Wednesday, April 21, 2021

H&M’s profits take a hit amid rampant expansion

Fashion giant H&M has reported a drop in full year profits as it begins to feel the strain from the strong US dollar amid extensive expansion.

In the 12 months to November 30, profit after financial items dropped by 11.8 per cent, topping £2.18 billion.

Despite group sales seeing a rise of six per cent to £20.2 billion over the year, it reported a dip in its gross margin, falling from 57 per cent in the year prior to 55.2 per cent. This is reportedly due to currency fluctuations.

The group reported a stellar year for expansion, boasting 427 new stores across 11 new markets and creating 13,000 new jobs over the same period. 

This brings its overall estate to 4351 stores in 64 markets, and a combined workforce of over 161,000.

Although it aims to continue expansion into the new year with plans to open five new stores and expand its global online presence, H&M has said it plans to refocus on sales, expecting to see a 10 to 15 per cent rise over the next year.

READ MORE: H&M Christmas trading fails to meet expectations

“Alongside opening new stores, we will also review the existing store portfolio to make sure that we have the optimal mix of brands, space and number of stores in each market,” H&M chief executive Karl-Johan Persson said.

“This will lead to re-locations, adding new store space and also closures.

“2016 was an eventful year which included many positive things but also challenges for us as well as for the industry.

“For fashion retail in general, 2016 was at the same time a challenging year in which various external factors – including geopolitical events – had a negative impact on retail trade in many markets.

“This was particularly visible in France, Germany, Switzerland and Italy, as well as in the US and in China. Since these markets represent a large share of our sales, this consequently had a great impact on our overall sales development.”

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