H&M braces for further in-store sales falls

H&M sales fall

H&M has warned on further sales falls across its stores in 2018, but hopes an online push and investment in new fascias will deliver a better result than last year.

Ahead of the retail giant’s first capital markets day briefing for investors, H&M said it expected a 25 per cent surge in sales online and from its fascias such as Cos and H&M Home this year.

While it also expected a further drop in in-store sales this year, it predicted a return to like-for-like sales growth from 2019 onwards.

In addition, H&M was hoping for higher earnings this year and “good increases in profit” from 2019 onwards as it steps up its turnaround strategy.

Earnings at the beginning of the year will also be hit by heavy markdowns, but H&M said this will be offset by the expected boost from online business and new stores.

“2018 is expected to remain challenging,” the Swedish retailer said.

“H&M’s sales in comparable stores are expected to remain negative with a gradual improvement during the year.”

H&M added: “The ongoing shift from physical stores to online is expected to continue.

“As the H&M group’s transition work and initiatives take effect, the physical stores are expected to return to comparable positive sales development from 2019 onwards, and with considerably lower price markdowns relative to sales compared with 2017.

“Overall, this is expected to lead to good increases in profit.”

The news comes after it admitted last month that it made “mistakes” and revealed fourth quarter net profit slumped by 32 per cent.

Sales in the fourth quarter ending November 30 also declined by four per cent, while operating profit the full-year period dropped by 14 per cent.

The results prompted chief executive Karl-Johan Persson to ramp up efforts to bring it in line with competitors, which includes plans to shut 170 underperforming stores around the world this year while opening around 390 new ones in current and new markets.

About a quarter of the new shops will be formats other than the flagship H&M, such as Cos, Monki and the soon-to-be-launched value fashion fascia Afound.

H&M has also seen its shares nearly halve in value over the past three years.

The retail group – the world’s second-biggest after Zara parent company Inditex – has more than 290 stores in the UK.

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