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H&M hails an ‘exciting and challenging’ time in fashion retail as it reports a fall in profits

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H&M chief executive Karl-Johan Persson says fashion retail is going through an “exciting and challenging” time as it transforms itself for the future. 

Speaking as the Swedish fashion retailer reported falling sales and profits in the first half of its financial year, he said the time of change was “challenging because it is complex, extensive and the pace of change is fast. Exciting because we can see positive trends and big potential in connection with our improvement work and investments.”

H&M reported sales including VAT of SEK 114bn (£9.6bn) in the six months to May 31. That’s up from by 0.9% from SEK 113bn (£9.55bn) at the same time last year. Profit after tax came in at SEK 6.0bn (£0.5bn), down by 28% from SEK8.4bn (£0.7bn)  last time.

The retailer outlined plans to transform its logistics, but warned that had already led to interruptions in service. 

Persson said: “As we signalled previously, it was going to be a tough first half-year. We went into the second quarter carrying too much stock and we still had some imbalances in the H&M assortment – something that we are gradually correcting. As part of our transformation work we are transitioning our logistics systems to make our supply chain even faster, more flexible and more efficient. These transitions are complicated and result in temporary interruptions as unfortunately occurred during the second quarter in some of our major sales markets. This negatively impacted sales in the US, France, Italy and Belgium as well as online sales in the Nordic region.

“Yet in a number of markets, sales developed positively; in Sweden, Norway, Denmark and Eastern Europe we grew considerably faster than the market. This shows we are on the right track and that our digital investments and improvement work are starting to have results. Overall, however, total sales for the quarter were not satisfactory, which meant that inventory levels were still too high at the end of the period.”

H&M, a Top50 retailer in IRUK Top500 research, said it was now focusing on developing its brands, making the H&M brand its top priority. There it is working on the customer experience both in store and online, and on the product assortment: it said it was already seeing positive results from its summer collections. It launched a new brand, Afound, a new Swedish online marketplace two weeks ago and says its mixture of fashion and lifestyle brands has been well-received both in stores and online. 

It also said results from pilot projects in AI and advanced data analytics around personalisation, allocation and price setting and in trend forecasting had seen “very good results” and were now being scaled up. Sales of H&M on Tmall had “got off to a very good start” and were contributing to growing sales in China. 

In this second half of this year it plans to widen its product range to include homewares, and in 2019 it plans to open stores in Bosnia-Herzegovina and to sell online in Mexico. Over the course of 2018 it expects to open around 390 stores and to close 150, with most of the openings in emerging markets and most closures in established markets. 

Image courtesy of InternetRetailing Media

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