Jan 31, 2017
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H&M Q4 profit up, e-commerce grows, will launch "one or two" new brands

Jan 31, 2017

Swedish fashion retailer H&M dropped on Tuesday a decades-old store growth target in favor of a turnover target to reflect growing online sales as it reported a small increase in pretax profit for the September-November period.

Pretax profit in H&M's fiscal fourth quarter unexpectedly rose following five consecutive quarters of falling profits, to 7.4 billion crowns ($839 million) from a year-ago 7.2 billion. Analysts polled by Reuters had on average forecast a 2 percent drop to 7.0 billion.


H&M said its new target is to increase local-currency sales by 10 to 15 percent annually with continued high profitability.

H&M has struggled with increasing competition in the budget segment while investments in IT and new concepts, as well as large markdowns, have dented margins and profits.

"Mark-downs increased during the year due to a lower sales increase than planned. In addition, the strong US dollar made the group’s purchases more expensive. However, in the fourth quarter earnings improved," H&M said.

H&M, which had unveiled earlier a weaker than-expected turnover for the fiscal quarter, as well as for December, said sales in Jan. 1-29 were up 11 percent in local currencies.

H&M said it would open 430 new stores this year, a plan at the bottom of the range of its earlier expansion target of 10-15 percent new stores annually. It said it would roll out e-commerce in Turkey, Taiwan, Hong Kong, Macau, Singapore and Malaysia, taking its online markets to 41.

H&M proposed an unchanged dividend of 9.75 Swedish crowns per share.

The Swedish group owns brands H&M, COS, & Other Stories, Monki, Weekday and H&M Home, and plans to launch one or two new brands this year.

H&M is amid an ambitious development phase which will see the retailer invest further in digitalising the business. In addition to improving its online offering including online purchases, online returns in stores, mobile payments and click & collect, the company said it will further develop the customer club and the use of mobile in stores to offer a more seamless shopping experience.

The company will also invest in its supply chain infrastructure to make it faster and more flexible. This includes investments in technology such as RFID and automatised warehouses, as well as new delivery options for customers. H&M now offers next day delivery in five markets and has started rolling out time slot deliveries in Japan.

Company CEO Karl-Johan Persson said investments in these areas and the ongoing expansion through new stores and online markets will ensure the group is well positioned for long-term and profitable growth.


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