Sweden — A Fashion retailer H&M reported a
bigger-than-expected 20% fall in quarterly profit as a new logistics
system suffered teething troubles and inventories of unsold stock grew.
Sweden’s H&M has seen profits shrink
and inventories pile up over the past couple of years as its core budget H&M chain has lost sales to low-price, high-street rivals such as Primark and online competitors such as ASOS and Zalando.
It has invested heavily in logistics and digitalisation and is reviewing its mix of stores and brands, and is also working on a new H&M store concept.
“The rapid changes in the fashion industry are continuing and the H&M group is in an exciting transitional period,” CEO Karl-Johan Persson said. “Our transformation work has contributed to a gradual improvement in sales development with increased market share in most markets during the third quarter.”
However, June to August pre-tax profit for the sector’s second-biggest apparel retailer after Zara-owner Inditex shrank 20% from a year ago to 4.01-billion krona ($454m) against a Reuters poll forecast for a 16% drop.
Markdowns increased by 0.7 percentage points, and inventories 15% to 38.7-billion krona or 19% of sales in the period, the third quarter of its financial year.
H&M, however, said the quality and balance of its inventories is better now than a year ago and it therefore expects markdowns not to grow in the fourth quarter on an annual basis.
Problems with the new logistics system in the US, France, Italy and Belgium led to extra costs of about 400-million krona and a sales drop of 8% in those markets.
On September 17, H&M posted estimate-beating quarterly local-currency sales growth of 4%, after unchanged sales in the second quarter and declines in the previous two, but warned that the logistics problems would hit profits. H&M’s shares have lost nearly two thirds of their value since record highs in 2015.
Sweden’s H&M has seen profits shrink
and inventories pile up over the past couple of years as its core budget H&M chain has lost sales to low-price, high-street rivals such as Primark and online competitors such as ASOS and Zalando.
It has invested heavily in logistics and digitalisation and is reviewing its mix of stores and brands, and is also working on a new H&M store concept.
“The rapid changes in the fashion industry are continuing and the H&M group is in an exciting transitional period,” CEO Karl-Johan Persson said. “Our transformation work has contributed to a gradual improvement in sales development with increased market share in most markets during the third quarter.”
However, June to August pre-tax profit for the sector’s second-biggest apparel retailer after Zara-owner Inditex shrank 20% from a year ago to 4.01-billion krona ($454m) against a Reuters poll forecast for a 16% drop.
Markdowns increased by 0.7 percentage points, and inventories 15% to 38.7-billion krona or 19% of sales in the period, the third quarter of its financial year.
H&M, however, said the quality and balance of its inventories is better now than a year ago and it therefore expects markdowns not to grow in the fourth quarter on an annual basis.
Problems with the new logistics system in the US, France, Italy and Belgium led to extra costs of about 400-million krona and a sales drop of 8% in those markets.
On September 17, H&M posted estimate-beating quarterly local-currency sales growth of 4%, after unchanged sales in the second quarter and declines in the previous two, but warned that the logistics problems would hit profits. H&M’s shares have lost nearly two thirds of their value since record highs in 2015.
- Reuters
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