H&M profits slide as high street decline outpaces online growth

H&M profits slide as high street decline outpaces online growth”

The group had 4,553 stores as of August 31, a 10% increase from the 4,135 stores it had at the same time last year, and it plans to add a net 385 stores this year, compared its forecast of 400 stores at its second quarter earnings.

In the local kuna currency, H&M sales in Croatia dropped 1% over the review period, the company said in its nine-month financial report.

Profit after financial items amounted to 5,016 million Swedish krona (614 million dollars) against 6,301 million Swedish krona (772 million dollars).

Fast fashion retailers are feeling pressure amid the move to online sales, which has forced them to invest in delivery and logistics at a time when price competition is increasingly fierce.

Although sales increased 5% during the June-August period, the company failed to reach targets as weak store sales were only partially offset by growth in online business.

H&M has recorded a 20 per cent fall in its third quarter profit despite a rise in sales, as summer discounts hurt margins. In the third quarter, the H&M group's sales including Value-Added Tax increased by 5 percent to 59,383 million Swedish krona (7,277 million dollars), while sales excluding Value-Added Tax amounted to 51,229 million Swedish krona (6,278 million dollars), an increase of 5 percent or 4 percent inn local currencies.

Gross margin declined to 51.4 percent from 54 previous year.

The company said, it continued rapid and profitable growth of the group's online sales, which in some established markets already account for 25 to 30 percent of total sales and it expects online sales to grow by at least 25 percent per year going forward. "The competitive landscape is being redrawn, new players are coming in and customers' behaviour and expectations are changing, with an ever-greater share of sales taking place online".

CEO Karl-Johan Persson said Thursday the fashion sector "is in a period of extensive and rapid change as a result of ongoing digitalization". COS, & Other Stories, Monki, Weekday and H&M Home also had a continued very good development. "This is of course something that we are not satisfied with and which, among other things, resulted in that we entered the third quarter with inventory levels that were too high". This contributed to the autumn collections getting off to a good start, although sales slowed somewhat towards the end of September.

Persson added the retailer is continuing to develop its assortment within all of its brands, while at the same time rapidly making a number of following investments in a bid to "seize the opportunities that arise with the shift within the industry".

However, the sales growth is still well below H&M's new annual target of 10-15 per cent.

The world's second largest retailer is also planning to open new physical stores in Georgia later this year, as in Uruguay and Ukraine next year.

H&M also announced the addition of about 385 new stores and improvements, including rebuilds, to its existing portfolio of high street shops.

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