other markets.Generally the majority of H&M’s newstores in a year are opened in our growthmarkets.Growth marketsA growth market has a large population baseand provides H&M with good opportunitiesto establish full-range stores in many locationsfor a long period.Among H&M’s growth markets are ourrelatively new markets of France, the USA andSpain. Here H&M has succeeded in establishingthe brand and achieving good sales withina short space of time. These countries offergreat opportunity to continue growing formany years to come. Germany and the UK,where H&M has been present for a long time,also represent important growth marketssince H&M’s market share is still small andthe population base large.In 2001 two-thirds of H&M’s new storeswere opened in the USA, Germany, UK, Franceand Spain.In a brand new market it is important tostudy the environment and intended storelocations on the spot, to see where our competitorsare located and how customersbehave. The overall assessment of the conditionsis crucial to our choice of expansionstrategy. The more stores and the greater thepopulation base, the more potential customersthere are. This increases the chancesof quickly achieving a critical mass for theSales/market incl. VAT, SEK M0 4,000 8,000 12,000 16,000SwedenNorwayDenmarkU.K.SwitzerlandGermanyNetherlandsBelgiumAustriaLuxembourgFinlandFranceUSASpain0 4,000 8,000 12,000 16,00013

purposes of logistics and central warehousing.Our expansion generally starts from thebiggest city in the region, where there is ahigh customer flow. We then establish morestores in the same region so as to utilise theinfrastructure and get as great a return aspossible from our advertising and marketing.Other marketsThe other H&M markets are at varying stagesof development. The common denominatoris that H&M is well established among bothcustomers and other interested parties. Thismeans that we can benefit from our knowledgeof local conditions and of customers’purchasing patterns. Since the players in themarket know us well, it is also easier to findgood store locations and to recruit staff.In certain markets, such as in the Netherlandsand Austria, there is still good potentialfor growth by establishing new stores. Herewe can grow cost-effectively because we have afunctioning infrastructure in place and alarge base over which to distribute the costs.In more mature markets such as in Scandinavia,however, it is difficult to increasemarket share further. In these countriesH&M’s stores are well distributed geographicallyand cover most of the areas of interest.The opportunities for expansion are thereforelimited primarily to new stores in smallertowns and complementary stores in majorcities.In all our markets we work constantly ondeveloping and strengthening our existingbusiness – something which is very importantfor H&M’s profitability and success. Thiscomes down to trimming costs, selling moreper unit of area, making stock managementmore efficient, etc. Sales can also be increasedby expanding the range to include more conceptsor by establishing concept stores, suchas stores selling only clothes from our youngpeoples ranges.CompetitorsH&M has a number of internationally activecompetitors. There is also competition atlocal level in the form of local chain storesand department stores. H&M sees itself as itsown biggest competitor. We are constantlycomparing the business with our own previousperformance. Our aim is to surpass whatwe have achieved previously. We believe thatthis is the best way to ensure that we remaincompetitive.Expansion in 2002H&M will continue its expansion in 2002 witharound 90 new stores; 10 stores will be closed.Our main expansion will take place inour growth markets of Germany, France, theUSA, Spain and the UK. We will also grow inour other markets, both by establishing newstores and by developing the existing business.Since the quality of the stores is of theutmost importance it is the availability ofgood business locations that determines ourrate of expansion.H&M is not planning to establish stores inany additional countries in 2002.14

GROWTH MARKETSUKYear established: 1976No. of stores: 59Turnover (SEK m): 3,453Turnover (GBP m): 233Employees: 1,768H&M opened its first store in the UK back in1976. Two years ago a major push was begunand in less than twelve months the numberof stores rose by nearly 40 per cent. Todaythere are 59 H&M stores in the UK. Our marketshare remains small, leaving room forcontinued expansion in the years ahead.Developments during the yearTurnover increased by 57 per cent during theyear (47 per cent in local currency) to SEK3,453m. 12 new stores were opened in thecourse of the year. This rapid expansion wasin part made possible due to H&M’s takeoverof six stores with good locations from theDutch chain C&A. The stores were opened inautumn 2001 after having been convertedinto bright new H&M stores.During the year we also launched a newflagship store on Kensington High Street inLondon. This is H&M’s seventh London store,excellently located on one of the big shoppingstreets where a number of well-knownfashion houses have stores. With a shop floorarea of 3,000 square metres extending overthree storeys, the store offers all our conceptsand has been very well received.2002H&M will continue to expand from its currentposition in major British cities and plansto open a further ten stores in 2002.GERMANYYear established: 1980No. of stores: 206Turnover (SEK m): 14,516Turnover (DEM m): 3,091Employees: 6,216Germany is the H&M Group’s biggest marketand accounts for approximately a third ofsales. At the end of the year there were 206H&M stores in Germany. Germany overtookSweden as our biggest market back in 1995.Germany is still a very important growth areafor H&M.Developments during the year2001 was a good year for H&M in Germany.Growth continued to be good and salesincreased by 30 per cent (20 per cent in localcurrency), amounting to SEK 14,516m. 18stores were opened in total. The sales figuresfor these new stores have been good.In March one of the country’s verybiggest stores was opened in Nuremberg andthis was also the H&M Group’s 700th store. Anumber of stores have also been refurbishedand expanded over the course of the year.2002Germany is a big market. Despite the factthat there are now over 200 H&M stores inGermany, H&M’s market share is just a fewper cent. H&M intends opening 22 stores inGermany in 2002, in parallel with continuedwork on increasing sales in existing stores.FRANCEYear established: 1998No. of stores: 31Turnover (SEK m): 2,187Turnover (FFR m): 1,562Employees: 1,366France is one of H&M’s youngest and mostexciting markets. We moved into the countryin 1998 and were immediately given a verypositive reception. The number of stores wasdoubled both in the second and third financialyear and major investments were madein building up warehouse and logistics capacity.Today H&M is represented primarily inthe Paris region and in southern France.Developments during the yearTurnover increased by 88 per cent in thecourse of the year (73 per cent in local currency),amounting to SEK 2,187m. The substantialexpansion that was commenced in the year2000 continued into 2001 with eight newstores. During the year there has been intensivework on adjusting buying volumes andstock levels for the new stores. The full effectof this work was felt in the fourth quarter.

H&M is always on the lookout for the bestbusiness locations for its new stores and duringthe spring we were able to open stores atsome of the hottest addresses in Paris forexample.Our store on Boulevard Haussmann reallydeserves to be called a flagship store. Thisstore, which is 2,300 square metres in size,was opened in February and is one of H&M’sbiggest stores in France, situated on a fashionableshopping street among a number offamous French department stores. Duringthe autumn the Group also opened its firststore in Grenoble.2002In 2002 H&M will take over nine stores fromMarks & Spencer (three of them in the Parisregion), quickly giving H&M stores in whatare absolutely the best business locations.Overall around 13 new stores will be openedin the course of the year.USAYear established: 2000No. of stores: 30Turnover (SEK m): 2,027Turnover (USD m): 197Employees: 1,187The year 2000 was something of a milestonefor H&M as we crossed the Atlantic and beganestablishing stores in the USA. H&M’s firststore was opened in March 2000 in Manhattan,New York. In 2001 we continued our substantialexpansion in the American marketby opening downtown stores in New Yorkand Boston as well as stores in big Americanshopping malls. Today we have 30 storesspread out across the densely-populatednorth-east USA.Developments during the yearTurnover increased by 152 per cent in thecourse of the year (124 per cent in local currency),amounting to SEK 2,027m. Our expansionhas continued according to plan andduring the year 20 stores were opened in theUS. In the fourth quarter the full effect of ourwork on adjusting stock levels and buying volumesto the growing sales could be seen. Salesfigures for the year were good, although theevents of September 11 had a negative effecton the American retail trade in the autumn.In March H&M opened another store inNew York, a store situated at the heart oftrendy SoHo. The store sells our most fashionorientedconcepts in teenagewear, ladieswearand menswear. The SoHo opening was precededby a show with invited guests from theworlds of fashion and the media. During theyear we also opened four stores on LongIsland, New York. In the autumn we openedour first store in central Boston – a 3,000square metre store selling all our concepts.2002H&M still has great faith in the USA as animportant market for expansion. A further12 stores are expected to open in 2002. Theslightly slower rate of establishment thanwas planned previously is due partly to theuncertainty in the American market followingSeptember 11, 2001 and partly to our goalof achieving greater efficiency in our existingUS stores more quickly. The changed situationin the American rental market is allowingH&M to be more selective and to obtainbetter terms in lease negotiations.SPAINYear established: 2000No. of stores: 10Turnover (SEK m): 488Turnover (ESP m): 8,832Employees: 463Spain is H&M’s very youngest market, whereour first store was opened in April 2000.Spain is a priority growth market, althoughexpansion this year was somewhat slowerthan desired. The reason for this was the difficultyof finding sufficiently attractive storelocations. H&M now has stores in Madrid,Barcelona, Zaragoza and Valencia.Developments during the yearTurnover during the year amounted to SEK488m, an increase of 161 per cent (141 percent in local currency).During the year H&M continued buildingup its Spanish organisation. A further threestores were opened. Valencia became a newH&M city in May. Madrid and Barcelona,Spain’s two most important cities, each gaineda new store in the autumn. The Madrid storewas the first Spanish H&M store to sell clothesfor all the family and was very well received bySpanish customers, who are getting to knowand appreciate H&M more and more – notleast for its fashion content and pricing.2002Our expansion in Spain will continue and itis planned that six stores will be opened duringthe year.16

OTHER MARKETSSWEDENYear established: 1947No. of stores: 118Turnover (SEK m): 5,433Employees: 3,523Sweden is H&M’s home market and is wherethe company’s head office is situated. It wasin the Swedish town of Västerås that thefounder of H&M, Erling Persson, opened hisfirst store in 1947. Sweden is today H&M’s secondbiggest market with 118 stores. One ofthe Group’s biggest stores in terms of areacan be found on Hamngatan in Stockholm.The opportunities to grow by establishingnew stores in Sweden are limited, however.H&M’s market share is currently around 10per cent and H&M has stores in most townsand cities. Here it is rather a matter of maintainingour market position and working allthe time to improve efficiency.Developments during the yearH&M’s sales increased by 3 per cent in 2001,resulting in sales of SEK 5,433m. Four storeswere opened in the course of the financialyear; Värnamo was one of the towns to get itsfirst H&M store. One store was closed. Duringthe year we also started the building of a newcentral warehouse in Eskilstuna.2002H&M is planning to open around three morestores in Sweden in 2002. .NORWAYYear established: 1964No. of stores: 67Turnover (SEK m): 3,516Turnover (NOK m): 3,086Employees: 1,385Norway was H&M’s first foreign outpost, thefirst store being opened in Oslo in 1964.Today there are 67 stores spread all over thecountry and our market coverage is good.Developments during the yearSales in Norway increased by 21 per cent (10per cent in local currency) in 2001, amountingto SEK 3,516m. Three stores were opened,one being a further store right in the centreof Bodø. In Oslo a new 30,000 square metredistribution centre was also taken into useduring the year. This brings all our warehousefunctions together in one place so thatH&M’s staff can make sure the Norwegianstores get their goods efficiently.2002One new store is planned for the year 2002..DENMARKYear established: 1967No. of stores: 49Turnover (SEK m): 2,251Turnover (DKK m): 1,823Employees: 939Denmark is one of H&M’s more mature marketsand was the Group’s second foreign venture.H&M has had a presence here since 1967.Today there are 49 stores and H&M is wellestablished in the market.Developments during the yearSales increased by 19 per cent during the year(9 per cent in local currency), amounting toSEK 2,251m.Three stores were opened, including theGroup’s first store in Næstved. One store wasclosed. Denmark’s biggest store at Amagertorvin Copenhagen is gradually being refurbishedto become a bright, modern store.A new and efficient distribution centrewas taken into use during the year. Thanks tothis distribution and stock management haveimproved noticeably and Denmark now hasone of the Group’s most efficient logisticsflows.2002It is expected that a further two stores will beopened in 2002.17

OTHER MARKETSFINLANDYear established: 1997No. of stores: 19Turnover (SEK m): 1,173Turnover (FIM m): 752Employees: 502Finland is H&M’s most recent addition inScandinavia and is one of the Group’syoungest markets. The first Finnish store wasnot established until 1997. Nonetheless, H&Mis today one of the best-known fashion chainsin the market to customers of the 15-29 agegroup. There is potential for further growthin Finland.Developments during the yearSales increased during the year by 26 per cent(14 per cent in local currency), amounting toSEK 1,173m. Five stores were opened in thecourse of the financial year, including akidswear store in Helsinki.2002In 2002 the H&M Group’s most northerlystore will be opened at Rovaniemi. The storewill be situated right next to “Father Christmas’sHouse” - a major Finnish tourist attractionthat is a popular destination for the Germans,Japanese, Britons, French and others.SWITZERLANDYear established: 1978No. of stores: 45Turnover (SEK m): 3,137Turnover (CHF m): 516Employees: 1,097Way back in 1978 Switzerland was the first marketon continental Europe that H&M movedinto. Today H&M has 45 stores in Switzerland,covering a large part of the country.Developments during the yearTurnover increased by 26 per cent during theyear (12 per cent in local currency), amountingto SEK 3,137m. Sales figures were good,with well-received collections.Five stores were opened during the year.In spring a concept store for young fashionwas opened in Bern. It was the Group’sfourth store of this type. A new store with avery good city location was then opened inLugano, in the Italian-speaking part ofSwitzerland. A further three stores haveopened since the summer, one of them inFreiburg. One store was closed in 2001.18

The big H&M store on the prestigiousBahnhofstrasse in Zurich was refurbishedduring the year and completed just in timefor the start of the autumn season.2002No new H&M stores are planned for 2002.NETHERLANDSYear established: 1989No. of stores: 57Turnover (SEK m): 3,082Turnover (NLG m): 739Employees: 1,800In 1989 H&M established its first base in theNetherlands, the first of the Benelux countriesthat the company moved into. AlthoughH&M has been in the market a long time,there are still good opportunities for establishingnew stores.Developments during the yearSales increased by 28 per cent (18 per cent inlocal currency), amounting to SEK 3,082m.During the year four stores were opened andone store was closed. One store was establishedin Dordrecht, a brand new city forH&M.H&M is becoming big among young peoplein the Netherlands. In view of this twoconcept stores for young fashion wereopened during the year in Amsterdam andRotterdam. Sales have developed well in thesestores. This gives Rotterdam five stores andAmsterdam nine.2002Four store openings are planned in thespring, including a new store in Alkmaar.Both markets are looked after from a sharedhead office in Brussels.BELGIUMYear established: 1992No. of stores: 35Turnover (SEK m): 1,640Turnover (BEF m): 7,203Employees: 710In 1992 our first store in Belgium was openedand H&M now has 35 stores in Belgium.Notwithstanding relatively good geographicalcoverage, there is still potential for morenew H&M stores to be established.Developments during the yearDuring the year turnover increased by 13 percent (5 per cent in local currency), amountingto SEK 1,640m. A further store wasopened in Ghent in the autumn.2002Five new stores are planned in Belgium in thecoming year.LUXEMBOURGYear established: 1996No. of stores: 4Turnover (SEK m): 173Turnover (LUF m): 761Employees: 76Luxembourg is the very smallest of H&M’smarkets with four stores and the operationsare handled by the Belgian company. For geographicalreasons the potential for expansionis limited.Developments during the yearSales increased by 20 per cent during the year(11 per cent in local currency), amounting toSEK 173m.2002It is planned that two new stores will beopened.AUSTRIAYear established: 1994No. of stores: 41Turnover (SEK m): 3,452Turnover (ATS m): 5,170Employees: 1,407H&M opened its first store in Austria in 1994.At that time that the competition was relativelylimited and the new venture quicklybecame profitable. Following acceleratedexpansion over the past year H&M now has 41stores in Austria.Developments during the yearTurnover increased by 19 per cent (9 per centin local currency) in the course of the year,amounting to SEK 3,452m. Seven new storeswere opened in 2001, most of them close tothe Italian border. In the autumn anotheryoung fashion store opened in a new shoppingcentre in Vienna, while one of Vienna’sbiggest H&M stores was given a completefacelift during the year.2002Five new stores are planned in Austria in2002, including two stores to be opened inWels and Liezen in the spring.19

From idea to storeDesign and buyingThe design and buying department inStockholm is where H&M’s collections arecreated. Its task is always to find the optimalbalance between the three componentsthat make up H&M’s business concept– fashion, price and quality – foreach customer group and market. Thebuying volumes and delivery dates arethen decided.21 production offices – 900 suppliersH&M’s 21 production offices in Europe,Asia and Africa are responsible for contactswith the 900 or so suppliers that manufactureour products. This means ensuringthat the buyer’s order is placed with theright supplier, that the goods are producedat the right price, are of good quality andchecking that production takes place undergood working conditions.Packing and transportThe transport chain begins at one of oursuppliers, where the goods are packed inboxes or prepared for transport as hanginggarments. From European suppliers goodsare generally sent by rail or road. From Asiathe goods are shipped. Goods are transportedby air only in exceptional cases.Transhipment at the transit depotPart of the goods flow is reloaded and senton from the transit depot in Hamburg, butan increasingly large part is now sent directto the distribution centres in each salescountry.A distribution centre in each countryEach H&M country has a distribution centre.From here the garments are distributedto central store warehouses or direct tostores. Certain goods are checked and preparedfor sale at the distribution centre, forexample by placing on hangers and finishingin steam tunnels.Central store warehouseAs each store begins processing increasinglylarge volumes there is a greater needfor flexibility in stock management. Somegarments therefore today go direct from thedistribution centre to a central store warehouse,from where the garments are calledoff in accordance with each store’s uniquesales pattern.In the storeH&M stores are restocked every day withnew items and special seasonal items. Thelead time – i.e. the time it takes to turn anidea into a finished garment that is for salein the store – varies between different productgroups within a time scale of 3-4 weeksto six months.20

DESIGN, PRODUCTION AND BUYINGWHERE H&M’S COLLECTIONSARE CREATEDH&M has around 80 designers who worktogether with buyers, pattern designers andbudget controllers to create collections foreach concept.During the planning stage an initial qualifiedassessment is carried out of what customersare expected to demand and this ischecked against what sold well in the previousyear. Inspiration is taken from all overthe world – via travel, trade fairs, exhibitions,films and music – and is turned into fashionsthat will suit H&M’s customers. The latesttrends have to be picked up on at very shortnotice, while other trends can be predictedup to a year in advance.Teamwork with clear rolesDuring the year the various team roles andthe distribution of responsibility among thestaff has been further clarified.The designer produces the theme of thecollection. Colours, cuts and materials arethen discussed in the team, with everyonecontributing their own particular area ofcompetence – designers, pattern designersand buyers. The buyer then makes contactwith H&M’s production office. The team alsogets important help from the sales merchandiser(there is one for each sales country)who contributes information on sales patternsand on what competitors are offeringin each market. The budget controller isresponsible for follow-up and project management.There are many advantages to working ina team for each concept. Mixing differentareas of competence which are each based onan interest in clothing creates creativity andteam spirit. The staff must follow theirinstincts, be sensitive to trends, take a holisticview and have a desire to make a good deal.Flexibility is a keyword, as is achieving balancein the range.Coordination between various teams isalso important for creating an attractiverange across the different collections.Better analysis of customers and theproduct mixIn 2001 H&M’s methods of analysing customergroups and market trends were furtherstrengthened. The aim is that the customermust always be able to find what he orshe is looking for. In addition, the price mustbe right and the garment must be of therequired quality.Our method of producing products thatour customers want to have can be illustratedusing a very simple triangular model. The trianglesymbolises the breadth of H&M’s range,from fashions that are sold in large quantitiesto the very latest trends.In 2001 we increased our focus on themost profitable products – fashion garmentsat the base of the triangle. These attract lotsof customers and can therefore be manufacturedin large volumes. Our analysis of ourspearhead garments has also become morein-depth. These are important because theyreinforce H&M’s image as a fashion house.Moreover, many of H&M’s future volumeproducts are generated from this group.Well-balanced fashion2001 was characterised by simple, clean, easyto-wearfashions. We also saw lots of combinationsof black and white as well as modernclassics. There was great interest in denim aswell.H&M’s range was entirely in line withdemand during the year as regards fashions,volumes and prices. Our rate of growth andability to increase market share in all H&Mmarkets in a tough market climate shows thestrength of our business concept and our wayof working.Flexible productionH&M has 21 production offices, ten each inEurope and Asia as well as one in Africa. Theproduction offices employ around 400 people,most of them local, who are responsiblefor contacts with the 900 or so suppliers whomanufacture H&M’s 500 million items. Thismeans ensuring that the buyer’s orders are21

DESIGN, PRODUCTION AND BUYINGplaced with the right supplier, that the goodsare produced at the right price and are ofgood quality and checking that productiontakes place under good working conditions.Around half of our goods are bought inEurope and the remainder primarily in Asia.Where an order is placed depends on manyfactors, such as price, transport times,import regulations and quality aspects.Working with independent suppliersrather than owning our own factories makesthe supply of H&M goods highly flexible,whilst at the same time the risks associatedwith tying up capital in machinery andstocks are considerably reduced.Focus on lead timesH&M is constantly working on reducing leadtimes. Today the lead times vary from 3-4weeks up to six months depending on thenature of the goods.A well thought-out planning processwhich starts long before the actual manufacturetakes place is one of the factors in oursuccess and behind our development.Efficient exchange of informationbetween H&M and our suppliers allows materialsetc. to be bought in early, while cuts andcolours can be decided at a later stage in theprocess. The fact that the processing of testgarments – testing and trials – is today takencare of direct in the production offices hasalso had a major impact on reducing leadtimes.Our aim is to cut lead times further bycontinuing to develop our preparatory planning.The later a specific order can be placed,the less risk there is of buying errors and thegreater the flexibility to restock stores withsuccessful products.Trends for Spring 2002The coming Spring/Summer collection featuresa mix of styles in different materials,cuts and colours. Feminine/masculine, elegant/rock,frilly/sharply tailored – everythingis possible.A top with clean lines might be combinedwith casual trousers, or an austere canvasmilitary jacket with an ultra-short sequinnedskirt. These clashes make the fashion picturevaried and exciting. The garments will be outin H&M stores from as early as January andwill be restocked on an ongoing basis duringthe spring.22

LOGISTICSCOMPLETE RESPONSIBILITYMEANS INCREASED CONTROLLogistics within H&M is both about physicallymoving goods from the production unit tothe store and about the important feedbackfrom the store to the buying department. In2001 our logistics function dealt with around500 million items or around 800,000 cubicmetres of goods. Getting the right volume ofgoods to the right country, the right city andthe right store at the right time requires awell planned distribution system.H&M manages every part of the logisticschain, which means that the company controlsevery stage and acts as importer, wholesalerand retailer. This allows us to achieveeconomies of scale and to control the flow asregards costs, quality and delivery dates.In total over 3,000 people work withinH&M’s logistics function. Stock managementis primarily carried out under our own auspices,whilst transport is put out to contractors.Lower rate of investmentAfter last year’s major investments in newinfrastructure in H&M’s new markets, developmentsin 2001 were somewhat calmer. Inthe USA we took a new central store warehousein Connecticut into use and in Norwaywe moved the distribution centre to newpremises in Oslo. In Germany the logisticsfacilities in Hamburg were expanded and inBelgium warehouse capacity in Brussels wasalso expanded in order to cope with the newstores that will be established in 2002. In Swedenthe building of a new central warehousein Eskilstuna was commenced.At the end of the year H&M had 13 distributioncentres – one in each country (apart fromLuxembourg, which is supplied from Belgium).In addition, there are a number of separatecentral store warehouses as well as two logisticsfacilities, one in Sweden and one in Norway,for our mail order business H&M Rowells.Continued focus on lead timesSimplicity, experience and continualimprovements are keywords in H&M’s goodsflow. We are constantly working on reducinglead times, including through the developmentof our IT systems.By relocating large parts of the productionof clothes with a high fashion content toEurope while concentrating our productionof volume items and basics on Asia we cancut lead times whilst maintaining flexibility.23

OUR EMPLOYEESOUR EMPLOYEES CREATETHE SPIRIT OF H&MEvery H&M employee helps to convey what isalso our business concept – fashion and qualityat the best price.At the end of the year H&M had around34,000 employees. The year has been characterisedby continued rapid expansion of thebusiness primarily in the USA, Germany,France and the UK. We have also workedintensively on adjusting our manning levelsto our growing sales. Thanks to great commitmentfrom all our staff we have succeededin this task.An important challenge in conjunctionwith H&M’s expansion and the large numberof new appointments is to maintain and passon the particular spirit of H&M throughoutthe organisation. We always prioritisestraight, fast decision paths so as to avoidbureaucracy.The spirit of H&MThe spirit of H&M is based on a number ofvalues which describe in simple terms howwe want to work and which are grounded inour business concept. The spirit of H&M isbased on sound commonsense, taking theinitiative, faith in the individual, direct communication,cost consciousness, team spirit,fast pace and continual improvement –always with the focus on the customer.Within H&M we provide room for peopleto make their own decisions and take responsibilityand staff get continual feedback ontheir performance. Locally organised competitionsin and between stores also act as animportant impetus for store staff.Job rotation is an important element forH&M employees in most positions. Store managersregularly visit call-off warehouses andthe staff and management in the countryand Group offices complete work experiencein stores. This creates understanding acrossboundaries and increased commitment.Our in-house newspaper H&M News isone of a number of tools in which we communicateand strengthen the corporate cultureas well as updating our staff on what isgoing on within the Group. The newspaper isissued four times a year.RecruitmentAt H&M we principally recruit internally.External recruitment is used primarily forsales staff for our stores. These later form agood recruitment base for positions ofresponsibility both in the stores and in otherfunctions within the company. That way weensure that the spirit of H&M is spreadthroughout the organisation, whilst at thesame time giving our employees opportunityto develop continuously.Our expansion in new markets over theyear has involved the recruitment of a lot ofnew staff at all levels who, together with anumber of experienced key personnel frommore established markets, have built up theorganisations in the USA and Spain in particular.The stores in these countries are nowrun primarily by local staff. This is an exampleof how H&M is able to transfer experienceand knowledge quickly and efficiently frommature to new markets.During the year a new recruitment campaignwas created in which H&M staff personallyparticipate. In the campaign, which isused in all H&M countries, members ofH&M’s staff say how they personally experienceH&M as an employer. This shows thediversity within H&M whilst at the same timestrengthening the credibility of the message.Developing skillsAttracting and retaining competent staff isimportant for our success. We therefore workcontinually on developing skills. The biggestknowledge gain is made through active learningin everyday work and all training is carriedout under the auspices of H&M itself.Newly employed store staff undergo athree-week induction programme in whichthe emphasis is on passing on experienceand skills. Each new member of staff is givena mentor. They then have continual trainingas needed, e.g. in customer care, textiles anddisplay.The induction programme guaranteesthat everyone has an equal grounding inH&M’s way of working. We also carry outmanagement training in which we placegreat emphasis on being a good communicatorof H&M’s values.OrganisationH&M’s head office is in Stockholm. In additionto the company management this is alsowhere the main functions for buying anddesign, finance, expansion, shop fitting anddisplay, advertising, information and PR,human resources, logistics and IT are located.In addition, H&M has 13 country officesthat are responsible for the local functions ineach country. H&M stores in Luxembourg areadministered by the country office in Belgium.H&M has 21 production offices, primarilyin Europe and Asia, which take care of contactswith H&M’s 900 or so suppliers.At the end of the year H&M had 771 storesin 14 countries. The average number ofemployees was 22,944 (converted into fulltimepositions), 17 per cent of whom weremale.25

OUR SOCIAL RESPONSIBILITIESWE TAKE RESPONSIBILITYIN ALL STAGESH&M’s business concept is to give customersunbeatable value by offering fashion andquality at the best price. Our concept of qualitymeans that customers must be satisfiedwith both our products and with H&M as acompany.Youth project in BangladeshH&M works actively to prevent child labour.Since 1999, for example, we have been runninga well-regarded project in Bangladeshwhich aims to improve the prospects ofyoung people who want to train as sewingmachinists. Around 160 young people aretrained annually at our training centre inDhaka and are then given work experience atone of H&M’s suppliers, where they are alsooffered permanent employment.Support for human rightsH&M supports the nine principles of UN’sGlobal Compact and OECD’s guide lines formultinational companies.Healthy ideals in advertisingH&M follows the International Chamber ofCommerce’s basic rules on advertising. Ourmarketing has a major impact and it is thereforeessential for us to communicate a positiveand healthy image. H&M’s advertisingimages are not aimed to convey a specificideal. The people we show in our advertisementsmust be healthy and wholesome. H&Mdeliberately distances itself from drug andalcohol abuse.Our responsibility to our customersWe place great emphasis on quality assuranceand on raising the quality of our products. Inaddition, we regularly carry out careful testsand quality controls. All the models in H&M’scollections undergo a number of quality andsafety tests.Some tests are carried out in H&M’s ownlaboratories and some in external laboratories.A final quality test is carried out at ourdistribution centres before the garments aredistributed to stores.Our responsibility towards those whomake our clothesWe endeavour to achieve long-term relationswith our suppliers. When suppliers sign acontract with H&M they undertake to abideby our high requirements. These requirementscover matters such as fire safety, theworking environment, the right to unionisationand a minimum wage as well as the factthat child labour, unreasonable workinghours, enforced labour and discriminationmust not occur. These criteria are stated inH&M’s Code of Conduct.Not all our suppliers meet all theserequirements from the start, but they mustaffirm their intention to make the necessaryimprovements if they are to be accepted as asupplier to H&M. Certain basic requirementsare always set. For example, companies thatdo not pay the minimum wage are notaccepted as suppliers to H&M until they canprove that they meet our requirements.Follow-up of H&M’s Code of Conduct isnot just a matter of inspecting the factories,but rather our staff also have an advisoryfunction. In each location a whole network oflocal contacts must be built up, such as with26

lawyers with a knowledge of local legislation,schools, voluntary organisations and authorities.Checks on complianceAround 30 full-time local H&M Code of Conductinspectors and 100 quality controllers inthe production countries check regularlythat the suppliers are observing our requirements.The inspectors follow an inspectionreport containing over 100 items. They interviewthe company management, inspect allthe factory areas, check documentation suchas payroll reports and time cards and in certaincases interview staff at the factories.H&M carried out 2,400 Code of Conductinspections in the course of the year.Reporting inspection resultsAfter each inspection a report is written forthe supplier specifying the points that needimprovement. H&M and the supplier agree adate by which the improvements are to beimplemented and the result is then followedup by H&M’s inspectors.“Clean Clothes”In the international “Clean Clothes Campaign”a number of international organisationshave drawn attention to the lack ofinsight into the work of the textiles industryas regards the working environment. Inresponse, H&M – in cooperation with Lindex,Indiska, KappAhl and the Swedish groupwithin the campaign has produced a concreteproposal for the form an independentinspection organisation might take. The proposal,which was presented under the name“Dress Code – a code of conduct for the textilesindustry”, is now being discussed atEuropean level.H&M’s policykidswear: H&M’s children’s clothes must becomfortable and practical. We do not makeclothes that may be perceived as provocativeon small children.war-inspired garments: H&M has decidednot to use camouflage patterns on our garments.offensive patterns: Tops with prints havebeen a big trend this year. Prints on tops andother garments must not be offensive, racist,sexist, political or religious.animal testing: At H&M we do not permitanimal testing on cosmetics products, eitherduring production or on the finished products.For further information visit www.hm.com27

H&M’s EnvironmentalPolicyContinuous improvements are significant for allH&M activities. This includes our environmentaleffort, which is conducted within the frameworkof our business operations. H&M's business conceptis to give our customers unsurpassed valueby offering fashion and quality at the best price.Our quality concept is based on ensuring that ourcustomers are satisfied with our products andH&M as a company.To this end, we are committed to actingresponsibly in our community. We shall also cooperatewith our suppliers to improve the socialand environmental standards in the factories thatmanufacture H&M clothing, thereby contributingto sustainable development in these areas. Toachieve this goal, H&M has adopted the followingprinciples.We shall:• always consider the health and safety of ouremployees. By adopting the precautionaryprinciple, we will continuously update ourrestrictions against the use of environmentallyand health hazardous chemicals in the productionof our garments and other products,• continuously update ourselves on environmentalnews and legislation. We will not be contentto follow existing environmental legislation, butwill in certain areas do more than the lawrequires,• conduct our business in a manner that utilisesnatural resources as efficiently as possible,• develop new and continuously improve existingenvironmental requirements concerning thepurchase of products and services,• train, inform and motivate our employees toparticipation and responsibility, thereby makingenvironmental work an integrated part of H&Mdaily routines,• specify for our suppliers our position regardingbehaviour towards the environment and humanrights and follow up to ensure that our suppliersimprove their operations according to theserequirements.

OUR SOCIAL RESPONSIBILITIESENVIRONMENTAL AWARENESSCOMES NATURALH&M takes environmental matters extremelyseriously and for a number of years has beenworking on increased environmental awareness.Back in the mid-1990s, for example, weintroduced chemical restrictions and sincethen our suppliers have had to guaranteethat they will abide by them. The Group’sfirst environmental manager was appointedin 1997 and the following year H&M’s environmentalpolicy was adopted. H&M has alsocharted the Group’s effect on the environmentand identified the environmentalaspects that are significant.Environmental thinking is a natural partof our business. Our restrictions and objectivesare revised on an ongoing basis. Duringthe year H&M has carried out a number ofenvironmental improvement measures. Productscontaining PVC, for example, are notallowed in or ranges since 1 January 2002.H&M’s overall environmental aims:• Environmental awareness – Promotion of environmentalawareness among our employees,suppliers and customers• Respect for nature – Caution in decision-makingout of respect for nature• Sustainable use of resources – Resource conservation,recycling and reduction of waste• Healthy products – Products that are safe touse and harmless to the environment duringuse and disposal• Clean production chain – Sustainable productionand production methods throughoutthe supply chain• Green transport – Clean and efficient transportwith limited influence on the climateOur environmental work – an integralpart of our businessH&M aims to integrate environmental workinto its everyday business within every area.To ensure that the environmental work isbeing carried out and given priority H&M hasappointed environmental officers in all thecountries in which we are active and withincentral departments.It is a mark of recognition for our environmentalwork that during the year H&Mwas ranked as one of the foremost listedretail companies in the Dow Jones SustainabilityIndex, Dow Jones’ index of companiescontributing to sustainable development.Chemical restrictionsH&M is endeavouring to ensure that chemicalsthat may be harmful to health and theenvironment are not used in the productionof our goods. We therefore have a list ofrestricted chemicals that are not permittedto occur. The list is continually updated.In 2001 H&M entered into cooperationwith a number of companies, including twolarge well-known American consumer goodscompanies, to establish common restrictions.The aim is to produce an industry standardwhich thus has greater impact.Cooperation with suppliersAll H&M’s goods suppliers have signed anagreement to comply with the establishedchemical restrictions. In this way we can alsocontribute to reducing the environmentalimpact of the production stage, as well as inthe incineration and recycling of worn-outclothing.However, the greatest environmentalimpact comes from the dyeing of fabrics andprocessing of fibres. To increase environmentalawareness in these early productionstages, H&M carried out several pilot projectstogether with our suppliers. In one projectwe have started charting our suppliers’ effecton the environment. This work will beexpanded in 2002. The suppliers in our pilotproject have also formulated environmentalaims in conjunction with H&M.A more detailed report of H&M’s environmentalwork in 2001 is published onwww.global-responsibility.com29

EXTERNAL FACTORSEXTERNAL FACTORSINFLUENCING H&MH&M faces various external risks in its business.A number of these can be dealt with bywell-developed internal routines, while othersare largely determined by external factors.FashionWorking in the fashion industry is a risk initself. Fashion is a perishable item and thereis always a risk that a collection is not appreciatedby the customers.Within each concept H&M must have theright volumes and achieve the right balancein the mix between fashion basics and thegoods with a high fashion content that are soimportant for H&M’s image. To reduce thefashion risk H&M is working systematicallyon reducing lead times from the idea untilthe finished product is in the store. The productionof clothing with a high fashion contentis also increasingly being commissionedin Europe, where lead times are shorter. Thisallows production to be adapted to customerdemand more quickly.H&M trades in 14 countries on two continents.Although purchasing patterns are relativelysimilar in the various markets, differencesdo occur. The start of the season variesbetween countries, for example, as does thelength of the season. Consequently, both thedelivery date and the volume of goods for thedifferent stores must be adjusted to match. InSpain, for example, autumn comes later andis considerably shorter than in Scandinavia.The weatherH&M’s goods are bought in and launched instores on the basis of a normal weather situation,i.e. assuming that autumn will arrivewhen it should according to the statistics andwill maintain a certain temperature. Majordepartures from the norm will affect sales.The biggest effect is felt if there are majordepartures at the beginning of a season.The economic cycleThis year most major economies experiencedslower economic growth and generally weakerdemand. It is difficult to know how an economicdownturn will affect H&M’s sales, buthistorically it has emerged that H&M doesnot tend to see any significant reduction insales when there is a downturn in the economiccycle.Currency hedgingThe most significant purchase currencies forthe Group are the US dollar and related currencies.Fluctuations in the dollar/euroexchange rates form the largest individualtransaction exposure within the Group. Tohedge against fluctuations in the dollar rateand thus reduce the effects of futureexchange rate fluctuations, the US dollar andrelated currencies are secured under forwardcontracts on an ongoing basis throughoutthe year. Since the sole aim of this currencymanagement is to reduce the risks, only actualexposure is hedged.In addition to the transaction exposurearising from purchases in foreign currencies,the Group is affected by currency fluctuationsas a result of the receivables and liabilitiesthat arise on an ongoing basis betweenGroup companies. However, with the introductionof the euro, some of this exposurehas been reduced. The majority of the risksthat remain are hedged through forwardcontracts.Translation effectsIn addition to the effects of transaction exposure,the Group’s result is also affected bytranslation effects. These arise when a foreignsubsidiary’s profit/loss is converted intoSwedish kronor in order to be consolidatedin the Group accounts. Over the past yearthese have been affected by the fact that theSwedish krona has strengthened against theEuropean currencies and weakened againstthe dollar. Thus the underlying profit/loss ineach market may be unchanged, but theneither reduced or increased when convertedinto Swedish kronor. Over the year the translationeffect was negative to the tune of SEK240 million.Translation effects also arise in respect ofthe Group’s net assets upon consolidation ofthe foreign subsidiaries’ balance sheets. Noequity hedging is carried out for this risk.Liquidity managementLiquid surplus funds are invested short-termin banks or in government securities in thelocal currency of the company in question.The Group does not utilise any derivativeinstruments in the interest-bearing securitiesmarket, nor does it trade in shares or similarinstruments.30

ADMINISTRATION REPORTThe Board of Directors and Managing Director of H & M Hennes& Mauritz AB (publ) submit herewith their report for the financialyear 1 December 2000 to 30 November 2001.TURNOVERTurnover incl. VAT for the H&M Group increased during the yearby 30 per cent (with comparable exchange rates, the increasewas 20 per cent) compared with last year and amounted to SEK46,528.2 M (35,876.1).Increased customer focus, good collections and a well balancedassortment have resulted in very positive sales developmentduring the year.H&M has increased its market share in each country ofoperation.In 2001, 93 new stores were opened and four were closed. Ofthe net increase of 89 stores, 37 were opened and two wereclosed during the fourth quarter. Group number of stores herebyamounts to 771 per 30 November 2001.Sales outside Sweden accounted for 88 per cent (85) of totalsales.In the financial year 2001/2002, approximately 90 new storesare planned to open and approximately 10 to close down. Themajority of the expansion will take place in H&M’s growth marketsGermany, France, the USA, Spain and U.K..PROFITSGross profit for the year amounted to SEK 20,499.1 M (15,396.8),which corresponds to 51.6 per cent (50.6) of sales.After deduction of selling and administrative expenses,operating profit was SEK 5,477.8 M (3,766.6). This correspondsto an operating margin of 13.8 per cent (12.4).Operating profit has been charged with depreciation accordingto plan of SEK 900.1 M (629.1) and start-up costs, the part ofinvestments in new stores that is charged directly to the incomestatement, of SEK 193.0 M (315.7). Operating margin calculatedon the result after depreciation but before start-up costs therebywas 14.3 per cent (13.4).Group financial net interest income amounted to SEK 256.2M (236.6).Profit after financial items was SEK 5,734.0 M (4,003.2), anincrease of 43 per cent. This financial year has been positivelyaffected by currency translation effects of SEK 560 M comparedwith last year.After deduction of taxes of SEK 1,917.6 M (1,450.5), profit forthe year amounted to SEK 3,816.4 M (2,552.7). The resultachieved corresponds to earnings per share of SEK 4.61 (3.08).Return on shareholders’ equity was 27.9 per cent (23.0) andreturn on capital employed was 41.6 per cent (35.8).This financial year, recommendation no 9, income taxes,issued by the Swedish Financial Accounting Standards Council,has been applied. The taxes for 2001 have thereby been reducedby SEK 152.0 M compared to earlier principles.LIQUIDITY AND FINANCINGThe Group balance sheet total increased by 30 per cent and wason 30 November 2001 SEK 20.410.3 M (15,700.4).During the year, the H&M Group generated a positive cashflow from current operations of SEK 6,012.3 M (1,941.2). SEK2,035.7 M (2,525.0) was invested through acquisitions of fixedassets.The financial assets amounted to SEK 8,530.9 M (5,403.2), anincrease of 58 per cent.Stock-in-trade decreased by 3 per cent (+ 23) and amountedto SEK 4,332.4 M (4,448.7). Stock-in-trade equals 10.9 per cent(14.6) of turnover and 21.2 per cent (28.3) of total assets. Thestock level has decreased as a result of adjusted purchase volumesand a good sales development.The Group’s debt ratio was 1.2 per cent (1.2). The share ofrisk-bearing capital was 77.8 per cent (79.8).The Group’s equity was on 30 November 2001 SEK 15,431.6M (11,889.8), which apportioned on the 827,536,000 outstandingshares equals SEK 18.65 (SEK 14.37) per share.DIVIDEND POLICYH&M’s financial goal is for the company to continue to enjoyhealthy growth. We must continue to expand with the same highdegree of financial strength. In view of this, the Board has determinedthat dividends should correspond to one-third of the profitper share after taxes. Although dividends will normally followthe profit trend, they may deviate in certain years.The Board of Directors will propose to the Annual GeneralMeeting a dividend of SEK 1.75 per share (SEK 1.35).BOARD OF DIRECTORS’ WORKThe Parent Company Board of Directors met six times during thefinancial year. Stefan Persson was re-elected Chairman of theBoard at a Board Meeting following election. The Board of Directorshave kept abreast of the financial development and positionof the Group. During the year, the Board adopted a workingarrangement for themselves that calls for them to hold five ordinarymeetings annually, the Board Meeting following electionnot included. It also stipulates that the Board of Directors shalldecide on the Group financing policy, investments/disinvestmentsin companies and activities, as well as new markets. Nospecial committees were appointed.32

INCOME STATEMENTS(SEK M)GROUPPARENT COMPANY2000/2001 1999/2000 2000/2001 1999/2000Turnover including VAT 46,528.2 35,876.1 6,112.0 5,733.7Turnover excluding VAT, Note 1 39,698.8 30,453.7 4,979.6 4,696.6Cost of goods sold, Notes 4, 5 – 19,199.7 – 15,056.9 – 2,721.4 – 2,628.6GROSS PROFIT 20,499.1 15,396.8 2,258.2 2,068.0Selling expenses, Notes 2, 4, 5 – 14,110.9 – 10,962.5 – 1,776.9 – 1,556.4Administrative expenses, Notes 4, 5, 6 – 910.4 – 667.7 – 383.2 – 259.7OPERATING PROFIT 5,477.8 3,766.6 98.1 251.9Result from financial investmentsDividend from subsidiaries 1,406.2 1,675.3Interest income 275.1 254.4 143.3 116.6Interest expense – 18.9 – 17.8 – 10.0 – 9.1PROFIT AFTER FINANCIAL ITEMS 5,734.0 4,003.2 1,637.6 2,034.7Appropriations, Note 8 – 45.3 – 0.3Taxes, Note 7 – 1,917.6 – 1,450.5 – 63.9 – 100.7NET PROFIT FOR THE YEAR 3,816.4 2,552.7 1,528,4 1,933.7Profit per share, SEK 4.61 3.08Number of shares: 827,536,00050,00045,00040,00035,00030,00025,00020,00015,00010,0005,0000Sales incl. VAT, SEK M96/97 97/98 98/99 99/00 00/01Group Abroad16,00014,00012,00010,0008,0006,0004,0002,0000Sales/country incl. VAT, SEK M2000 2001SwedenNorwayDenmarkU.K.SwitzerlandGermanyNetherlandsBelgiumAustriaLuxembourgFinlandFranceUSASpain6,0005,0004,0003,0002,0001,0000Profit after financial items/Income for the year, SEK M96/97 97/98 98/99Profit afterfinancial items99/00 00/01Income forfor the year33

BALANCE SHEETS(SEK M)ASSETSFixed AssetsGROUPPARENT COMPANY2001 2000 2001 2000Intangible AssetsRenting rights, Note 9 86.8 104.3 0.2 0.3Tangible AssetsLand and buildings, Note 9 607.6 516.9 122.2 126.6Equipment, tools, fixtures and fittings, Note 9 5,572.8 4,337.4 406.7 407.76,180.4 4,854.3 528.9 534.3Financial AssetsShares and participation rights, Note 13 8.5 8.5Long-term receivables, subsidiaries 24.0 24.0Other long-term receivables 107.2 96.6 9.0 9.2Deferred tax receivables 310.0417.2 96.6 41.5 41.7Total Fixed Assets 6,684.4 5,055.2 570.6 576.3current assetsStock-in-trade 4,332.4 4,448.7 631.2 698.9Current receivablesAccounts receivable, trade 507.7 420.5 246.8 209.0Accounts receivable from subsidiaries 3,679.5 3,244.8Tax receivable 11.4 –Other current assets 57.6 134.9 9.0 42.7Prepaid expenses and accrued income, Note 10 297.3 237.9 48.1 41.5862.6 793.3 3,994.8 3,538.0Short-term investments 5,063.1 3,813.8 1,353.0 960.0Cash and bank balances 3,467.8 1,589.4 52.8 96.5Total Current Assets 13,725.9 10,645.2 6,031.8 5,293.4TOTAL ASSETS 20,410.3 15,700.4 6,602.4 5,869.715,000Risk Capital1005,000Stock-in-trade2012,000804,000169,000603,000126,000402,00083,000201,0004096/9797/9898/9999/0000/010096/9797/9898/9999/0000/010Risk Capital, SEK MShare, %Stock-in-trade, SEK MStock-in-trade in per centof turnover excl. VAT, %34

BALANCE SHEETS(SEK M)EQUITY AND LIABILITIESEquity, Note 11GROUPPARENT COMPANY2001 2000 2001 2000Restricted EquityShare capital, Note 14 206.9 206.9 206.9 206.9Restricted reserves 2,268.5 1,673.8 87.8 87.82,475.4 1,880.7 294.7 294.7Non-restricted EquityProfit brought forward, Note 15 9,139.8 7,456.4 3,133.7 2,317.2Profit for the year 3,816.4 2,552.7 1,528.4 1,933.712,956.2 10,009.1 4,662.1 4,250.9Total Equity 15,431.6 11,889.8 4,956.8 4,545.6Untaxed reserves, Note 16 578.6 533.3ProvisionsProvisions for pensions 98.7 96.1 95.4 92.8Provisions for deferred tax liabilities 755.9 639.4854.6 735.5 95.4 92.8Long-term LiabilitiesLiabilities to credit institutions 86.0 41.9 24.2 24.5Current LiabilitiesAccounts payable, trade 998.1 925.3 355.9 215.3Accounts payable, subsidiaries 172.4 24.7Income tax liability 793.9 363.7 36.5Other current liabilities 710.5 431.9 61.9 54.0Accrued expenses and deferred income, Note 12 1,535.6 1,312.3 357.2 343.04,038.1 3,033.2 947.4 673.5TOTAL EQUITY AND LIABILITIES 20,410.3 15,700.4 6,602.4 5,869.7Securities providedReal estate mortgages, not 18 32.5 32.5 32.5 32.5Contingent liabilities 21.0 21.0 21.0 21.035

CASH FLOW ANALYSES(SEK M)GROUPPARENT COMPANY2000/2001 1999/2000 2000/2001 1999/2000Profit after financial items 5,734.0 4,003.2 1,637.7 2,034.7Adjustment for items not affecting cash flow – 859.5 – 821.4 – 22.8 – 24.5Cash flow generated by current operations beforechanges in working capital 4,874.5 3,181.8 1,614.9 2,010.2Cash flow generated by changes in working capitalChanges in:Current receivables – 40.3 – 208.0 – 456.8 – 469.4Stock-in-trade 145.3 – 844.1 67.7 – 55.0Current liabilities 1,032.8 – 188.5 273.9 – 16.8Cash flow generated by current operations 6,012.3 1,941.2 1,499.7 1,469.0Cash flow from investment activitiesInvestments in fixed assets – 2,035.7 – 2,525.0 – 81.0 – 136.0Cash flow from financing activities – 1,273.7 – 1,049.0 – 1,069.4 – 1,113.7of which dividend – 1,117.2 – 1,117.2 - 1,117.2 – 1,117.2Cash flow for the year 2,702.9 – 1,632.8 349.3 219.3Liquid funds, beginning of the period 5,403.2 6,832.4 1,056.5 837.2Cash flow for the year 2,702.9 – 1,632.8 349.3 219.3Changes in currency rates 424.8 203.6Liquid funds, end of the period 8,530.9 5,403.2 1,405.8 1,056.536

NOTES TO THE FINANCIAL STATEMENTSACCOUNTING PRINCIPLESThe accounting and valuation principles comply with theaccounting laws, the recommendations issued by the SwedishFinancial Accounting Standards Council and the SwedishAccounting Board.This financial year, recommendation no 9, Income taxes,issued by the Swedish Financial Accounting Standards Council,has been applied.Consolidated accountsGroup companies calculate income tax in accordance with therules and regulations of the country in question. Deferred taxexpense in the consolidated accounts amounts to 30 per cent ofthe change in untaxed reserves for the year. The Group hasmade allocations for calculated taxes on expected dividendsfrom subsidiaries during next year.The value of stock-in-trade is reported in the consolidatedfinancial statements net of market-value obsolescence.Parent Company financial statements report the value ofstock-in-trade net of the tax-deductible obsolescence reserve.Foreign currencyThe most significant purchase currencies for the Group are theUS dollar and currencies related thereto. Fluctuation in the dollar/Euroexchange rate forms the largest individual transactionexposure within the Group. To hedge against fluctuations in thedollar rate and thus reduce the effects of future exchange ratemovements, US dollars and related currencies are securedunder forward contracts on an ongoing basis throughout theyear. Since the sole aim of this currency management is toreduce the risks, only actual exposure is hedged. The Group’soperating result for the year has been negatively affected by SEK67 M (last year positively by SEK 59 M).Translation effects also arise in respect of the Group’s netassets on consolidation of the foreign subsidiaries’ balancesheets. No equity hedging is carried out for this risk. The translationdifferences for the year, which are reported directlyagainst Group equity, amount to SEK 684.6 M.Receivables and liabilities in foreign currencies have beenreported in accordance with recommendation no 8 of theSwedish Financial Accounting Standard Council. This meansthat receivables and liabilities have been assessed at theexchange rate at the balance sheet date.Forward exchange agreements, which ensure the flow ofcurrencies between group companies, have been dealt with in amanner where receivables and liabilities have been assessed ata forward rate. If no receivables or liabilities arose, the assessmentof forward exchange agreements did not affect theaccounts.1 TURNOVER EXCLUDING VAT PER COUNTRY, SEK MSwedenNorwayDenmarkU.K.SwitzerlandGermanyNetherlandsBelgiumAustriaLuxembourgFinlandFranceUSASpainTotal2START-UP COSTSStart-up costs are included in the selling expenses and refer tothe cost involved in modernising and fitting out newly acquiredpremises and newly established operations. Start-up costs havebeen charged to the income statement in accordance with theaccounting and taxation practice of each country. Start-up costsduring the year amounted to SEK 193.0 M (315.7).3 SALES TO GROUP COMPANIESParent Company net turnover includes SEK 499 M (SEK 760 M)concerning the internal sale of goods to subsidiaries.4 SALARIES, OTHER REMUNERATION AND PAYROLLOVERHEADS (SEK M)2001SwedenNorwayDenmarkU.K.SwitzerlandGermanyNetherlandsBelgiumAustriaLuxembourgFinlandFranceUSASpainOther countriesGroup, totalBoard +Man. Dir.,Salary10.32.41.33.03.14.21.41.61.41.32.02.62.937.5Other,Salary868.2433.4230.0367.1370.01,343.9280.1157.7285.513.685.9247.9367.261.1107.15,218.72000/20014,3532,8391,8013,0472,91612,5222,5931,3562,8931569621,8292,01242039,699PayrolloverheadsTotal379.967.017.123.951.2281.568.335.581.71.720.496.961.016.510.21,212.8of whichpensionsTotal64.44.810.41.40.70.20.50.10.63.40.33.290.01999/20004,2082,3671,5111,9402,3079,6322,0471,1962,42212976497279816130,454of whichpensions**Board +Man. Dir.3.00.30.20.20.10.10.10.30.14.437

2000SwedenNorwayDenmarkU.K.SwitzerlandGermanyNetherlandsBelgiumAustriaLuxembourgFinlandFranceUSASpainOther countriesGroup, totalBoard +Man. Dir.,Salary11.42.02.32.83.34.3*) Pension costs in Sweden have been reduced by SEK 34.3 M, which representsthe company’s repayment of pension funds from SPP.**) Company and Group outstanding pension obligations to this group totalSEK 5.2 M (5.0).Severance payThe managing Director of the Parent Company is entitled to oneyear’s notice. In the event the company cancels the employmentcontract, the Managing Director shall receive an additionalyear’s salary as part of the severance pay.There are no other agreements regarding severance pay inthe Group.Terms of employment for other Group senior executive officersIn accordance with decision at the Annual General Meeting,remuneration to the Board of Directors reached SEK 3,900,000(3,900,000), of which SEK 3,000,000 (3,000,000) was paid to theChairman of the Board. Board members employed by the companywere not compensated.Remuneration to the Managing Director amounted to SEK4,775,000 (5,831,000). The usual premium for a Swedish ITPretirement plan should be added to the aforementioned figures.Certain executives who are entitled to retire between theages of 60 and 62 receive retirement payments. The cost of thesepayments has been covered by separate insurance policies.5 DEPRECIATION ACCORDING TO PLAN (SEK M)Equipment and leasehold rights have been depreciated at a rateof 12 per cent of acquisition cost, based on the estimated economiclife. Real estate has been depreciated at 3 per cent ofacquisition cost.Depreciations for the year have been reported in the IncomeStatement as follows:GROUPPARENT COMPANYCost of goods soldSelling expensesAdministrative expensesTotal6 AUDIT FEES (SEK M)Ernst & YoungAudit assignmentsOther assignmentsOther auditorsAudit assignments1.31.21.01.62.91.936.0Other,Salary820.3360.8195.0247.1320.21,133.6214.2138.5254.111.276.1144.0134.130.580.84,160.500/01105.2751.543.4900.100/016.82.72.1PayrolloverheadsTotal316.856.213.419.137.8231.045.033.673.61.217.255.921.38.26.6936.9GROUP99/0077.0522.130.0629.199/005.72.71.8of whichpensions*Total15.64.08.81.30.80.30.20.20.42.00.12.936.600/0113.069.34.186.4of whichpensions**Board +Man. Dir.1.50.20.10.30.10.10.12.499/0012.360.43.576.2PARENT COMPANY00/011.10.199/001.00.17TAX ON PROFIT FOR THE YEAR (SEK M)Present taxes paidDeferred taxesTotalPresent taxes paidDeferred taxesExpected tax expense according toSwedish tax rate 28 per centDifference in foreign tax ratesSundry non deductible/non taxableTax free dividend from subsidiaryIn the balance sheet under long-term receivables a deferred tax receivableof SEK 310 M is included, referring to loss carry forward estimated to beutilised within the next few years.* of which tax on untaxed reserves - 72.08 APPROPRIATIONS (SEK M)Depreciation in excess of planChange in capital based tax equalisation reserve KChange in accrued fundTotal9 LEASEHOLD RIGHTS, REAL ESTATE AND EQUIPMENT(SEK M)Leasehold Real estate EquipmentGrouprightsAcquisition value carried forward 131.7 590.3 6,280.9Acquisition for the year1.6 67.8 1,843.0Sales/disposal- 18.6- 157.1Translation effects11.1 44.5 449.9Closing acquisition value125.8 702.6 8,416.7Depreciation carried forwardSales/disposalDepreciation for the yearTranslation effectsClosing accumulated depreciationsClosing residual value according to planParent CompanyAcquisition value carried forwardAcquisition for the yearSales/disposalClosing acquisition valueDepreciation carried forwardSales/disposalDepreciation for the yearClosing accumulated depreciationsClosing residual value according to plan- 27.45.6- 14.6- 2.6- 39.086.800/01-1,997.680.0 *-1,917.61,997.6- 80.0 *1,917.61,605.5285.926.21,917.6The Group has not entered into any leasing agreements. Contractsfor leased premises have been entered at normal marketterms. Rental charges for the financial year 2000/2001 amountedto SEK 4,277 M.10 PREPAID EXPENSES AND ACCRUED INCOME (SEK M)Prepaid rentAccrued interest incomeOther itemsTotal00/01194.317.985.1297.30.70.7- 0.4- 0.1- 0.50.2GROUPGROUP00/01- 14.7- 30.6- 45.399/00117.816.7103.4237.9- 73.4- 18.5- 3.1- 95.0607.6175.40.5175.9- 48.8- 4.9- 53.7122.299/00-1,372.6- 77.9-1,450.5PARENT COMPANY63.963.9445.811.7- 393.663.999/00- 28.051.7- 24.0- 0.3-1,943.5132.1- 867.0- 165.5- 2,843.95,572.8659.980.4- 19.5720.8- 252.219.5- 81.4- 314.1406.7PARENT COMPANY00/0126.26.015.948.199/0025.93.312.341.538

11 CHANGE IN SHAREHOLDERS’ EQUITY (SEK M)Shareholders’ equity 1 Dec. 2000Effect of changed accountingprinciplesAdjusted shareholders’ equity1 Dec. 2000DividendsCapital shares in untaxed reservesTranslation differencesProfit for the yearShareholders’ equity 30 Nov. 2001Sharecapital206.9206.9206.9Restrictedreserves1,673.8158.01,831.8325.1111.62,268.5Unappropriatedearnings10,009.110,009.1- 1,117.2- 325.1573.03,816.412,956.2Total shareholders’equity11,889.8158.012,047.8- 1,117.2684.63,816.415,431.614 SHARE CAPITALThe share capital consists of 97,200,000 class ‘A’ shares (10votes per share) and 730,336,000 class ‘B’ shares (one vote pershare), with a par value of SEK 0.25 each. The total number ofshares is 827,536,000.15 APPROPRIATION OF PROFITS IN ACCORDANCE WITHTHE RESOLUTION OF THE 2001 ANNUAL GENERALMEETING (SEK M)Unappropriated profit at 30 Nov. 00Dividend, SEK 1.35 per shareUnappropriated profit carried forwardSEK M4,250.9- 1,117.23,133.712 ACCRUED EXPENSES AND PREPAID INCOME (SEK M)Holiday pay liabilityPayroll overheadsAccrued interest expenseOther itemsTotal00/01294.6130.81.51,108.71,535.6GROUP99/00243.9114.68.1945.71,312.313 PARTICIPATION IN GROUP COMPANIES(all companies are wholly owned) (SEK M)OrganisationnumberParent company participation )K E Persson AB556030-1052AB Hennes556056-0889Big is Beautiful, BiB AB556005-5047Bekå AB556024-2488Impuls AB556151-2376Carl-Axel Herrmode AB556099-0706H & M Rowells AB556023-1663Mauritz AB556125-1421Erica Modehus AB556070-1715H & M Hennes & Mauritz International BVSubsidiary participation in group companiesCarl Axel Petterssons AB 556027-7351H & M Hennes & Mauritz ASH & M Hennes & Mauritz ASH & M Hennes LtdH & M Hennes & Mauritz SAH & M Trading SAH & M Hennes & Mauritz Holding GmbH, HamburgH & M Hennes & Mauritz GmbH, HamburgImpuls GmbH, HamburgModehaus H & M Hennes & Mauritz GmbH, MünchenMagis GmbH & Co. KG, HannoverH & M Hennes & Mauritz Holding BVH & M Hennes & Mauritz Netherlands BVH & M Hennes & Mauritz USA BVH & M Hennes & Mauritz Belgium NVH & M Hennes & Mauritz GesmbHH & M Hennes & Mauritz OYH & M Hennes & Mauritz SARLH & M Hennes & Mauritz LPH & M Moda SLH & M Reinsurance SAH & M Hennes & Mauritz Far East LtdPuls Trading Far East LtdH & M Hennes & Mauritz International LtdPuls Trading International LtdNumberof shares1,0001,0003,3004501,2501,0001,1502,0001,00040,000 NLG1,200PARENT COMPANYBookedvalue00/01101.573.91.5180.3357.2Domicile99/0094.069.56.8172.7343.00.1 Stockholm0.1 Stockholm0.4 Stockholm1.3 Stockholm0.1 Stockholm3.0 Stockholm0.6 Stockholm0.2 Stockholm2.6 Stockholm0.1 Netherlands8.5StockholmNorwayDenmarkU.K.SwitzerlandSwitzerlandGermanyGermanyGermanyGermanyGermanyNetherlandsNetherlandsNetherlandsBelgiumAustriaFinlandFranceUSASpainLuxembourgHong KongHong KongHong KongHong Kong16 UNTAXED RESERVES (SEK M)Depreciation in excess of planOther untaxed reservesTotal17 AVERAGE NUMBER OF EMPLOYEESSweden, Parent CompanyNorwayDenmarkU.K.SwitzerlandGermanyNetherlandsBelgiumAustriaLuxembourgFinlandFranceUSASpainOther countriesGroup, total18 SECURITIES PROVIDED (SEK M)Real estate mortgages provided forliabilities to credit institutesSweden Dagskiftet StockholmHolmens gård, BoråsTotal Parent Company19 KEY FIGURE DEFINITIONSReturn onshareholders’ equity:Return on capitalemployed:Debt/equity ratio:Share of risk-bearingcapital:Solidity:Interest cover:Total3,5231,3859391,7681,0976,2161,8007101,407765021,3661,18746350522,94400/01223.1355.5578.600/01 99/00Males18%9%6%21%11%17%15%16%16%11%11%33%38%18%31%17%00/017.525.032.5Total3,5561,3218881,3251,0475,9281,6567351,4215851994855928743220,680Profit for the year divided byshareholders’ equity.Profit after financial items plus interestexpense divided by shareholders’ equityplus interest-bearing liabilities.Interest-bearing liabilities divided byshareholders’ equity.99/00208.4324.9533.3Shareholders’ equity plus deferred taxliability divided by the balance sheettotal.Shareholders’ equity in relation to balancesheet total.Males17%8%8%22%9%17%15%15%18%14%14%14%40%22%16%17%99/007.525.032.5Profit after financial items plus interestexpense divided by interest expense.39

PROPOSED DISTRIBUTION OF EARNINGSGROUPAccording to the Group Balance Sheet, unappropriated Group profit amounts to SEK 12,956.2 M.At the disposal of the Annual General Meeting SEK 4,662,151,292The Board of Directors and Managing Director propose that:shareholders be paid a dividend of SEK 1.75 per share SEK – 1,448,188,000To be carried forward as retained profits SEK 3,213,963,292SEK 4,662,151,292Stockholm, 29 January 2002Stefan Persson Fred Andersson Birgitta Brusberg* Vivian Enochsson*ChairmanWerner Hofer Sussi Kvart Bo Lundquist Stig NordfeltMelker SchörlingRolf EriksenManaging Director* Employee representative40

AUDITORS’ REPORTTo the general meeting of the shareholders of H & M Hennes &Mauritz AB Corporate identity number: 556042-7220We have audited the annual accounts, the consolidated accounts,the accounting records and the administration of the board ofdirectors and managing director of H & M Hennes & Mauritz ABfor year financial year 1/12 2000 – 30/11 2001. These accountsand the administration of the company are the responsibility ofthe board of directors and the managing director. Our responsibilityis to express an opinion on the annual accounts, the consolidatedaccounts and the administration based on our audit.We conducted our audit in accordance with generally acceptedauditing standards in Sweden. Those standards require that weplan and perform the audit to obtain reasonable assurance thatthe annual accounts and consolidated accounts are free frommaterial misstatement. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in theaccounts. An audit also includes assessing the accounting principlesused and their application by the board of directors and themanaging director, as well as evaluating the overall presentationof information in the annual accounts and consolidated accounts.As a basis for our opinion concerning discharge from liability, weexamined significant decisions, actions taken and circumstancesof the company to be able to determine the liability, if any, to thecompany of any board member or the managing director. We alsoexamined whether any board member or the managing directorhas, in any other way, acted in contravention of the CompaniesAct, The Annual Accounts Act or the Articles of Association. Webelieve that our audit provides a reasonable basis for our opinionset out below.The annual report and the consolidated accounts have been preparedin accordance with the Annual Accounts Act and, thereby,give a true and fair view of the company’s and the group’s financialposition and results of operations in accordance with generallyaccepted accounting principles in Sweden.We recommend to the general meeting of shareholders that theincome statement and balance sheet of the parent company andthe group be adopted, that the profit for the parent company bedealt with in accordance with the proposal in the administrationreport and that the members of the board of directors and themanaging director be discharged from liability for the financialyear.Stockholm, 30 January 2002Åke HedénAuthorised AuditorGunnar WidhagenAuthorised Auditor41

FIVE-YEAR SUMMARY1996/1997 1997/1998 1998/1999 1999/2000 2000/2001Turnover, including VAT, SEK M 21,279.4 26,649.8 32,976.5 35,876.1 46,528.2Change from previous year, % + 24 + 25 + 24 + 9 + 30Sales outside Sweden, SEK M 16,853.1 21,730.1 27,667.4 30,621.0 41,095.0Sales outside Sweden as a percentage oftotal sales, % 79 82 84 85 88Operating margin, % 13.5 14.8 16.4 12.4 13.8Profit after financial items, SEK M 2,511.9 3,468.2 4,758.6 4,003.2 5,734.0Net profit for the year, SEK M 1,690.9 2,286.9 3,075.4 2,552.7 3,816.4Cash and Bank balances includingshort-term investments, SEK M 3,797.0 5,159.9 6,832.4 5,403.2 8,530.9Stock-in-trade, SEK M 2,708.4 3,237.9 3,609.3 4,488.7 4,332.4Restricted equity, SEK M 1,392.0 1,626.5 1,651.2 1,880.7 2,475.4Non-restricted equity, SEK M 5,081.4 6,779.4 8,642.6 10,009.1 12,956.2Return on shareholders' equity, %, Note 19 29.1 30.7 32.9 23.0 27.9Return on capital employed, %, Note 19 42.5 46.3 50.3 35.8 41.6Debt/equity ratio, %, Note 19 2.1 1.6 1.3 1.2 1.2Share of risk-bearing capital, %, Note 19 77.4 77.9 76.4 79.8 77.8Solidity, %, Note 19 72.4 73.4 72.5 75.7 75.6Interest cover, Note 19 198.8 252.3 324.7 225.9 304.4Number of stores in Sweden 117 120 124 115 118Number of stores outside Sweden 373 430 489 567 653Total number of stores 490 550 613 682 771Average number of employees 12,096 14,101 17,652 20,680 22,94420Operating margin, %Return on shareholders’ equity, %40100Solidity, %163580128302520604041520096/9797/9898/9999/0000/011096/9797/9898/9999/0000/01096/9797/9898/9999/0000/0142

H&M SHAREBusiness ratios per share 1996/1997 1997/1998 1998/1999 1999/2000 2000/2001Shareholders' equity per share, SEK 7.82 10.16 12.44 14.37 18.65Earnings per share, SEK 2.04 2.76 3.72 3.08 4.61Change from previous year, % + 27 + 35 + 35 - 17 + 50Dividend per share, SEK 0.75 1.00 1.35 1.35 1.75 *Market price at financial year-end, SEK 89.25 150.25 270.00 169.00 213.00P/E ratio 44 54 73 55 46Distribution of shares, December 2001Average numberNumber of Number of of shares perShareholdings shareholders % shares % shareholder1– 1,000 170,083 92.6 33,974,664 4.1 2001,001 – 5,000 10,370 5.6 23,310,134 2.8 2,2485,001 – 10,000 1,430 0.8 10,657,542 1.3 7,45310,001 – 50,000 1,264 0.7 26,491,811 3.2 20,95950,001 – 100,000 163 0.1 11,798,173 1.4 72,381100,001 – 369 0.2 721,303,676 87.2 1,954,753TOTAL 183,679 100.0 827,536,000 100.0Major shareholders, December 2001Shares % of voting % of capitalheld rights stockThe Stefan Persson family 301,672,400 69.1 36.5Liselott Tham 36,805,700 2.2 4.4Robur Fonder 28,114,856 1.7 3.4Alecta 26,608,148 1.6 3,2SEB Fonder 17,958,600 1.1 2.2Nordeas fonder 16,425,989 1.0 2.0Handelsbanken fonder 13,519,942 0,8 1,6Fjärde AP-fonden 10,470,200 0.6 1.3Skandia 10,055,355 0.6 1.2Andra AP-fonden 9,907,660 0.6 1.2* Proposed dividend300250200150B-ShareGeneral Index1005015(c) SIX96 97 98 99 00 0143

BOARD OF DIRECTORSSTEFAN PERSSONborn 1947Chairman, H&MMember of the board since 1979Other board assignments: ABElectrolux and INGKA Holding B.V.No. of shares in H&M:283.474.400VIVIAN ENOCHSSONborn 1940Employee representative since1977No. of shares in H&M: 600FRED ANDERSSONborn 1946Managing Director, CoromandelHolding ABMember of the board since 1990Other board assignments: ConsiliumAB, Indoor Group Ltd and ViamareInvest ABNo. of shares in H&M: 4,300WERNER HOFERborn 1935Lawyer and partner of Luther &Partner, Hamburg/BerlinMember of the board since 1996Other board assignments: Chairmanof Puma AG, ElectroluxDeutschland GmbH and IspatGermany GmbHNo. of shares in H&M: 4,000JAN JACOBSENborn 1951Deputy member of the boardsince 1985No. of shares in H&M: 200,000BIRGITTA BRUSBERGborn 1937Employee representative since1992No. of shares in H&M: 100SUSSI KVARTborn 1956Bachelor of Laws, Sussi KvartABMember of the board since 1998Other board assignments: TheSwedish National Grid andStockholms Stadsteater ABNo. of shares in H&M: 2,20044

BO LUNDQUISTborn 1942Member of the board since 1995Other board assignments: Chairmanof ACSC AB, board memberof CityMail ABNo. of shares in H&M: 20,000STIG NORDFELTborn 1940Managing Director, Pilen ABMember of the board since 1987Other board assignments: Chairmanof United Care ScandinaviaAB, NetLight Consulting AB andSurephone AB, board member ofIBS ABNo. of shares in H&M: 4,000AGNETA RAMBERGborn 1946Deputy employee representativesince 1997MELKER SCHÖRLINGborn 1947Member of the board since1998Other board assignments:Chairman of Securitas AB,Hexagon AB and KarlshamnAB, vice chairman of AssaAbloy AB, board member ofSkandia ABNo. of shares in H&M: 114,000MARIANNE NORIN-BROMANborn 1944Deputy employee representativesince 1995No. of shares in H&M: 70ROLF ERIKSENBorn 1944Chief Executive Officer andManaging Director of H&MDeputy member of the boardsince 2000No. of shares in H&M: 17,80045

ADDRESSESH & M HENNES & MAURITZ ABRegeringsgatan 48Box 1421SE-111 84 StockholmTel: +46 8 796 55 00www.hm.comH & M ROWELLS ABHultagatan 47SE-501 89 BoråsTel: +46 33 16 97 00H & M HENNES & MAURITZ A/SStenersgaten 1 EPB 68 AlnabruNO-0614 OsloTel: +47 22 17 13 90H & M HENNES & MAURITZ A/S (postorder)BølerveienPB 104NO-2021 SkedsmokorsetTel: +47 63 87 00 40H & M HENNES & MAURITZ A/SAmagertorv 21, 4. salDK-1160 Copenhagen KTel: +45 70 10 23 31H & M HENNES LTDHolden House57 Rathbone PlaceGB-London W1P 1AWTel: +44 20 7323 22 11H & M HENNES & MAURITZ SARue du Marché 40CH-1204 GenevaTel: +41 22 317 09 09H & M HENNES & MAURITZ NETHERLANDS B.V.Kalverstraat 112-IIP.O. Box 10506NL-1001 EM AmsterdamTel: +31 20 556 7777H & M HENNES & MAURITZ BELGIUM N.V.Rue de la Madeleine, 51BE-1000 BrusselsTel: +32 2 219 98 70H & M HENNES & MAURITZ GesmbHMariahilferstraße 53AT-1060 ViennaTel: +43 1 585 84 000H & M HENNES & MAURITZ OyAlexanderinkatu 42BPB 389FI-00101 HelsinkiTel: +358 9 34 34 950H & M HENNES & MAURITZ sarl2-4 Rue Charras, 4th floorFR-75009 ParisTel: +33 1 53 20 71 00H & M HENNES & MAURITZ LP1328 Broadway, 3rd floorNew York, NY 10001Tel: +1 212 489 8777H & M MODA SLPlaza Catalunya 9, 2ºES-08002 BarcelonaTel: +34 93 260 86 60H & M HENNES & MAURITZ GmbHGroße Bleichen 30DE-20354 HamburgTel: +49 40 350 95 5047

ANNUAL GENERAL MEETINGOF SHAREHOLDERSThe Annual General Meeting will be held at the Stockholmsmässan(Victoriahallen) in Stockholm on Friday,19 April 2002, at 3 p.m.Shareholders who are registered in the share registerprint-out on Tuesday, 9 April 2002 and give notice oftheir intention to participate in the Meeting no later than12 noon, Monday 15 April 2002.NOMINEE SHARESShareholders whose shares are registered in the nameof a nominee must re-register their shares in theirown names to be entitled to participate in theMeeting. In order to re-register shares forparticipation in the Meeting, shareholdersshould, in good time before 9April 2002, request temporaryowner registration, whichis referred to as votingright registration.NOTICENotice of intention to participate in the Meeting must besubmitted by mail, telefax or telephone to:H & M Hennes & Mauritz ABBox 1421SE-111 84 Stockholm, SwedenTelephone +46 8 796 55 00, telefax +46 8 24 80 78Shareholders wishing to participate in the Meeting mustregister their intention no later than 12 noon, Monday,15 April 2002.DIVIDENDThe Board of Directors has proposed Tuesday, 24 April2002 as record day. VPC (Swedish Securities RegisterCentre) is expected to commence paying dividends on29 April 2002.The Board of Directors and the Managing Directorhave decided to propose to the Annual General Meetinga dividend for 2001 of SEK 1.75 per share.FINANCIAL INFORMATIONH & M Hennes & Mauritz AB will provide the followinginformation for the 2002 financial year:First Quarter Report,including sales development – FebruaryHalf Year Report,including sales development – MayNine Months Report,including sales development – August22 March19 June19 SeptemberFull Year Report, includingsales development – December January 2003Annual Report March 2003Sales development for the remaining months will bepublished around the 15th of the following month.This information will also be available at www.hm.com