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H&M posts profit slide, but as store sales dip, online grows

Swedish fashion retailer H&M has posted a decline in its first quarter profit, but says it anticipates better results as its digital transformation accelerates.

H&M posted a 61 per cent drop in profit for the three months to February. Pretax profit fell to 1.26 billion crowns ($154 million). The clothing retailer’s net profit of 1.37 billion crowns was boosted by a one-off positive tax income of 399 million crowns related to US tax reform.

“As communicated previously, the start of the year has been tough,” said H&M CEO Karl-Johan Persson, noting that weak sales in the fourth quarter resulted in a high level of markdowns, impacting quarterly earnings.

However, Persson was confident that the company’s digital expansion has put it on the right track for future growth.

“2018 is a transitional year for the H&M group, as we accelerate our transformation so that we can take advantage of the opportunities generated by rapid digitalisation.”

Online in 47 markets

H&M started selling online in India and China through Tmall this month, saying its China launch has already exceeded high expectations.

With the launch of H&M online via franchise in Saudi Arabia and the United Arab Emirates later this year, online shopping will be available in 47 markets.

The company this year also plans to launch Afound, an off-price marketplace offering products from popular fashion and lifestyle brands, including both external brands and those from the H&M group. The first Afound stores and a digital marketplace will open in Sweden to start with.

Sales for online and new business are expected to grow by more than 25 per cent during the year, resulting in a somewhat better result for full-year 2018 compared with the previous year.

“Many of our ongoing initiatives are giving good indications and results, even though they have not yet been implemented at a large enough scale to have a decisive effect on the overall results,” Persson said.

Going forward, H&M has plans to further enhance its online store through additional testing and faster development and continue to integrate its physical and digital stores. This will include faster and more flexible delivery and payment options.

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