H&M trims store openings to focus investment on its online operations

Fashion retailer H&M said it would open fewer stores this year than was previously mentioned as the group intends to concentrate investment on its online operations.

Company CEO Karl-Johan Persson said they are continuing to integrate their physical and digital channels to make shopping experience easy and convenient for their customers.

“This and other extensive investments are driving costs in the short term,” Persson said.

“Our new online platform and our new logistics systems have not yet achieved full efficiency, but for customers have resulted in improvements such as faster and more flexible deliveries and a more seamless shopping experience.”

H&M said online sales continued to develop strongly and has posted a 27 per cent increase in the first half in SEK and 20 per cent in local currencies.

The Sweden-based retailer said with a chunk of its investment to be concentrated on online, it will curtail its store opening program.

The company announced it will open a net of 130 stores worldwide set to open this year, which is below its previous target of 175.

Persson, who is the grandson of the company’s founder, said the transformation work is having an effect and will continue at a fast pace within their strategic focus areas.

He said the H&M group continues to increase full-price sales, reduce markdowns and increase market share, showing that customers appreciate their collections and the improvements they are making to the product assortment and the customer experience.

“Sales developed well in most markets,” he said.

The company posted an 11 per cent increase in net sales in the first half to SEK108.5 billion (A$16.7 billion) and a net profit of SEK5.37 billion, down from last year’s SEK6.01 billion.

“We had the strongest growth in countries such as the US where we grew sales by 17 per cent, in Mexico by 25 per cent, in India by 39 per cent, in Russia by 19 per cent and in Poland by 11 per cent in local currencies,” Persson said.

“We also grew in the UK and Sweden where we took market share despite challenging market conditions.”

Total sales in the group increased by 11 per cent in SEK and with 6 per cent in local currencies in the second quarter. 

“We have also increased the value for our customers through further investments in the customer offering so that we offer the best combination of fashion, quality, price and sustainability,” Persson said.

In April, H&M provided detailed information concerning the factory and material for individual garments to help customers make more sustainable choices.

“We have continued to develop our new digital features and during the spring we also substantially expanded H&M’s customer loyalty programme, which now has more than 43 million members.”

The fast fashion retailer also announced they have expanded their partnership with global payments provider Klarna to enable frictionless checkout across all its channels and elevate the shopping experience of its customers.

The company said they are aiming to further integrate H&M’s digital and physical stores to give customers a seamless, personalised and engaging shopping experience no matter where, when and how they shop.

According to Klarna, frictionless check-out provides shoppers a seamless experience between digital and in-store purchasing.

“So when they are paying, it will be consistent across channels and intuitive, personalised and fast. Therefore eliminating all unnecessary steps and anything that doesn’t add value and negatively impacts the consumer experience.”

The frictionless shopping experience also incorporates all of the consumers preferences on the purchase including important aspects like delivery options that best meets their needs.

“It should be a super smooth process for the consumer but also one which very much puts them in control,” Klarna stated.

The frictionless shopping experience will go live with H&M in the United Kingdom, the US, Sweden, the Netherlands, Austria, Finland, Denmark and Switzerland this year. Six countries will be added in 2020. 

Kate Ormrod, lead retail analyst at GlobalData, said H&M’s efforts to strengthen its product ranges and availability are clearly resonating with shoppers, helping to drive full price sales and reduce markdowns.

“Having been a laggard for so long, H&M’s investment continues apace as the retailer is still yet to fully harness the opportunities that lie within online,” Ormrod said.

Persson said their transformation work in response to the rapid shift in fashion retail is continuing at full speed.

“While the costs of this have held back profitability in the short term, we remain convinced that our focus on meeting customers’ increased expectations will contribute to a gradual increase in profitability and to long-term positive development for the H&M group.”