In its full year report presentation, H&M has revealed “mixed” online and in-store performance across its global network, with up to 160 stores now on the chopping block.
H&M has been slower to adapt to the digital economy than most other fast fashion retailers that operate within the global market. The company’s CEO, Karl-Johan Persson highlighted this in the business’s full year report presentation that was released last week, after the company reported stronger growth in its online business than across its in-store network.
“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,” Persson said.
In Q4, H&M’s net sales rose by 12 percent (six percent in local currency) to US$50.4 billion. In the same period, online sales rose by 24 percent equating to gross profit of SEK 30.6 billion. Looking at the full year, net sales rose by five percent to SEK 210.4 billion with online sales increasing 22 percent to SEK 30 billion. By the end of 2018, the business says digital transactions accounted for 14.5 percent of its overall sales.
According to Persson, these results are still below the company’s overall targets but show signs of improving.
“While this performance is still some way off the targets that we set at the beginning of 2018, these positive signals confirm we’re making progress across all our strategic focus areas: to create the best customer offering; a fast, efficient and flexible product flow; a stable, scalable tech foundation; and adding new growth through store and online expansion,” he said.
“We were able to outperform a number of markets in the fourth quarter. In the UK, for example, 38 percent online growth, offset against a 1 percent decline in stores, led to total growth of 8 percent. In several markets, the total growth was driven by both physical stores and online. Among these were China (+24 percent), India (+43 percent) and Russia (+27 percent). However, other markets such as the USA and Norway, were more challenging. In parallel with our global online roll-out, we are intensifying our store portfolio optimisation and we continue the integration of physical stores and digital channels,” Persson explained.
Moving forward, the fashion retailer’s CEO says that it will continue focusing on its logistics and tech infrastructure to improve its overall customer experience. In the long-term, he believes the benefits of these initiatives will help offset the additional costs of its logistics upgrades that impacted the company’s performance in Q4 2018.
“We opened three new fulfilment centres in the fourth quarter with a total of around 230,000 square metres. This means we can offer customers faster deliveries and a wider assortment while reducing the capacity constraints that slowed us 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. With this, all H&M online markets are now on the new platform,” Persson said.
The company will also reportedly be shifting “the balance of [its] investments towards digital”, as it plans to close approximately 160 stores. This figure includes stores that will be renegotiated, rebuilt or adjusted to ensure each store has the best profile for its relevant demographic. At the same time, the business expects to see a net addition of roughly 175 stores in 2019 as H&M Group looks to increase sales in local currencies by ten to 15 percent per year.
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