H&M Q4 profit drops as industry is challenged

FAN Editor

Swedish low-cost fashion brand Hennes & Mauritz AB said Wednesday that its fourth-quarter profit fell 33 percent to 3.99 billion kronor ($506 million) as the company tried to adapt to a broad shift toward online shopping by consumers.

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Sales during the same period dropped 2 percent to 50.4 million kronor ($6.4 million) as “the industry changes are challenging everyone and this will continue in 2018.”

CEO Karl-Johan Persson says “at the heart of the transformation is digitalization and it is driving the need to transform and re-think faster and faster.” He said the group’s 2017 performance was “clearly below our expectations.”

Persson said the company found weakness in sales at the physical stores, where “the changes in customer behavior are being felt most strongly and footfall has reduced with more sales online.”

There is “still potential for strong growth in some regions whereas in others we can get a better balance by reducing store space,” he said.

The group said it plans to open approximately 390 new stores and close 170 stores in 2018 with new H&M store markets planned in Uruguay and Ukraine.

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The brands H&M and H&M Home will open on the world’s largest e-commerce platform in China in March, and H&M will launch a new brand, called Afound, in Sweden together with a digital marketplace there. It will be an off-price marketplace offering products from well-known and popular fashion and lifestyle brands.

In recent weeks, the Stockholm-based group had been accused of racism over an ad showing a black child dressed in a hoodie reading “coolest monkey in the jungle,” for which H&M has apologized.

It led to the company appointed a company veteran to become a diversity leader.

“All in all, we feel 2017 was a year where we made more steps forward and did more groundwork for the future, but we have also made some mistakes that have slowed us down,” Persson said.

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