Swedish fashion retailer H&M’s online investments were unable to make up for lost store sales as the company reported a slump in full-year profit.
The world’s second largest clothing retailer said its full-year pretax profit fell to US$239.19 million (2.05 billion Swedish krona) for the year through November from $2.08 billion, hurt by restrictions and lockdowns.
Profit for the final quarter to November 2020 fell to $438.92 million from $650 million. Online sales increased by 50 per cent in local currencies.
Online sales for the financial year increased by 38 per cent in local currencies and 39 percent in SEK, representing 28 per cent of the group’s total sales for the full year
“Taking decisive measures quickly, combined with an attractive customer offering, led to a better recovery than expected up until the second wave of the pandemic struck,” said group CEO Helena Helmersson.
“Our measures to mitigate the negative effects of ongoing restrictions and closures are continuing. Although the situation at the time of writing is highly challenging, the H&M group stands strong.”
Helmersson said the ongoing restrictions, along with the many temporary store closures, will have a substantial negative impact on the company’s first quarter. But she said with strong, profitable online growth and good cost control, the company succeeded in ending the year with a strong financial position.
“The recent years’ transformation initiatives and investments, focusing on the digital, have been especially important for managing the crisis and this work is continuing at full speed,” according to Helmersson.
“Customers want to meet us where, when and how they choose – in the stores, on our websites, on digital marketplaces and on social media. They are showing us clearly that they appreciate a convenient and inspiring experience in which the channels interact and strengthen each other.”
“We are continuing our initiatives for digital growth, integration of the channels and optimisation of the store portfolio,” she added.
Emily Salter, retail analyst at GlobalData, said with H&M’s revenue and operating profit significantly affected by the pandemic, it showed its online proposition proved unable to make up for lost store sales.
Eighty per cent of the clothing retailer’s stores were temporarily closed in its worst quarter.
“As H&M continues to play catch-up with its digital proposition, online sales accounted for 28 per cent of the group’s total sales in FY2019/20,” Salter said.
According to Salter, though that was a significant improvement versus the last financial year, H&M faces increasing competition in Europe and the US from players such as ASOS and Zara as they hone their digital offers.
H&M closed 187 stores and opened 129 last year, resulting in a net decrease for the year of 58 stores.
This year, the company said it plans to open 350 stores and will close just over 100, resulting in a net decrease of around 250 stores.