H&M profits miss expectations amid transformation

Fast fashion giant H&M Group’s profits dropped last year, missing market expectations as it executed plans to overhaul the business.

Sales rose 5% to 210.4 billion Swedish kroner (£17.75 billion) in the year to 30 November, with performance improving in the second half.

But profit before tax dropped 25% to 15.6 billion kroner (£1.32 billion), coming in below consensus expectations as the company invested heavily in transforming its products and systems.

H&M embarked on a transformation programme last year, with the aim of improving the product selection and shopping experience. Changes include an upgraded mobile app, faster deliveries and the rollout of click-and-collect.

H&M said its efforts had paid off in the form of more full-price sales and smaller discounts in the fourth quarter. This trend is expected to continue into the current year.

“It has been a challenging year for H&M group and the industry but after a difficult first half, there are signs the company’s transformation efforts are beginning to take effect,” said chief executive Karl-Johan Persson.

“Improved collections generated better full-price sales and lower markdowns towards the end of the year.”

In the UK, a 1% decline in store sales was offset by a 38% increase online, giving 8% total growth.

Across the whole group, online sales increased by 22% and now account for 14.5% of total sales.

Maureen Hinton, group retail research director at GlobalData, said the company is still playing catch-up on digital shopping.

She said: “The introduction of services such as click and collect, online return to stores, and next day delivery, are being rolled out, but are in less than 11 of its 47 markets to date and are still behind competitors who have been offering these services for several years, and have moved on to much faster and more innovative options.

“While its online penetration has reached 14.5%, the UK, which is a benchmark for online, has an average for clothing & footwear online of 27%, demonstrating how far H&M still has to go.”

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