Fashion retailers Bonmarché, River Island and H&M have this week all reported falling store sales contrasting with strong online growth. This seems to be further evidence of fashion sales moving online fast – and come just days after Next said that it expected its online sales to overtake store sales for the first time in this current financial year. Here’s what they said.
H&M: online expands but stores hit by technical issues
H&M Group, which also owns brands including Cos and Afound as well as H&M, ranked Top50 in IRUK Top500 research, reported a 32% rise in online sales in the third quarter of its financial year, while total sales grew by 9% to SEK 64.8bn (£5.6bn). The retailer now sells online in 47 markets, and is expanding its website to serve all the 70 markets where it has stores.
But sales in stores in the US, France and Belgium were hit by technical difficulties when it introduced new logistics systems, part of its work to speed up its supply chain and to integrate its online and stores systems.
Chief executive Karl-Johan Persson said H&M’s task now was to develop its product assortment so as to offer the “best combination of fashion, quality and price in a sustainable way”. It is also working to improve the customer experience, testing new displays and fittings in stores and rolling out what works. “Our improvement work is Our improvement work is benefiting from our investments in advanced data analytics and AI in areas such as quantification, allocation, pricing and trend forecasting,” he said.
He added: “The rapid changes in the fashion industry are continuing and the H&M group is in an exciting transitional period.”
Persson added: “We are continuing to optimise the store portfolio in order to accommodate customers’ changed shopping patterns in the ongoing shift online. In the year to date this has meant a lower net addition of new stores within the group. We are also seeing that the shift provides opportunities to achieve even better lease terms for both new and existing stores.”
Bonmarche: warns on profits as store visits fall
Bonmarché this week warned that full-year profits would not meet expectations after three months in which store sales fell but online sales grew.
During the first quarter of the year, online sales grew by 27.3% while store like-for-like sales fell by 1.2%. This week’s trading update suggests that online sales have continued to grow at a similar rate in the second quarter but that store sales did less well.
“The continuation of warm weather for an extended period may have delayed demand for early autumn stock,” it said in a trading statement today, “but we believe that the more dominant factor is that underlying consumer demand for the UK high street is weaker which is impacting footfall.”
Bonmarché, ranked Top150 in IRUK Top500 research, said it expected online sales to continue to grow at least as fast as they have been, as a result of improvements to the online shopping experience and a move towards broader online ranges. Overall, Bonmarché expects full-year pre-tax profits to fall to £5.5m from £8m last time.
Chief executive Helen Connolly said: “These are undoubtedly challenging times in the retail industry and, in common with many other businesses, Bonmarché’s store trading has been impacted by weaker consumer sentiment and footfall. We have continued to improve our proposition, particularly our digital capabilities, reflected in the strong online sales. We remain focussed on exploiting the opportunity afforded by the increasing demand for online shopping, whilst modernising the store offer and customer experience. Whilst it is disappointing that FY19’s result is expected to be lower than originally planned, despite the challenging market, the health of the business remains strong.”
River Island: online expands but stores hit in competitive digital market
Fellow Top150 retailer River Island, meanwhile, reported falling sales and profits in its full-year results to December 30. Turnover of £901.9m was 2.3% down on the previous year, while operating profit of £87.7m was 34.2% down. This retailer also said that its online sales increased, as did wholesale.
In its results statement the business, owned by the Lewis family, said: “Overall the trading was stable and the business has continued to invest significantly in its core customer proposition and keep pace with technological developments to service customeres’ changing requirements to shop across multiple channels. Consequently, the company continues to see growth from its online and wholesale channels and remains focused maintaining its physical store present, all of which are seen as key areas of growth.”
During the year, River Island opened seven new stores and relocated five. Looking to the future, the company said the fashion industry was changing fast, as customers opt for “more diverse, speedier and more convenient shopping journeys and with increasing competitive especially in the digital sector.” It said this competition was considered the key business risk it faces, as does the “increased economic uncertainty fuelled by Brexit, resulting in inflation and weaker disposable income”. It said: “The company seeks to manage the risk of losing customers to key competitors (both within the UK and elsewhere) by offering uniquely designed merchandise of high quality at a fair price and by providing a high level of customer service and convenience, both online and in stores.”
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