Swedish fast-fashion retailer, H&M has released its financial results for Q3. For the period ending August 31, 2018, the company has reportedly increased its online sales by 32 percent in 47 markets.
In the three months from June 1 to August 31, 2018, H&M’s sales, including VAT, increased by nine percent to SEK 64,800 million. Sales excluding VAT also increased by nine percent, while sales in local currencies increased by three percent excluding VAT and one percent including VAT.
“The rapid changes in the fashion industry are continuing and the H&M group is in an exciting transitional period,” the fashion retailer’s CEO, Karl-Johan Persson said in H&M’s quarterly financial report.
“Our transformation work has contributed to a gradual improvement in sales development with an increased market share in most markets during the third quarter, particularly in Germany, Sweden, Eastern Europe, Russia and China.”
He also highlighted the company’s online performance, which was by far the business’s best-performing category for the quarter.
“Today H&M online is in 47 markets and we are continuing at full speed to roll out online globally to all our existing store markets, as well as to other markets,” he said.
However, the company also hit new hurdles in the US, France, Italy and Belgium in Q3 while trying to implement a new logistics system. Problems that arose during implementation reportedly led to negative store sales in these regions.
“Intensive work to correct the problems – which have now been largely resolved – resulted in extraordinary costs of around SEK 400 million in the quarter. The new logistics systems, however, are an essential part of our work to make our supply chain faster, more flexible and more efficient, and to continue the integration of stores and online,” Persson said.
H&M’s Q3 results are visibly better than Q2 when the company closed the first half of 2018 with a substantial amount of excess stock, equating to US$4 billion of inventory.
For the period ending May 31, 2018, H&M reported a 28 percent drop in profits, which Persson said wasn’t surprising given the high stock levels.
“As we signalled previously, it was going to be a tough first half-year. We went into the second quarter carrying too much stock and we still had some imbalances in the H&M assortment – something that we are gradually correcting,” he said at the time.
H&M’s Growth Plans for Q4
Moving forward Persson says H&M’s focus will be on customer experience, sustainable practices, quality product lines that come with an affordable price point, and of course, continued changes to both its online and physical shop footprints.
“We are getting a positive response from customers to the changes that we are making both online and in stores… We are therefore now scaling up to this in more stores and markets.”
Investments in artificial intelligence and advanced data analytics technology is also reportedly paying off, with plans in place to use this technology to improve efficiencies in areas like quantification, allocation, pricing and trend forecasting.
“As always, we have a long-term perspective. Our improvement work is continuing, and although many challenges remain, there are more and more indications that we are on the right track,” Persson said.