H&M reports online sales growth amid overall profit drop

Internet Retailing

4th Oct 2017

Swedish fast fahsion giant H&M has reported a quarterly earnings drop after reduced footfall in stores and increased competition in the fashion sector.

Net profit for the three months to end-August, the third quarter of the retailer’s financial year, came in at 3.84 billion kronor ($470 million), a drop of 20 percent. Sales grew 4.6 percent to 51.23 billion kronor.

Despite the drop, which was in line with analysts’ forecasts, there was rapid and profitable growth of the retailer’s online sales, which in some established markets already account for 25 to 30 percent of total sales.

“The fashion retail sector is growing and is in a period of extensive and rapid change as a result of ongoing digitalisation,” said Karl-Johan Persson, CEO, H&M.

“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.”

Persson said the shift to online was “clearly reflected” in H&M’s increasing online sales, however did not fully compensate for reduced footfall to stores in several of its established markets.

The fashion retailer is now looking to refine its store portfolio, with a raft of renegotiation, rebuilds, relocations and closures to take place. Overall, it will close around 90 stores during the year, resulting in a net addition of approximately 385 new stores.

H&M has launched an e-commerce presence in six new markets so far this year, including Turkey, Taiwan, Hong Kong, Macau, Singapore and Malaysia. It will open online stores in a further two markets in 2017 – the Philippines and Cyprus – bringing the total number of online markets to 43.

The roll-out of online stores will continue during 2018, India among those markets slated to get an e-commerce site. H&M said it plans to offer e-commerce in all of its store markets in the future as well as in other markets.

Speaking to The Weekend Australian in July, H&M’s country manager for Australia, Hans Andersson, said there is no timetable yet for the launch of an online store Down Under.

H&M also said there had been a successful reception of its new brand, Arket, in London as well as online in 18 markets.

“Creating and launching new brands is an important part of our growth strategy, and next year we plan to launch another new brand,” said Persson.

Meanwhile, the company is continuing to improve its online offering by investing in more and faster delivery options, making more products available for online purchase and integrating physical and online stores for a more convenient shopping experience.

The retailer expects group online sales to grow by at least 25 per cent per year going forward.