H&M profit drops due to online investment

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Photo from: HM FB Page

 

(Inside Retail Asia | February 11, 2019)

Swedish fast-fashion retailer H&M said its profit dropped in the year to November 30, blaming investment in its online business for the decline.

The world’s second largest clothing retailer embarked on a transformation program last year, investing heavily in logistics and digital technology aiming to improve the shopping experience and product range. This included an upgrade in its mobile app, faster deliveries and the rollout of click-and-collect.

The company is also working on a new H&M concept store.

In the last three months of its financial year, the company spent around US$48.5 million on logistics and technology, including resolving problems it flagged earlier last year.

H&M CEO Karl-Johan Persson said the upgrade in the company’s logistics systems inevitably resulted in increased costs but will lead to a range of improvements for customers.

“Against a backdrop of rapid changes in the fashion industry, in 2018 we accelerated our transformation to future proof our business, ending a challenging year for the H&M Group and the sector with strong signals that we are on track,” he said.

Persson said it may have been a challenging year for H&M and the industry but after a difficult first half, there were signs the company’s transformation efforts were beginning to take effect.

H&M posted a 5% increase in full-year revenue to $22.7 billion, while in local currencies, net sales rose by 3%. Profit fell by 21.8% to $1.36 billion from the same period last year.

Online sales rose 22% to SEK 30 billion ($3.2 billion) and now comprise 14.5% of the company’s total revenue.

“With a stronger customer offering and the ongoing improvements in buying and logistics, we expect this trend to continue,” Persson said.

According to Persson, the company opened three new fulfilment centres in the fourth quarter with a total of around 230,000sqm so it can offer customers faster deliveries and a wider assortment while reducing the capacity constraints that slowed them down in some markets in 2018.

“We have also completed our online transition with investments in 2018, enabling us to successfully migrate online in Germany to the new platform earlier in January 2019,” he said. “With this, all H&M online markets are now on the new platform.”

“Changing consumer behaviour and technological innovation will continue to transform how and when people shop, we are building a business with the flexibility to respond to this constant evolution,” he said.

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